“I can’t wait for our audit!”—said no one ever. Yes, as auditors, we get it: an independent audit of your organization’s financial statements is probably not an event you anticipate with glee. But with a little preparation, the audit process can be—dare we say—downright painless. Here are three simple things you can do to make life easier during your next audit:
- Establish an organized filing system.
While an auditor won’t look at every transaction, they could look at any transaction. Preparing for your audit begins with keeping organized accounting records throughout the year. If your accounting records are unorganized (e.g., stashed in a box) or impossible to find, it won’t be a quick and easy process. At a minimum, neatly file away documentation of expenses, revenues, and significant agreements such as leases and loans. Also, be sure to document any internal approval processes you have in place so the auditors can verify the transaction was approved. For example: a manager initials all the invoices they approve.
- Reconcile accounts soon after year-end.
When it comes to reconciling accounts, it pays to be proactive. Preparing detailed schedules of all balance sheet accounts will help you catch potential errors. You can also give these schedules to the auditors to support your account balances. If you’re not sure about an account, or if you’re unable to reconcile it, ask your auditor for guidance before they show up.
- Complete your auditor’s checklist.
Prior to your audit (usually around year-end), your auditor will provide a detailed list of exactly what he or she needs to complete it. Although it may be tempting to set it and forget it, don’t. Regardless of how organized your filing system or accounts are, you will need time to pull together schedules and find the necessary source documents. Completing as much of the auditor’s checklist as you can—as soon as possible—can help to prevent a stressful rush later.
You can never be too prepared.
Checking these three practices off of your to-do list is a great way to prepare for your next audit—if you don’t leave them until the last minute, that is. The more prepared you are, the more efficient your auditors will be, allowing your audit to be as quick and painless as possible. If you have questions about this topic or are feeling overwhelmed at the thought of preparing for your auditor, please don’t hesitate to give us a call.