The financial year-end can be an overwhelming and stressful time for the audit function. Amy Cradock sets out some steps you can take to help lessen the load and ensure an efficient financial year-end.
A well-prepared audit can help to minimise the risk of missed reporting deadlines, added costs and the demands on management. Here are some steps you can advise clients to take when preparing for an audit.
Set out a clear project plan
In advance of the financial year-end, meet with your auditors or clients, and work out a clear project plan for timelines and deliverables. This can act as a tracker throughout the audit process.
Allocating responsibilities
A critical part of audit readiness is allocating responsibilities internally. This includes scoping the level of resources and expertise necessary and setting a timeline for project management.
Documentation and filing
Advise clients to keep all documentation in a secure, easy-to-access location to avoid a scramble when the auditors arrive.
They should keep track of debt agreements, leasing arrangements, lawsuits, complex transactions, technology modifications, and contracts with major customers and vendors.
Don't leave everything until year-end
The financial year-end can often be hectic when trying to complete month-end and year-end reconciliations. Avoid leaving everything until this very busy time to prepare for your audit.
Complete reconciliations and prepare any required information for the audit in the lead up to the year-end.
Once you do reach year-end, you will only need to complete reconciliations from that month and any additional required accruals. By doing the work in the lead-up to year-end, you will be able to conduct the audit efficiently and with the proper resources.
Identify significant changes
Organisations preparing for an audit should consider how their financial situation has changed in the past year. For example:
- Are there new projects or agreements?
- Is there more revenue coming in?
- Have you accesses grants or government supports over the past 12 months?
It is also important to note any non-financial changes in the company. Have internal control systems been altered, or have new processes been introduced? Organisations should note these changes as they could indirectly impact the fiscal findings for the financial year.
Incorporate lessons from the previous year's audit
Most year-end audits will have adjustments made and management letter points. These can be a great starting point to help draw more accurate conclusions for the current year's audit.
Schedule a planning meeting with those performing the audit and other decision-makers to see how you can navigate the previous year-end recommendations and improve the accuracy of this year's audit.
Communication
The auditor and the client should be in constant communication.
Frequent communication is key to ensuring queries, questions and requests are addressed promptly to prevent delays while minimising the pressure on everyone.
I recommend weekly calls throughout the audit process, with an audit project plan and the use of a tracker to help oversee progress.
Inventory
For companies performing a year-end physical inventory count, my advice is to plan carefully and educate your teams.
Consider counting before year-end and doing a roll forward, with approval from the auditor. Like your year-end sales cut-off, you should also have a solid process in place to ensure proper shipping and receiving cut-off.
Amy Cradock is Director of Financial Accounting & Advisory Services at Grant Thornton Ireland.
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