A financial audit for a business is a review and examination of the books to determine the health of its finance and accounting processes and controls. Audits can provide a business with credibility to obtain funding in the way of debt and investments, as well as provide outside entities a level of trust and assurance.
Being prepared is the best way to approach an audit with less stress and the knowledge that it will go seamlessly. We’ve provided the following guide to help you prepare and are more than happy to discuss managing the necessary requirements for you with your independent audit firm.
Audit preparation steps:
- Notify anyone in your business who will be impacted by the audit. The more time a department or individual has to prepare for requests from your Fractional CFO or you, the better. Less surprises make for an easier audit for everyone involved.
- Once you know the dates your auditors will be on-site or requesting initial “provided by client” (PBC) documentation, put that on a shared calendar. Often a business will take around 2-5 days to start clearing items on the PBC list by saving them all to folders for one person to share with the auditor or upload to the audit firm’s online document portal.
- Ask your Fractional CFO or auditor if there are new tax laws or standards you should be aware of to record or make adjusting journal entries for before the audit takes place. Auditors will be looking for up-to-date processes and the application of recent FASB standards such as ASC 606 (revenue) and ASC 842 (leases).
- Perform a self-review of your financial data and reconciliations. Are all of your balance sheet account totals supported by documented transactions? Do you have support in the way of invoices or payments? An audit is a time commitment, but well worth it for a business. Financial audits lend credibility to your business, which affects investors, federal funding such as grants, loans, and more.
- Next, review past audits if you’ve had any previously for this business.Previous audits provide insight into internal control recommendations and any adjustments by the audit team in prior years. Second, speak with auditors if you haven’t already. Stay in communication with your audit team. Ask questions. Clarify what documents are needed. Check on progress if the audit spans a longer time frame.
- Gather your latest financial statements and reconciliation schedules. Be sure there is backup documentation available to support amounts on the balance sheet.Often, there are many documents to gather and to create. Ask your auditor what specific calculations they may need for the disclosure notes they’ll be including with the financial statements, so you can get started on preparing that data.
- If you’re wondering what documents are needed, we’re experts at statements and schedules and have helped many clients through financial audits. We also prepare many financial statements for clients who are ready to engage an auditor for compilations, reviews, or audits. If you’d like assistance engaging with your independent or government tax auditors, please use the “Contact Us” form and set up a time to discuss our services.