Year end has come and gone. Your auditor is contacting you about the upcoming audit. Are you ready and anticipating the audit or do you dread it? You probably feel like you are back in school and prepping for an exam. Read on to make sure you make the grade.
The day to day transactions, internal control documentation, and filing of supporting documents are the material you will be tested on.
- Don’t procrastinate. Perform monthly reconciliations of your accounts. If there are any discrepancies you will be able to identify them and make corrections more timely.
- Make sure accounts are complete. Consider accounts receivable, promises to give, in-kind donations, payables, and other accruals that may need to be recorded.
- File and maintain supporting documentation in a way that allows for you to quickly find requested items. Make sure key internal controls are documented. If you are monitoring a procedure, document your review with your initials. If it’s not documented, it’s not done.
- Ask questions! There are no dumb questions. Reach out to your auditors throughout the year for guidance on various accounting and internal control issues.
Prepare and Study
The time has come to prepare for the audit. The prepared by client (PBC) list includes the items that you will be tested on. The auditor will provide this prior to the audit to help in focusing your studies.
- Don’t procrastinate! Go through the list and make sure you understand what is being requested.
- Final reconcilations. Reconcile all general ledger accounts. Supporting, detailed schedules provided for the audit should agree with the trial balance. Any variances should be identified and corrected prior to the audit.
- Provide the requested items as soon as possible, but no later than the agreed upon due date. Make sure the provided documents are in the electronic format requested (i.e. trial balance in excel) and are easily identifiable as to what it is supporting. Referencing the PBC line item is helpful.
- Ask questions! Again, no dumb questions. Your questions will let you streamline your preparation and provide the right information.
It’s time for the audit fieldwork. The test will cover your fiscal year.
- Please provide all remaining PBC items at the beginning of fieldwork. Don’t make your auditor request those items throughout the audit. Again, provide the documents in a manner that allows the auditor to easily identify what the document is supporting.
- Pop quizzes. Auditors may ask for items not previously requested, make inquiries, and ask for additional support. You may be asked for something that you haven’t been asked to do before.
- The results of the exam are provided in the Independent Auditor’s Report and if necessary, in a management letter. Management letter comments should be included in your coursework for the next fiscal year.
Did you make the grade?
After the audit, self-assess. Look at what went well and what things could be done throughout the year to make the preparation and exam go more smoothly.