Preparing for your Financial Statement Audit

Audit time is your time to shine.  There is nothing better than showing someone that speaks your language (the auditors) what a great job you’ve done all year.  Below are some suggestions to let auditors know that you are on top of your game.

  • Prepare the financial statements, in your accounting system, that match the audit report.  This will improve your auditor’s (and your Board’s) confidence in your accounting system.
  • Prepare the notes to the financial statements.  Remember, the auditor’s job is to audit your financial statements.  You should give them the statements, including disclosures.
  • Document your accounting processes, especially the more complex processes.  Experience shows that flow-charts communicate your processes very effectively.  These documents demonstrate to the auditor that you have been deliberate in your processes and controls.
  • Document your internal controls over cash activities.  One of our favorite tools is a segregation of duties flow chart.  This documents for the auditor that you have made thoughtful decisions to protect your most liquid asset.
  • Make year-end adjustments before the audit.  Don’t rely on your auditor to make adjustments.  Reducing the number of audit adjustments adds to your auditor’s, and your Board’s, confidence in you.
  • Make an audit binder.
  1. During the year, when you handle something unique or that will need to be seen at audit time (fixed asset purchase) make a copy for the binder. Come audit time it is easy to take stuff out that you don’t need,
  2. Make a work-paper for every balance sheet account.  Reconcile from the supporting documentation to the General Ledger balance for every account.  This is a wonderful place to let the auditor know why your accounting determinations were so smart (i.e. all year end accounts receivable were collected within 20 days, therefore no allowance for bad debts were established).

Remember, auditing is about risk; your job is to communicate to the auditor an accurate measure of your organization’s risk. If you need assistance with your audit preparations please give us a call.