When it comes to any business’s financial records, it is always necessary to make sure everything is reported accurately. Whether it’s an investor, customer, or the IRS questioning about your financial records, the last thing you want to have is a problem or lawsuit on your hands for inaccurate financial bookkeeping.
Financial audits are one of the best strategies to ensure the financial books for your business are updated and reported correctly. This is why we have put together a list of 8 keys to conduct a successful financial audit.
1. Make a plan
A very important aspect of any financial audit is going to be your organization and preparedness for the day of the audit. This is why having an efficient action plan is key.
Throughout the year, roles and responsibilities for financial asset preparation should be delegated accordingly and executed in a timely manner. By making this a year long priority, planning appropriately and setting reasonable expectations, the level of anxiety and frustration for any audit will be significantly reduced.
2. Delegate the work load
Financial audits involve a lot of specific data points and organization to pull off effectively; that is why delegating the work needed to produce all financial assets is so vital to the success of an audit. It’s recommended to evenly distribute all responsibilities to the appropriate employees and utilize a system of updates or calendar reminders to keep people on task and aware of deadlines. By dividing the work up and managing expectations, you can assure there is never overlapping, or redundant work being done.
3. Use a document management software
Having an organized records system is another key to a success. By choosing reliable document management software, you will be able to create and file all of your assets in one centralized location. Scrambling the day of or a few days before an audit to gather all of the needed documents for the auditor is not recommended. Instead by having a document management system, you will not only be able to locate all the necessary documents, but you will be able to speed up the actual audit significantly.
4. Address all changes in activity
Organizations see changes on a consistent basis over a fiscal year, that’s why keeping track of all these changes is essential for any audit. Whether you received a new grant of funding or there were new requirements for reporting, keeping a record of all of these changes will be potentially necessary information for the auditor to give an honest and complete audit. Any of these changes should be presented to the auditor before the actual audit during the planning and data collection phase.
5. Be available during audit and accommodate auditor/s
It’s typical during audits for auditors to frequently ask questions, so making yourself available streamlines the process and makes it more efficient as well as preventing delays. Also make sure to give the auditor(s) plenty of space to conduct their work. If you have a document management system, as mentioned in tip 3, you may not need to worry about any of the auditing to be done on location as the auditor(s) will be able to access documents remotely. This is not always the case, so always be prepared for an onsite audit.
6. Ask questions
It is always recommended to ask plenty of questions before audit fieldwork to avoid any delays. Never assume you know what an auditor is asking you for, double check and clarify to ensure nothing gets misinterpreted. Auditors are normally willing to help answer any accounting questions concerning abnormal transactions your organization might need help accounting for. If anything comes up during your documentation process make note of it and ask your auditor about what course of action you should take.
7. Do reconciliations throughout the year
By conducting reconciliations throughout the year, you will not only guarantee non-conflicting accounting, but if there are any issues that do surface, you will have plenty of time to figure out a fix before any audit is performed. Another benefit of performing these throughout the year is building the confidence of your team to take care of finances in an efficient and accurate manner every time.
8. Self-review before the audit
Once you have finished all fiscal year-end entries and are ready for your audit, take this time as an opportunity to do a review of the information recorded. Make sure to have all necessary information updated – a disclosure checklist is handy for giving you a list of items needed for your auditor. Make sure the amounts recorded match up or reconcile to the trial balance. Once you’ve reviewed this information, prepare to answer any questions regarding your finances that might come up in the audit.
If you are an organization that is considering Rochester accounting firms for your financial audit, consider contacting Davie Kaplan CPAs. Our one-on-one approach and personal commitment to your individualized situation serves as the basis for the long-term relationships we have established with all of our clients.