The Audit from the Inside
CPAs in business and industry, whether they work for small companies or huge conglomerates, sooner or later encounter the external auditors. By carefully preparing for the annual audit, we have been able to spend less time with our auditors, save on audit fees and also end up with an efficiently run audit. In addition, we've found that by working smoothly with our auditors, the audit becomes a valuable service, not an onerous annual event. This article lists techniques and procedures that will help your company's internal accounting staff experience a well-run, cost-efficient audit year after year. It is mainly for controllers, chief financial officers or others who are in charge of the audit at the client end, but any CPA in business and industry will find the tips and techniques useful. 1 PLANNING AS THE CORNERSTONE We call our auditor and set the date for the preliminary planning and fieldwork. For any company, this date should fall about three months before your yearend, as soon as possible after the relevant financial statements are completed so the information is still fresh to you and your staff. We inform the auditors of the date of the statement on which they will be doing the preliminary fieldwork. For example, if your fiscal yearend is December 31, you should use your September 30 statements. If you can finish up those statements by October 20, schedule the audit fieldwork to begin on October 27. At that point, ask the auditors to send you an audit schedule telling you when each stage of the audit will occur and listing all of the schedules, reports, minutes and other information they would like available for planning and the preliminary fieldwork. At my company, interim audit needs include, for example, a listing of all additions and disposals of property, plant and equipment for the year January 1 through the date of the interim procedures and an expected price increase percentage for the inventory items purchased throughout the year. During the week after the September 30 financial statements are released and before the auditors are due, you and your staff should gather all the data needed for the audit. If you do not get the audit schedule by October 20, ask the auditors to fax it to you immediately. 2 RALLYING THE TROOPS As soon as we set the date for our preliminary audit, I send a memo to all of the staff who will be involved in the audit. I have them mark their calendars accordingly and tell them to make themselves available to the auditors during those dates. I explain they may have to work late during this period. Next, I follow up with a copy of the audit schedule: Each item needed for the audit is marked with the name of the responsible staff member and a due date -- usually the last working day before the audit is to begin. When they arrive on the premises, I give this annotated copy of the audit schedule to the auditors. I make sure to go over each line item the day before the audit is to begin to ensure that each person on my staff has completed his or her assigned tasks. Some CPA firms use a software program, such as Accountants Trial Balance (ATB), which allows you to key in the trial balance. You can give it to the auditors on a disk or by e-mail. This saves your company money because it saves the auditor time. Most auditors have spreadsheets that can accept these files; Windows 95 programs have made such transfers especially simple. Right before the audit's start date, I have a brief meeting with all staff members who will be working with the auditors. I explain that audit requests get first priority; scheduling conflicts should be reported to me. I tell them to refer any questions they can't answer to me: As the audit coordinator, I run the audit for the company. Usually, the chief financial officer appoints the coordinator if there is no controller to direct the audit. Some companies have a general accounting manager or financial accounting manager who may be appropriate for the job. …