Audit readiness is essential during these turbulent times. Giles Mullins looks at what you can do to prepare for your annual reports and how we can help.
We're expecting a challenging reporting season, due to the ongoing practical challenges caused by recent events. Going concern, significant judgements and estimates, and subsequent events will continue to come under scrutiny and audit readiness is key.
This, in turn, will increase the level of work required by the auditor to gain sufficient and appropriate audit evidence over certain balances and transactions. Working with our non-audit clients we've seen some patterns that you can exploit to see you through these turbulent times.
Consider the findings from your previous audits as soon as you can. Are you confident that you have addressed the issues leading up to the prior period audit adjustments and recommendations?
Once you've seen how previous audits have gone and what could be done better, you can lay out the best way towards audit readiness. Now, you need to apply robust project management to ensure you stay on the path, particularly where delays are possible.
Taking your audit readiness plan to stakeholders
Once you have a plan, take it to your stakeholders, both internal and external, to make sure everyone is on the same page. Don't forget colleagues from outside of finance. Make sure they have seen the timetable and are available to speak to the auditors.
In the run up to preparing for your audit, step back and consider what's new and what's changed during the year. Auditors write to third parties seeking confirmations of balances, transactions, and arrangements, including your customers, banks, and solicitors.
Have these contact details, and any information of new arrangements for audit readiness available to the audit team.
Preparing these technical papers will help the auditor understand how you've treated areas of complexity, estimation and judgement and should be completed when reviewing accounting policies.
Updating your audit readiness documentation
Next, update your forecasts and stress testing to help guide your Going Concern review and disclosure wording. Take a critical look at your balance sheet and income statement to ensure you have supporting evidence for all your reconciling items.
Also, look at your meeting minutes and make sure you're documenting and sharing information that's critical to the governance of the business.
It’s important to illustrate to auditors that you have good control over all of your trading ledgers. Are you comfortable when debtors are circularised, the response will match your ledgers, and have you updated your bad debt calculations?
Ensuring you have captured all your liabilities is critical and a strong purchase invoice system captures costs and reconciles to your supplier statements. Journals in the finance system should have a description, evidence, and approval.
Where we can help
We know that facing an audit can be a stressful situation for any finance team. We can help prepare you for audit and support you while the audit is ongoing, by:
Carving out deliverables at year-end
Managing the audit process
Acting as an audit triage for queries while you deal with business-as-usual (BAU)
Or, acting as BAU while you deal with the audit process