Organizations everywhere are beginning end-of-year preparations and starting to plan for 2021. While year-end activities can seem daunting, the experts at SST are here to offer recommendations and guidance to help your organization’s processes operate efficiently and accurately.
1.The audit process should begin with communication between the auditor and the client prior to the fiscal year-end. Arrange a meeting with your auditor to discuss any changes related to the following areas:
- Activities of the entity
- Reporting requirements
- Required implementation of new accounting standards
2. After this discussion, the auditor should provide an engagement letter which includes the fee estimate and date for the start of fieldwork. This conversation will begin the process of establishing a timeline for the audit. In addition, it will bring to light any new significant entries that may need to be recorded before the year-end close to implement any new accounting standards.
3. Next, the auditor should provide a list outlining the schedules and documents needed for the audit. Some of these documents can be provided prior to year-end, but others cannot be finalized until the year-end close is complete. Most audit firms use portals where documents can be uploaded quickly and securely at any time by the client and viewed by the auditor. Documents auditors may also request access to the following:
- Articles of incorporation and bylaws
- Employee handbook
- Accounting policies and procedures manual
- Organization charts
- Loan agreements and lease agreements
4. The audit client should consider assigning each item on the request list to a responsible team member with a due date. This will help ensure all documents are available for the auditor at the start of fieldwork. If the audit client feels any of the documents/schedules are not needed or has questions regarding preparation, they should contact the auditor for clarification as soon as possible.
5. Once the year-end close is finalized, the client can begin the review and reconciliation process. This includes a review of schedules and workpapers to determine if the balances agree with the trial balance. Any differences should be reconciled and resolved prior to fieldwork, if possible. This process is imperative to ensure a smooth audit with fewer adjustments. In addition, the client should be prepared to explain variances from year to year and from actual to budget.
6. Prior to fieldwork, the client should ask how many auditors will be working in the office, if in-person. The auditors will need adequate space to work and will most likely require internet access. Client staff should be available to answer any questions the auditors have and provide additional schedules and supporting documentation. This will increase auditor productivity and eliminate time spent waiting for client responses and documentation.
7. Upon completion of fieldwork, the auditor should provide the client a list of any outstanding issues or documents needed to complete the audit, if any. Again, the client and auditor should communicate the dates that finalized financial statements are needed.
Finally, communication prior to and during audit fieldwork is critical to a smooth and efficient audit. Implementing the above processes can help eliminate a significant number of adjustments, reduce audit fee overruns and ensure deadlines are met.
For more information about the auditing process or to receive a quote, contact SST today.