Beat the Heat of Audit Planning

By Mark Sweeney

Importance of Audit Planning As you walk out the door on a Friday afternoon and the heat and humidity greet you, it is clear that summer has arrived. This past Friday, all I could think about was the beach and my impending departure later that night for a week with the ocean and sand. Packing for the beach has always been an issue for me because I usually manage to leave something important behind like sun screen, my toothbrush, or both. Making a packing checklist has now become a staple for me.

Even though summer brings the heat and humidity as well as vacations, it also brings the audit season for many June 30 fiscal year ends. Making an audit preparation checklist can help your organization efficiently and effectively prepare for your audit and ensure that the information your auditor requests will be complete and available. The following is a list of items that I would recommend including on your organization’s audit preparation checklist:

  • Request a planning letter from your auditor to be received as close to your fiscal year end as possible. This letter should list the items needed by your auditor to complete the audit of your financial statements. While the auditor’s planning may not be all-inclusive due to circumstances that arise during testing, your auditor should attempt to make the letter as complete as possible.
  • Update your organization’s financial policy manual for all changes that may have occurred during the year. If your organization does not have a financial policy manual, consider drafting one.
  • Review the organization’s year-end trial balance and ask yourself, “Do the account balances seem reasonable based on known transactions that occurred during the year?” If certain amounts seem unreasonable, determine and document the cause.
  • Prepare a budget-to-actual comparison. For significant variances ensure the cause is documented and substantiated by your records.
  • Ensure all new or revised leases and other contracts are gathered in one location and made available to your auditor during fieldwork.
  • Ensure all significant balances are reconciled to subsidiary ledgers and supported by documentation. For example, reconcile third party service provider payroll reports to payroll expense recorded on your general ledger and ensure all bank reconciliations are complete.
  • Obtain copies of all minutes from Board of Directors meetings in addition to all other committee meetings.

Start with these few easy steps and it should help eliminate the heat of preparing for your upcoming audit.

Photo by juicyverve (License)

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