Working on the audit side of public accounting for 10+ years, I have performed audits of countless sets of financial statements. There are various reasons that a client may need this service, ranging from fulfilling a periodic requirement in their debt agreements to providing potential or existing investors with a full disclosure of the Company’s financial information. Whenever I am engaged to perform an audit, my top-of-mind focus is on making it a positive experience for all parties involved with the successful outcome of producing a quality set of audited financial statements.
What Does a Successful Financial Statement Audit Look Like?
I have found that certain things contribute to the success of a financial statement audit. This partial list of eight criteria is a good starting point:
- Communicate throughout the year
Rather than waiting until right before the audit, inform your accountant in advance of any unique transactions or activities (debt transactions, related party transactions, large capital expenditures, acquisitions, etc.) that may require complex accounting. This helps to avoid complications and delays during the audit.
- Maintain documentation
Documents considered audit “evidence” include any important email correspondence, meeting minutes, notes about oral conversations, detail to support accounting transactions and the like. Electronic records are a best practice, as they can be made readily available to your auditor when requested.
- Perform internal reconciliations
Before providing audit evidence, do your own reconciliation of reports and details supporting general ledger accounts. This gives you greater confidence in data accuracy and preparedness going into the audit.
- Perform analytical reviews
This analysis should be a comparison of current period financial information with historical financial results. Then, be prepared to discuss the reasons for the changes or fluctuations, year over year, on an account-by-account basis.
- Assign and designate time and resources
Realizing audit responsibilities are above and beyond daily accounting jobs, it is crucial to dedicate the proper personnel and allow adequate time to prepare for and complete an audit. It also helps to provide your communication preferences and availability to the auditors in advance of the audit for scheduling purposes.
- Be familiar with new auditing or accounting requirements
This is where it pays to have ongoing communication, so you can ask questions about any relevant changes to the accounting standards or auditing requirements and have discussions early on about what related information will be required during the audit.
- Read through new or amended formal agreements
If any new agreements have been entered into or changes made to existing agreements, be sure to read those details and be ready to answer questions during the audit. This may include debt agreements, lease agreements, equity agreements, related party agreements, etc. Work with your accountant to identify the terms (including any required covenants) that will need to be disclosed in your financial statements. Also, provide these agreements to the auditor as soon as they are available—both to satisfy the audit evidence requirement and so the auditing team can read through the agreements to ensure that the related accounting is in accordance with the guidance.
- Revisit the prior year’s audit results and recommendations
Take a look at suggestions that were made by last year’s auditor regarding ways to improve and streamline business processes to optimize the audit process. Have those ideas been implemented? Can they be implemented before the next audit begins? If so, put new procedures in place to ensure a smoother auditing experience.
Do you need audit assistance? Contact our Houston audit team!
Undergoing an audit of your company’s financial statements does not have to be an intimidating or stressful experience. In fact, it can be a learning opportunity if approached with a positive attitude. Working with a firm that wants you to be successful in completing the financial statement audit is also key. While there is no perfect audit, we can strive towards making it as accurate as possible (and as painless as possible) by being prepared and having a free flow of communication between both parties.
The Weinstein Spira auditing team is here to address your concerns and assist with financial statement audits in a caring, thorough manner. Let’s talk about it. Contact us to discuss your audit concerns.