How to Prepare for an Audit
by Lee Byrd
For many organizations, an audit is an annual process that requires the Organization’s personnel to devote additional time and effort above and beyond their day-to-day responsibilities. It can be tiresome and unwelcome to those assigned with task of handling the audit. However, there are many ways in which an Organization can prepare for an audit which could lead to less time the auditor’s spend on site, decreased stress around deadlines, and an overall more efficient audit process.
- PBC List – PBC stands for “Prepared By Client” and this is a schedule of initial audit requests provided by the auditor, which are to be prepared by Organization personnel. Because the auditor’s schedule is often tight, it is essential that the items on the PBC List are prepared and ready for the auditor prior to the start of fieldwork. Items that are not completed timely could cause significant delays in the audit process.
- Prepare throughout the year – If the Organization has been audited before, personnel likely have an idea of key information or schedules that will be requested by the auditor. Rather than waiting until the PBC List is received, it may be helpful to update these schedules periodically throughout the year. Such items include investment, debt or fixed asset rollforwards which must be prepared from underlying data and records. As these schedules are updated, be sure to keep those supporting documents in a file or folder to provide the auditor at year-end with the audit package.
- Organization – Keeping your audit files and underlying support organized will be key to aiding the audit efficiency. Items from the PBC List should be accumulated in folders and labeled according to the PBC List numbering, if possible. This will aid the auditor in identifying and processing the information quickly. Additionally, having supporting documentation such as invoices and deposits filed in an orderly manner will allow Organization personnel to quickly pull support requested by the audit throughout fieldwork. The less time it takes to provide the auditor requested documentation, the less time the auditor must spend on site.
- Designated Personnel – While it is important to delegate preparation of audit schedules and accumulation of other requested support to financial personnel throughout the organization, it is important to designate an individual, such as a controller or CFO, as the audit contact. This individual will be responsible for communicating deadlines and any delays to the audit team. More importantly, this individual should review all schedules and support prepared by other personnel prior to providing that information to the audit team. Ensuring that provided information is complete and accurate will prevent duplication of effort and audit findings.
- Information is Key – Know what has happened within the organization during the year. The auditor will ask about significant events, variances from prior year, and variances from budget, just to name a few. Providing clear, concise explanations for these variances will allow the auditor to document appropriately. Additionally, any information that can be provided to the auditor prior to the start of fieldwork will allow the auditor to develop expectations and may reduce the number of variance inquiries made throughout the audit.
- Communication – Your chosen auditor should always be open to communication from their clients, whether during the actual engagement or throughout the year. Be sure to reach out with questions so that issues can be resolved prior to the start of the audit. Additionally, if you feel that you will not have the requested information prepared by the designated date, notify the auditor immediately so that scheduling and deadlines can be addressed as soon as possible.
It is equally important to the audit firm and the Organization for the audit to be as efficient and seamless as possible. The above suggestions should aid in creating a pleasant audit experience for all parties involved.
Langdon & Company LLP’s audit team is here to help. Contact us with questions regarding your audit engagement. Lee Byrd ([email protected]) is an Audit Manager at our Firm and has over 7 years of experience with a variety of clients.