How to Prepare for a Financial Statement Audit

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If your organization is required to have your financial statements audited, there are several things you can do to keep your audit interruptions—and fees—down. Based on our experience working with hundreds of audit clients over more than three decades, here are nine proven strategies for improving the process.

1. Get prepared. Auditors are always impressed by organized records, and the best way to get organized is to start with our audit materials list. Number the items on the list that apply to you and set up a folder, notebook tab, or pile for each item. Whenever possible, provide your documents as spreadsheets, word processing documents, PDFs, or other commonly used electronic formats.

2. Be predictable and consistent. Our auditors like it when records are ordinary and boring. So, if you have a group of month-end journal entries for depreciation, accrued payroll, etc., maintain them on one entry that looks the same every month. Keep your entries as ordinary, routine, and easily identifiable as possible, with every deposit, transaction, and invoice recorded in the exact same way.

3. Provide support for every transaction. Be consistent by including the same support (checks, deposits, journal entries) for each type of transaction, and make sure every transaction has the required approvals.

4. Document your approval processes—and stick to them. Make sure each of your approval processes will pass the auditor's tests. For example, if a disbursement requires a board signature, make sure it has one. 

5. Don’t turn an audit into an accounting engagement. You can’t do accounting work at the same time you’re going through an audit. For best results, get your accounting work done first—posting accruals, and depreciation, and making sure everything lines up. To prepare for your audit, hire an accountant to do your monthly or quarterly reviews—or ask us for a recommendation.

6. Insist on consistency. Contact your audit team ahead of time to learn who will be coming. Will they be the same auditors as last year? If not, it’s okay to push back a bit and request the same individuals be involved. The greater the consistency, the shorter their learning curve will be—and the less interruption for your operations.

7. Set up an audit committee. Creating and maintaining an audit committee for your company is a crucial tool in preventing fraud—also helps you save time and money with your outside auditor. The audit committee serves as a direct line of communication between your board of directors and the outside auditor. 

8. Internet connection. To save our clients time and money, we do our audit work in paperless mode. So if possible, please provide the audit team with a high-speed internet connection.

 9. Complete your own legal confirmations. Another effective way to save money on your audit is to assign a company employee to fill out the legal confirmations that the auditor will mail. 

By implementing the recommendations listed above, you can make your next audit go much more smoothly and with less interruption and expense. If you have any questions, feel free to contact us.