The prospect of an independent annual audit of your company accounts is unlikely to trigger delight! An auditor needs to delve deep into the inner workings of a company, and it may feel as if you’re being presented with a long list of extra work at the end of each financial year.
But this exchange needn’t be too demanding for your firm. By taking some simple measures throughout the year, you can ensure that your annual audit is as seamless and effortless as possible and obviously it has the added value of being best practice for running your business.
Perform year-round reconciliations
Leaving it until the last minute to complete reconciliations for the bank, debtors, creditors, fixed assets and provisions will prove a sure-fire way to prolong and complicate an annual audit. To avoid this, we recommend that your finance department completes reconciliations on a quarterly or monthly basis. This will flush out any anomalies early on, leaving you plenty of time to fix them prior to the start of the annual audit.
Address potential complications throughout the year
If your company inputs an unusual or new transaction that your auditor is likely to question further down the line, don’t wait until your financial year-end to address it. Give your auditor a call and provide them with the information they need to make sure it has received the correct accounting treatment. This way you avoid having to backtrack through months of documentation to explain yourself at the end of the year. At Bracken Rothwell, we are happy to assist our clients with such questions throughout the year, not just at the year end.
Ask for the prepared-by-client list in advance
Just prior to your audit and after your financial year-end, your company should receive a “Prepared By Client” (PBC) list from the auditor. This will detail much of the documentation that the auditor requires for the audit and is likely to be quite extensive.
It will typically include requests for documents such as the trial balance, bank statements and reconciliations, inventory records and any other pertinent documents. This can take a long time to compile in one go. By requesting the PBC list in advance, you can incorporate fulfilling these requests into your year-end processes. This will avoid unnecessary duplication of work whilst ensuring you have everything to hand when required.
Don’t leave anything to chance – ask questions
Once you have the full PBC list from the auditor, examine it to make sure that you understand everything that is requested of your company. If there are any items that you don’t understand, seek clarification prior to the start of the audit. The auditor will be happy to field any questions that you may have, and consulting with them ahead of schedule could even help you identify a more efficient way of providing the information.
Plan around the annual audit
Set aside plenty of time for the audit and ensure that all of your key staff are available when required. This means making sure that your finance and accounting staff haven’t booked time off during the audit, and that they generally have a quiet calendar when the auditor is carrying out fieldwork.
You will have provided much of the documentation requested by the auditor prior to the actual audit. However, in order to gauge a comprehensive understanding of your company, the auditor will request additional information and details behind the figures. Not being able to answer any queries promptly will inevitably prolong the process.
Go digital for your annual audit
Thanks to the emergence of online accounting and invoicing software, it’s now far easier for firms to document and categorise documents that will be required in preparation for an audit. Much of this is automated, meaning less work is required of your finance department.
Alternatively, you can store your documents digitally by scanning them and uploading them onto the cloud. This means you have the information you need readily accessible online, rather than having to rifle through filing cabinets come your financial year-end.
If you need any help or advice with going digital please give us a call, Bracken Rothwell would be happy to give you the benefit of our experience when choosing your digital solution.
Keep tabs on problems arising
Typically an audit firm will often have agreed to a fixed fee based on the expected time required and level of staff needed to do the job. If the auditor finds a problem, do not shy away from asking if the extra work will affect the level of the end fee. Also highlight possible problem areas early in the planning process to ensure that the auditor is aware of them and has time to factor them into the audit work carried out. Surprises found late in an audit can lead to increased work and delays to sign off.
Where there’s change there’s risk and potential cost
Audit work should focus on particular areas of change since this is where the biggest opportunity lies for errors to be uncovered or made. This includes changes in staffing since new staff may misunderstand processes, or uncover issues buried by previous employees. Highlight all changes to the business clearly in the audit planning process to ensure the auditors target their efforts appropriately and any cost effect is minimised.
Guaranteed assurance with Bracken Rothwell
By raising a red flag to any potential problems and helping with any required amendments, an audit can offer unparalleled value to a business. At Bracken Rothwell we believe in getting it right first time, we provide an efficient, comprehensive service which means less legwork for our clients and focus on providing solutions to their problems.
If you are in need of Audit support please get in touch with Adam Gavin.