An ultimate guide on how to prepare for year-end financial audits
With each challenging year coming to an end, it’s time to take some deep, relaxing breaths and enjoy a nice day off.
But before we do that, we need to prepare your financials for the year-end audit.
Even though the audit process may sound scary, you don’t need to worry. All the hard work you’ve put in to close the year will go a long way in your year-end audit as well. Let’s look at the year-end audit, how it works, and what you can do to make it a little easier to handle.
What is the year-end audit?
First, a refresher. An external audit team reviews and verifies your financial records during the year-end financial audit. An external audit surely builds credibility and helps you identify any issues missed during the year. If your company is public, you will be required to have external audits, but even private companies can benefit from them.
How to Prepare for an Audit
Preparing for a year-end audit is essential in ensuring that the firm receives an unqualified or clean opinion. The opinions generally mean that the auditor stamps its approval and that the financial records are not materially misstated.
Here are a couple of steps to ensure a successful audit:
Planning for the year-end audit
Planning is vital, and additional time needs to be taken to prepare for an audit adequately. It may be a couple of months or a few weeks, based on the complexity of financial records.
Time is definitely required leading up to the audit, and additional resources must be allocated for final preparations related to planning and setting expectations for the audit.
During the fiscal year, records should be kept up to date, reducing the pressure close to the audit time.
Keeping up with accounting standards
Accounting standards and legal & regulatory requirements are updated every year. Therefore, it is essential to familiarize the finance team with new accounting developments instituted by regulatory bodies.
Staying up-to-date reduces the time required to track data and make changes to 100% comply with regulations.
Evaluate organizational changes
If the firm’s been audited before, the changes in its financial situation from the last audit should be considered. Material changes may affect the entire auditing process, such as new projects being onboarded in or government support and grants being given.
Non-financial changes must be taken care of as well. For example, if internal control systems and management accounting standards were altered.
Learn from the past data
Assess previous years’ audit notes and essential recommendations. Improve by adapting and making sure past mistakes are not repeated.
Prepare a timeline and start assigning responsibilities
Start reviewing the list of requirements from the auditors and assign each item to a skilled and responsible person with a due date. Define the timeline for the completion with the auditors and maximize efficiency.
Start organizing and preparing all working papers and schedules. Here is the list of the documents you will need.
- General ledger
- Fiscal year budgets
- Invoices and bills
- Transaction records
- Financial statements
No doubt, preparation is the ultimate key to success. Year-end audits do not have to be daunting, and they don’t need to fill you with dread.
With the well-planned work and support from your auditors, your staff can avoid interruption, and you can oversee the work with minimal stress. Even though there is a lot of work to be done, audits will not be tedious or scary if prepared and planned well-advanced.