Do you feel that your audit process takes longer than it should?
Going through an audit is like tearing a Band Aid from your skin. The quicker you get it done, the less it hurts!
Following a few simple audit efficiency tips can help make the process quicker, more valuable, and less painful.
They may also help you keep your fees down, as audit fees (whether fixed or hourly) are ultimately based on the amount of time the audit firm spends on your engagement. The longer it takes, the more you’re charged!
Audit overview
Before we get into the actual audit efficiency tips, we need to recognize that audits are highly regulated engagements. Auditors are subject to extensive continuing education requirements and peer review.
In addition to conducting fieldwork at your office, requesting numerous documents, and drafting the audit report and management letter, audits also require a lot of behind-the-scenes work that the audited organization never sees.
Auditors must include significant documentation in their files: not only what they do and what they find but also why they do it. This can include numerous strategy memos, narratives and checklists.
Aside from this, audits involve collecting, analyzing and organizing a huge amount of data and documents from the audited organization.
This is where “human” and professional factors, such as auditor and client personalities, work styles, organizational skills and administrative prowess can make a significant difference to the amount of time required to complete an engagement.
Audit efficiency tips
1. Reconcile all balance sheet accounts monthly (or at least quarterly)
Preparing balance sheet schedules/analyses is a highly effective way to ensure that accruals and deferrals are properly made and that transactions are recognized in the proper period.
If done properly, this can help make audit preparation a breeze. It also helps ensure that interim financial statements used by senior management and the board for decision-making purposes are reliable, and reduces the number and severity of problems discovered during the audit process.
2. Periodically assess your risk of material misstatement
It’s important to look at the types of transactions that go into your financial statements, understand their relative level of complexity, and identify where things might go awry.
This will allow you to take steps to proactively address such risks before they become problems. More problems discovered during the audit process may translate into a longer and more expensive audit.
3. Make sure your files are organized
Whether you keep paper files in old-school filing cabinets or store documents on a cloud server, make sure there is a place for everything and everything is in its place.
4. Follow the PBC checklist
Before the start of your audit, your auditor will provide you with a PBC (or ‘prepared by client’) list of documents that are needed to get started.
The list is typically very detailed about which documents are requested and includes spreadsheet templates.
One of the best ways to achieve audit efficiency is to follow the checklist to a T (only ignoring items that are truly not applicable to your organization).
If the auditor provides example templates, complete them (or use comparable equivalents). When auditors receive information in a format that they are used to, the audit process tends to go smoother and faster.
5. Follow established protocol for document flow
These days, it is common for auditors to use web-based document portals to exchange documents. They tend to add efficiency to the process and can be more secure than email for transmitting confidential and sensitive information.
Make sure that you and your auditor are on the same page regarding how documents and data should be shared.
If your auditor is accustomed to using their file portal but you decide to transmit documents your own way (e.g. through email, Dropbox, or by mailing a USB stick), this may feel easier for you but the auditor may end up racking up extra hours to locate the information they need.
6. Ask your auditor if there is anything else….
In addition to the above, your auditor firm may have additional thoughts about ways to make your engagement more efficient. Be sure to check in with them early in the process whether they can offer any of their own audit efficiency tips.
The above tips should help you prepare for an audit that costs you less, goes more smoothly, and is ultimately less painful for your organization.
Those of you less familiar with the audit process may also want to check out our previous blog posts on who needs audits and when, and on general preparation for audits.
If you need assistance in arranging an audit, please contact us.
