No matter what time of year it is, there’s always an organization facing an audit and a CPA firm helping them through the process. And because most audits are constrained by regulatory, tax, and other strict deadlines, the pressure’s always on to get audited financial statements finalized and out the door.
So why, after camping out in your office for several days, do auditors not have a final product? What causes seemingly unnecessary delays? What’s really going on behind the scenes?
An Overview of Success and Speed
Effective communication and timeliness are perhaps the biggest themes in what we consider smooth, fast, and easy audits. Throughout the entire process, keep checking in with your audit team on these key indicators of success. For example, ask yourself if you have consistent communication with your auditors, and whether request lists are received and answered promptly and in full.
The Many Steps to Completing an Audit
Though not every auditing firm will work this way, at Lemler Group (now merged with Donovan CPAs), we break our audits into two pieces: preliminary and final. Though we follow the same steps as everyone else, doing preliminary allows our auditors to perform almost half the work before the client’s year end, making the final phase shorter and easier to complete by crucial deadlines.
Preliminary Work
Performing an audit requires more than just checking numbers on a spreadsheet; auditors come to understand how your organization operates — its goals, mission, and vision — and the internal controls it uses to ensure its finances support operations fairly.
In addition to a few tests and document collection, auditors can start this part of the audit process prior to the end of the fiscal year. Though perhaps unique to our firm’s way of handling things, here’s how Lemler Group does preliminary work:
- Roll forward or create a new client binder in auditing software, removing documents that only pertain to the previous year.
- Prepare a request list for documents available before year end. Each one is tailored to the client.
- Insert documents into audit software, filling placeholders and establishing links between spreadsheets, supporting evidence, and the fixed asset database.
- Perform tests on accounts and transactions to ensure the proper internal controls operated as designed.
- Anticipate issues, changes, and suggestions to offer client during the final phase.
- Perform a risk assessment to determine which areas to test during final and how to test them.
- Plan and/or schedule final audit with client.
Though these tasks can seem tedious, they are the necessary underpinning for the bulk of the audit. Whether these steps occur before or after year end, they must be completed before the final phase, and delays in communication will only compound as the audit progresses.
To make your audit quicker, start preliminary as early as possible. As soon as a request list comes in, answer it: this moves your firm to the top of the list for first-come-first-served.
Final Work
The crux of an audit, the final phase seeks to confirm the numbers reported in the organization’s financial statements are accurate and arose from proper use of internal controls and any additional compliance requirements. This is how that magic happens:
- Send a final request list, asking for the trial balance, general ledgers, bank statements, and other required documents.
- Enter these documents into the auditing and supporting software, creating a network of linked values, evidence, and formulas.
- Perform an audit on each number in the trial balance to ensure its value is reasonable and accurate.
- This is the step where adjustments occur. If certain transactions were entered under the wrong category, the debits and credits will change to reflect a more accurate representation of where money came and went during the year.
- Ask questions and request additional supporting documents, if necessary.
- Get approval from board of directors, owners, and/or those in charge of governance for the organization for the audited financial statements.
- Submit audited financial statements and related documents to client, regulatory agencies, and other necessary parties.
Perhaps even more so than in preliminary, the final phase of the audit includes a large amount of back-and-forth communication. The faster your auditors are at responding to questions, and the more freely you can ask them, the faster your audit may move along.
Speed is Service
Quickness is not always about competence when it comes to auditing. There are dozens of sticking points at every step of the process that have nothing to do with the numbers themselves or those in charge of auditing them. Instead, it’s about the quality of the relationship and the trust you either build or break at each stage in the process.
At the end of the project, the two themes that drive success relate directly to the quality of service your auditor provides. If the firm is hard to reach, the team inconsistent and under-prepared, or the individual staff members difficult to work with, your audit will effectively slow to a crawl. That’s why the Donovan team strives intentionally to be timely, relational, and prepared with every client. We don’t charge for conversations with our team, and we’re always here to serve.
Contact us today to see how we may be able to serve you!
