How to prepare for a successful annual audit

The prospect of an independent audit of your company accounts is unlikely to trigger delight. An auditor needs to delve deep into the inner workings of a company, and it may feel as if you’re being presented with a long list of demands at the end of each financial year. 

But this exchange needn’t be too demanding of your firm. By taking some simple measures throughout the year, you can ensure that your annual audit is as seamless and effortless as possible.

Perform year-round reconciliations

Leaving it until the last minute to complete reconciliations will prove a sure-fire way to prolong and complicate an audit. To avoid this, we recommend that your finance department completes reconciliations on a quarterly or monthly basis. This will flush out any anomalies early on, leaving you plenty of time to fix them prior to the start of the audit.

Address potential complications throughout the year

If your company inputs an unusual or new transaction that your auditor is likely to quiz further down the line, don’t wait until your financial year-end to address it. Give your auditor a call and provide them with the information they need to make sure it has received the correct accounting treatment. This way you avoid having to backtrack through months of documentation to explain yourself at the end of the year.

Ask for the prepared-by-client list in advance

Just prior to your audit and after your financial year-end, your company will receive a prepared-by-client (PBC) list from the auditor. This will detail much of the documentation that the auditor requires for the audit and is likely to be quite extensive. 

It will typically include requests for documents such as the trial balance, bank statements and reconciliations, inventory records and plenty more, and can take a long time to compile in one go. By requesting the PBC list in advance, you can incorporate fulfilling these requests into your year-end processes. This will avoid unnecessary duplication of work whilst ensuring you have everything to hand when required.

Don’t leave anything to chance – ask questions

Once you have the full PBC list from the auditor, examine it to make sure that you understand everything that is requested of your company. If there are any items that you don’t understand, seek clarification prior to the start of the audit. The auditor will be happy to field any questions that you may have, and consulting with them ahead of schedule could even help you identify more efficient processes.

Plan around the audit

Set aside plenty of time for the audit and ensure that all of your key staff are available when required. This means making sure that your finance and accounting staff haven’t booked time off during the audit, and that they generally have a free schedule whilst the auditor is carrying out fieldwork. 

You will have provided much of the documentation requested by the auditor prior to the actual audit. However, in order to gauge a comprehensive understanding of your company, they will be after additional information and details behind the figures. Not being able to answer any queries promptly will inevitably prolong the process.

Go digital

Thanks to the emergence of online accounting and invoicing software, it’s now far easier for firms to document and categorise documents that will be required in preparation for an audit. Much of this is automated, meaning less work is required of your finance department. 

Alternatively, you can store your documents digitally by scanning them and uploading them onto the cloud. This means you have the information you need readily accessible online, rather than having to rifle through filing cabinets come your financial year-end.

Guaranteed assurance with HillierHopkins

By raising a red flag to any potential problems and making amends, an audit can offer unparalleled value to a business. At HillierHopkins, we provide an efficient, comprehensive service which means less legwork for our clients and more solutions to their problems.

It may be that your company is exempt from carrying out an audit, if it meets the Government’s definition of a small company or micro-entity. In which case, we can provide a Limited Assurance Report to help you meet the requirements of modern business without the need for an audit. Get in touch for further details
 

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