Audit Readiness: Planning for Success

Overview

Audit readiness is critical for organizations undergoing their first audit, changing auditors, or expanding scope. Preparation reduces disruption, cost, and risk by achieving a greater understanding of the purpose, scope and timing of the engagement.

Increased Burden on Accounting Teams

For companies entering their first financial statement audit, switching auditors, or expanding audit scope, the burden on accounting teams can increase significantly beyond typical responsibilities. Most clients do not budget their staffs additional time commitment that an audit incurs as the onboarding to the engagement is not clearly communicated throughout the organization. Additional audit burden can include multiple full team meetings per week, hundreds of reports to compile and provide to audit teams, scrambling for dated source documents, dealing with audit team specialists, resolving audit team questions and comments, and much more. This can lead to decreased employee moral, lower than expected work quality and even increased internal cost.

Risks of Being Unprepared

When a client is not prepared for an audit, teams may lack readiness for busy season hours and fail to use interim periods effectively. This often results in additional accounting hours as well as requests obtained by the team towards the end of the audit, frequent back-and-forth requests due to lack of understanding of auditor rationale, and difficulty providing sufficient audit support. Audit standards and guidance very specifically outline their procedures to address certain risks surrounding the financials and disclosures of the company. Without gaining insight into what these standards are, it may be difficult for the client team to understand what source documents or explanations the auditor may need in order to satisfy their requirement. One answer that may suffice or make sense internally might not necessarily resolve the issue for the auditor. These challenges can lead to control deficiencies and frustration between audit teams and client contacts, not to mention overrun billings from the audit firm. If these issues rise to the level of an auditor’s materiality, the client may then have to disclose these issues to upper-management, the board of directors, or even stakeholders and investors.

Value of Audit Readiness Workshops

Audit readiness workshops help prepare teams for the timing of audit requests, explain the purpose behind those requests, and clarify what constitutes sufficient support. Workshops ensure audit scope is understood and that audit team skills align with the entity’s complexity. This also provides the foundation for a solid auditor relationship which is critical in conflict resolution and team moral. Within an audit readiness workshops, the team will identify those staff members who will be tasked with assisting with the audit engagement. This will further assist in assigning responsibility of each member of the team, whether that be by area of the financials, segment of the business, or a specific section of the audit. From there the workshop can help the team anticipate what requests they will receive from audit teams, when they will take place and with what deadlines, understand the nature and purpose of requests, and establish streamlined and effective communication with the audit team. As a result of the workshop, client teams leave the sessions feeling more prepared, confident and comfortable with their assigned tasks within an audit and eventually lead to smoother audits.

Better Audit Outcomes

Proper preparation reduces accounting hours, limits unnecessary management involvement, keeps costs reasonable and mitigates the risk of deficiencies or misstatements in the final audit report. Don’t run the risk of needing to resolve critical issues within an audit before it is too late.

Evergold Advisory helps organizations prepare for audits with clarity, structure, and institutional execution. To inquire more about our Audit Readiness Workshops and Audit Support, contact us at info@evergoldadvisory.com.