Most accountants have a love-hate relationship with their auditors – they love to hate them. The yearly external audit is often met with feelings of dread because of the extra work and effort it takes. When someone is already busy and stretched to their limits, it’s a distraction from what are perceived as more pressing issues for the company. However, it doesn’t have to be this way. It’s all in the attitude you take toward the exercise. I actually don’t mind the audit. It gives me a chance to have someone else take a look at the health of the company, and the work I’ve done over the year, and give some validation to it all. When I get that seal of approval at the end of it, especially when the auditors can’t find any faults, it’s time for a mini-celebration!
If you fall into the camp I mentioned from the outset of this post, let me offer up some words of wisdom to turn the dread into a positive outlook and maybe not make your auditors your best friends but at least people you don’t mind running into.
Don’t delay
When you hired your auditors, you asked them to come in to review your books and provide their opinions as to the fair presentation of the financials you produce. They have a job to do and yours is not the only company they are auditing. If you are on a calendar fiscal year, there are a lot of other companies going through the same thing you are at the same time and the auditors are busy. They want to get the audit done. Dragging out the process is not to anyone’s advantage, yours or theirs. The quicker you respond to their requests for information, the quicker they can move on. Simple requests, and even not so simple requests, should not take days to address. Auditors will schedule their visits months in advance of actually arriving at your office so make sure to keep your calendar clear as much as possible so you can give them your full attention. I once had an auditor tell me I was one of their favorite CFOs because I got them the information they needed in a thorough and timely fashion. Help yourself by making their job easier.
It’s all in the preparation
Unless it’s your first audit, either literally or with a new firm, you should have a fairly good idea of what the auditors are going to ask for in advance. So why not set up schedules you know are going to be requested and keep them up to date throughout the year? What might take a few minutes each month to prepare could take hours if you leave it to when it is actually requested. This is not the most efficient use of your time and will lead to the delays I spoke of earlier. Also, look at your systems and utilize the features that will make responding to requests simpler. For example, does your accounting system allow you to attach electronic copies of invoices to the bill postings? If so, use it! When the auditors give you a list of invoices they want to see, you can quickly and easily access all of them with a few mouse clicks instead of sifting through paper files (and running the risk of nasty paper cuts).
Pre-audit
If you don’t enjoy the audit process to begin with, asking you to deal with the auditors twice might be bridge too far. But hear me out on this one. I started this a few years ago with my auditors and it has actually worked out well for both of us. My company is on a calendar fiscal year. Sometime around October or November, I will get a preliminary list of requests from the auditors mostly dealing with some of the more mundane things they will want to review. This might include copies of any major agreements entered into during the year or narratives on company procedures and controls. These need to be dealt with anyways and since I’m not in the throws of year end, this is a perfect time to knock these items out so the audit after closing the books is more focused on the financial aspects.
Talk to them
In the same vein as the pre-audit work, remember your auditors are a great resource for information and you should not be afraid to pick up the phone during the year if you are unsure of how best to handle something. Because of what they do, they are usually up to speed on all the new changes in the accounting standards and the auditors could save you hours of research if you are not familiar with the changes. It is far better to get an opinion upfront and do it right from the get go then find out months later you’ve doing it wrong and now have to deal with year-end adjustments and the subsequent fallout.
I realize that some audits are more complex than others but with the right attitude and preparation, the annual audit process does not have to be something that you or your team wants to avoid each year.