Preparing for an Audit
There’s a lot to know about audits, but all of it is quite understandable and approachable if you work with the right auditor, and most of all, if you work with the same auditor over the course of several years. The more you work with the same auditor, the better they understand your business and the more your business will benefit. Your auditor is an indispensable resource and can help you identify opportunities for improvement, resulting in more effective processes within your business.
The audit is an essential tool to make sure you haven’t overlooked a single detail when it comes to your company’s financial health. To initiate the audit, your entity will file a Request for Proposal (or engagement letter) with an accounting firm. The engagement letter will serve as a basic outline for the audit and generally includes a description of services to be performed, what your staff will be responsible for, fees charged for the audit and related work, and the timeline for completing the audit.
So, how do you and your non-profit, company or agency prepare for an audit? Amatics recommends a few steps here.
How to Prep for an Audit
2. Designate a liaison. While senior management should be made available throughout the process, choose a staff member to act as a key liaison with the auditor. This person can obtain whatever books and records will be requested and can respond to questions throughout the audit.
3. Prepare documentation. This means getting your books in shape. Pulling together your financial records saves all parties time and money. Ensuring your records are up-to-date, accurate, and organized will make the job much easier for the auditor and your team. Most of the information auditors will request are basic, everyday things that your company employs as part of its standard accounting processes. Ideally, you’ll be able to give the auditor a three-ring binder filled with a full set of tidily organized financial statements for the year.
4. Communicate. Ask the auditor any questions you may have. Tell them about areas with which you’ve struggled with your business, as well as any other concerns. Make the auditor aware of any outside consultants, regulatory agency inquiries or future plans. Provide related reports and correspondence.
Planning, prep and communication will ensure your audit is completed as efficiently as possible. So, rather than begrudge, dread, or worst of all, avoid, an audit, talk to your accountant about how they can help you embrace this opportunity to improve your business.