Preparing for an Audit: Are You Ready?
From a business perspective, an audit can be seen as disruptive to the day-to-day operations. The delay in operations caused by an audit can be compounded if you’re not ready for your auditor.
Here are a few helpful tips to prevent a lengthy disruption when preparing for your company’s yearly audit.Purpose of an Audit
An audit by a CPA under generally accepted auditing standards provides credibility to your financial statements, which makes them more useful to banks, investors, vendors and other interested parties.
In turn, CPAs must verify that the financial statements are supported by a concurrent general ledger including appropriate adjustments, such as depreciation. An auditor must verify that current accounts, like cash, receivables, prepaid and payables, are reconciled to appropriate detail.Management Responsibility
The financial systems and documentation are the responsibility of management. For the auditor to do his job, the reconciliations and adjustments need to be completed by the business before the audit starts. For the audit process to achieve its objective in a cost effective, efficient manner, the business owner must be sure his accounting function is applying appropriate internal controls and procedures. If these systems work appropriately, there is no reason an audit could not start within 30 days of the fiscal year end.
Prior to starting the audit, your CPA firm will provide an interactive list of documentation and other requirements. This will usually be accessible through an interactive portal.Assign a Knowledgeable Person to Coordinate Necessary Information
It is very important to make sure an officer or management level employee and accountant have a comprehensive understanding of accounting policies, the yearly financials and major events from the fiscal year being audited. They must also be dedicated to making sure that the auditors’ questions are answered, and the documents asked for are delivered in a timely fashion.
This is a great way to optimize your face-to-face time with your auditor. Having employees that are knowledgeable about the financials and why there are variances from the budget and prior-year information can help the audit move along at a faster rate.Be Proactive
An audit is most effective when it is completed as close to year end as possible. An easy way to shorten the length of the audit is to be proactive. Don’t wait for your initial meeting with an auditor to begin working on the end of year financials and developing an understanding of the major events for the year.
The most effective and efficient audits occur with businesses that attempt to deliver all documentation as soon as an auditor has requested the information or before the auditor even asks for it. Think about what an auditor has asked you for in previous years and what questions they might ask about specifically for the past fiscal year. You might not be asked every question that you come up with, but it is better to be over prepared then under prepared.The Importance Of Being Prepared
Your auditing firm will do everything they can to meet your timing requirement. Please do not reschedule, if at all possible. Rescheduling causes considerable logistical issues and ultimately requires more time for both parties. We can help expedite completion once we are on site.
Let’s get started!
Ryan Skuce joined Earney & Company, L.L.P. in 2003, and became a partner in November 2013. He works extensively with physicians, medical practices, and large medical groups. Ryan has experience in accounting and tax services including financial reporting and analysis, technical support, cash flow planning, physician compensation strategies, and medical practice strategic planning. He also has experience in the areas of accounting and tax for a variety of for profit and nonprofit clients. Ryan is currently a member of the American Institute of Certified Public Accountants (AICPA) and the North Carolina Association of Certified Public Accountants (NCACPA). Ryan works with his clients on evaluating operational and technical issues. He provides back-office accounting support, and recommends and assists in the implementation of ideas to cut overhead costs and streamline operations. With an in-depth knowledge of existing and proposed tax laws, Ryan often advises companies on tax deferment or savings through proactive structuring of transactions. He also assists his clients with Internal Revenue Service audits. He received his Masters of Science in Accountancy from UNC-Wilmington and resides in Wilmington, where he enjoys playing hockey with a local team.