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Five Steps to Prepare for a Financial Statement Audit

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Following are five steps you and your finance team can take to better prepare for a financial statement audit. These steps will help decrease the audit burden on you and your team. After all, an audit should not be looked at as a burden. It should be viewed as a tool that ensures your financial operations are working properly and provides insight on best practices and how to improve.

  1. Be proactive. The auditors should reach out to you and provide you with a requested list of items they will need to perform the audit. However, you can reach out to them as well when you have time to work on their requests. This way you can work on the requests according to your schedule.
  2. Ask questions. If the auditor’s request list is not clear on a particular item, do not hesitate to ask the auditor questions before he/she comes out to perform fieldwork. This will cut down on the time spent pulling unnecessary information and last minute scrambles to pull requests together. In addition, in many cases, there is no need to re-create new schedules for the auditor’s purposes. Most times, auditors can utilize the schedules and reconciliations that you and your team prepare on a monthly basis.
  3. No surprises. Keep communication with the auditors open throughout the year. If you have any unusual transactions or changes in operations, it is best to keep the auditors in the loop and ask for their advice. This way you have the auditor’s approval of how to record the transaction and it will cut down on time spent at year end.
  4. Be prepared. Try to have all requests ready by the auditor’s deadlines and for when he/she comes out into the field.  This will cut down on the questions and interruptions when in the field and the auditor will be able to work through the audit more quickly. This will also cut down on any extra audit costs.  In addition to having all requests ready, make sure that all individuals that will be needed during the audit will be available for auditor’s questions. If key individuals are on vacation or not available when the auditors are in the field, it will slow down the audit process.
  5. View the auditors as a resource. As noted above, a lot of times auditors are viewed as being a burden. Try to change this mindset and instead utilize their knowledge and skill set to improve your financial operations. Ask auditors for advice on best practices, internal controls, benchmarking, etc. Ask them what changes they have seen within a particular industry. Auditors appreciate these types of questions and want to help.
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