Oh no! Your bank called you this year and told you that you need an audit for your business to renew your line of credit. A feeling of horror sweeps over you since you haven’t been through this before or perhaps it has been a long time. However, it doesn’t have to be a horrible experience.
The key to surviving an audit is planning and communication. As an experienced auditor when I reflect back on audits that haven’t gone well it always comes back to planning and communication. As a client being audited, you can have a big impact on the process. Insist that your auditor communicate with you and include you in the planning process. For your part, a key element is a detailed “prepared by client list” (PBC list) from your auditor. Don’t ignore that list or procrastinate. Instead, as your team is closing your books, use that list as your shopping list and knock out the items as soon as possible. Make sure the items are as accurate and complete as possible.
A good auditor should use the PBC list and work out a timeline with you. To make life easier on all of you, make sure you plan according to that timeline. A good timeline should have about 80% to 90% of the items available well before your fieldwork begins and be as close to 100% done as possible when fieldwork does begin. If there are items that will require confirmations to be sent, the auditor should request those items well before fieldwork. This allows time for proper responses and for items to be returned prior to fieldwork commencement so that the flow of fieldwork is not interrupted. The biggest frustration for an auditor and the client is when fieldwork begins and neither the client or the auditor is truly prepared because information isn’t available to audit.
Once fieldwork begins, one of the biggest misunderstandings is that the PBC list is an end-all list. The truth is an audit is a very iterative process like peeling back the layers of an onion. The PBC list will be a living document throughout your audit and should be used as a tool to knowing what has been done, what’s left to do, and what are the necessary follow up items. As a client, always ask questions and understand that your auditor wants to get the audit complete for you in the time provided. Don’t be afraid to ask why, don’t hold back information and be prepared and over-communicate with us. Before you know it, the questions will end, report drafts will appear for approval and an audited financial statement will head to the bank which will return your life back to a hectic normal.
It sounds too simple, but the iterative process of planning and communicating using the PBC list as a tool can make your audit feel like a breeze.
At Hall & Company, our auditors are tasked with being ahead of the curve on all of our engagements. This involves over communicating, planning early and using the PBC list as the tool it is meant to be and our ultimate goal is to make the audit process go as smooth as possible. If your auditor or accountant isn’t doing that for you, then we’re probably the right firm for you. Give us a call!