Dreading your annual audit? Don’t!
There’s no denying, an audit can be a hassle. But it doesn’t have to be. And yes, it can throw up the odd unpleasant surprise – but in reality, it shouldn’t.
So, how can you take the surprises and the hassle out of your annual audit?
It’s simple: Be prepared.
Want to learn how? Read on.
Why you must prepare for an audit
An audit can be stressful and disruptive if you fail to plan for it. It will take longer and cost more. You also run the risk of getting an unfavourable opinion.
What information will the auditors ask for?
The auditors will look for information to assess the following:
- Existence and occurrence – that assets and liabilities exist, and that transactions recorded occurred and pertain to the business.
- Completeness – that all transactions and events have been recorded.
- Accuracy – that the amounts and other data relating to recorded transactions are correct
- Valuation – that assets, liabilities and equity have been appropriately valued.
- Presentation and disclosure – that assets, liabilities, income, expenses and other information have been properly presented.
What you should do throughout the year
Keep in mind, as you carry on your daily transactions, that there will be an audit at the end of the year. Some of the things you can do are:
- Improve your processes – try to define and document procedures in your business. You should aim to continuously improve your processes.
- Organize your filing systems – make sure that you can easily find documents.
- Document all transactions – ensure that you get receipts, invoices and other documents to support the transactions. This should be habitual.
- Keep records up-to-date – make sure that you update and reconcile your accounts throughout the year.
- Review your management and budgets throughout the year – make sure you can understand the reasons for any changes.
- Keep minutes – record important meetings and decisions.
- Address issues – make sure that you address any issues and recommendations arising from the past audit.
And remember, if you’re entering new transactions, ask your auditors about accounting treatment if you’re not sure.
As you get to the year-end
As you come to the end of the year, some of the things you can do include:
- Plan all the activities needed to ensure that you complete your accounts on time.
- Set up a planning meeting with your auditor to discuss the audit. They will discuss in a broadway their approach, the timing of the audit, and their fee. They will ask questions and request information to plan the audit.
- If the auditors share their audit plan with you, ensure you discuss it with them. Ask questions and take any action necessary to be ready.
- Ask the auditors to send you a list of the documents they will need for the audit. They should send it, so you have enough time to get them ready.
At the year end and during the audit
Follow these steps:
- Appoint a person to liaise with the auditors.
- Close, reconcile, prepare and review your financial statements.
- Prepare the documents requested by the auditor and send them to him before the audit begins.
- Get and sign the engagement letter. The engagement letter is the contract for the audit.
- Ensure that all your staff who have anything to do with the audit are available to auditors. They should respond to questions and requests for documents without delay.
Audit preparation helps to reduce the cost of the audit and makes it beneficial.
From my experience, in the Ghanaian market, many businesses do not prepare for their audits. This increases the time spent by the auditor and results in higher audit fees. It also increases the risk that they may get an unfavourable opinion. Implementing our suggestions can improve the situation.
Written by Emile Vorgbe
Emile is a manager in the audit unit of SCG Chartered Accountants.