Audit fee is determined by auditors’ time spent on your engagement so the better you are prepared the cheaper the project will cost!
Audit plan should be prepared prior to the kick off. Apart from thefinal deadline it should contain other important targets. Would you like to have weekly meetings to monitor the audit status? Do you expect preliminary results after 3 weeks? When should you deliver required documents and when does an auditor want to set meetings with your accountants? List of important dates should be specified along with the engagement letter or even added as an appendix.
Auditor sends you a list of required documents with a deadline to deliver (PBC list, short from Prepared by Client). Apart from obvious requirements like a general ledger, they may ask for documents that may seem unrelated to audit or too sensitive to hand on (like employee salaries). Instead of avoiding the requests it is better to contact your auditor right away and discuss those PBC items. Any delay caused by you (like not delivering employee salary list) can be considered as a failure to meet the deadline and you may be additionally charged for auditors’ overtime.
Auditors are boned by non-disclosure agreements so conveying any sensitive data is safe. But it is possible to negotiate a limited access (auditors only view the information, they can copy it but you do not send the documents) or ask for only the engagement partner or manager to have access to it. Always erase personal data (employee name and surname, date of birth, etc.) before sending documents.
Sometimes it may seem that you are asked for documents unrelated to the engagement. But to swiftly pass the audit suppress your surprise and just deliver what the auditor is asking for. Auditorsare like detectives, they search for more than meets the eye. Not until a large amount of information is analyzed can they identify what is missing and where are mistakes. Those additional documents shed additional light to the company’s financial situation and give a better overview.
Often auditor asks to code required documents in accordance with the PBC list, so they can find a specific document without opening every file. Deliver every requested document. For example, an auditor asks for A1) list of suppliers; B2) payables per each supplier; C3) aging table of suppliers’ payables. Companies usually send one complex file C3 that includes aging payables per each supplier (contains all three requested information). It is better to send all 3 documents A1, B2 and C3 (can be copies of the same document). Or one document but coded „A1, B2, C3 Aging payables per each supplier”. Completeness of delivered documents is monitored by PBC codes. Even though file C3 contains all requested information, lack of files A1 and B2 can be viewed as failure to deliver all PBC items.
Remember that Excel is auditors’ best friend. Deliver all numeric data in Excel format. If auditor must format data themselves which is time consuming, they can charge us extra for delays. If your general ledger and trial balance cannot be exported to Excel, let the auditor know in the Letter of Inquiry. Therefore, they can include extra time in their timeline assessment and you will avoid extra charges.
Finally, it is crucial to timely response to auditors’ queries, most often by email. Auditors prefer responses in writing because your emailsare considered a better audit evidence then minutes from a call. Delayed answers can prolong the engagement because your response might be imperative to continue audit work. That is why answer auditors’ questions as soon as possible.
Benefits from audit
Audit objective is to assure financial statement’s readers that all data presented are reliable, relevant and fairly represent company’s financial position. Unqualified opinion increases the company’s credibility, rises chances to obtain financing from banks, assures suppliers about liquidity and investors about profitability. Your company is more credible to the market.
Auditors look under the hood of your business. It may be irritating but that is just the nature of audit. No point in being annoyed, see new opportunities that audit offers. Auditors talk to your employees and evaluate company’s processes, like how journal entries are made, how receivables are aged or how inventories are monitored. Thanks to this you can check whether your employees actually perform their tasks in accordance with company guidelines.
Moreover, auditors have years of experience and know well your industry. Ask them for tips to improve your processes and increase effectiveness. Maybe there is a better IT system to manage inventory? Maybe your company has a control in place that is time consuming, minimally effective and there is a better solution?Advices like this are not the audit goal so have a friendly relationship with your auditor to receive such tips.
Of course the main goal of an audit is to examine the financial statement. Do you correctly apply the Accounting Act (or IFRS), do you reliably present all information? Fairly prepared financial statement is in your best interest – based on in you create a business plan and development the strategy. A good strategy starts with correctly identifying the factual state. Because many of us are emotionally attached to the company,the judgement can be sometimes clouded. Luckily an auditor comes to the rescue!