Why prepare for your Annual Audit

How to get return on investment for your Audit.

For many the prospect of the Financial Year End and an upcoming Audit feels like a chore, it’s a necessity which many prefer to get over and done with quickly and its purpose is purely compliance and with it comes a hefty bill.

What if I said it’s an investment, that it can provide you with essential information about the health of your Business and how preparation can reduce your audit fees?

Would you like to view your audit differently? Here’s how.

Audit preparation is key.

The most valuable thing an auditor can be handed is a complete and accurate Audit File.

The Audit File contains most of the information your auditors need to run their audit.

Your Auditors should have sent you a PBC list (Prepared By Client list). This is a list of the information the Auditors need to complete a successful Audit from which the Audit File is created.

For a PDF of a standard PCB click here

If you would like this in Excel format please contact [email protected]

Each item/entry in the file is referenced. This reference is linked to the PBC list so the Auditors can go directly to a document in the file by looking at the file name.

The file should be shared with the auditors at least 2 weeks ahead of the scheduled audit, enabling them to prepare for you and be informed.

The audit file is a living record and it evolves during the audit, it records all conversations with the auditors, data provided to the auditors and contains any audit adjustments and final Accounts. It’s a full record of your audit and financial year and a brilliant record of your business.

The file can be soft copies of documents or a hard copy, there are benefits for both and you will need to decide what works best for your organisation.

The benefits

To you and your business:
  • Missing information or items of concern are identified internally before the audit starts, therefore reducing the risk of surprises during the audit.
  • Auditors are able to engage quickly and reference information efficiently thereby avoiding costly delays.
  • There are less interruptions from Auditors seeking information during the audit as data has already been provided.
  • It also serves as a complete record of your company’s key activities for the year, all in one place.
For your Auditors:
  • They are able to analyse and evaluate, rather than spend time collating and reconciling.
  • They gain comfort from the moment they step foot in your door as they have insight.
  • They don’t waste time waiting on information.

So how does this save me money?

Have you witnessed a badly run audit? It can be frustrating for both the audit team and also the business, endless back and forth searching for information and wasting time.

This is the main cause of audit overruns, resulting in additional fees. At the end of the audit when you were expecting an invoice for £10,000 and you get one for £15,000. This adds up when you have annual audits!

What about the time your team has lost, the time spent being reactive rather than proactive? It’s disruptive to the day and effects their productivity.

There’s more…

Changing Auditors can be an onerous and painful exercise, even within the same firm! Most Audit firms share their audit files, but this isn’t always the case. So how does the incoming Auditor get comfort over the prior year Accounts (the starting point for this year) if there hasn’t been an Audit handover? They pretty much have to do the bulk of the audit all over again. How wonderful would it be to just hand them a file which has all the preparation and the audit records and communication in it? Done!

How about this…..

You have a change in Finance staff and they need to get up to speed on the Financials, a lot can be learnt about key contracts, the Balance Sheet, areas of risk and general financial health from the audit file, helping your new member of staff to get up to speed quickly and efficiently.

You mentioned my audit is an investment?

We’ve seen that if your Auditors have an Audit file they are not spending time reconciling and searching for information, they are analysing and evaluating. You are paying for this so why not engage with it. Your auditors can give you valuable feedback on your Financial Controls, areas of Financial Risk and they can suggest where you might want to make improvements. Obviously they have to remain independent, but why not use their insight to improve the integrity of your financials.

I see the benefit but how long does it take?

If you haven’t done an audit file before, it can take time to pull it together for the first time. Depending on how complex your accounts are and how accessible information is, it can take up to a week or so of focused attention. Remember though, it has to be done, it’s either proactive or reactive when the auditors are on site.

That said if you get into the habit of doing it, you can do it during the year. There are parts of the file that you can add to throughout the Financial Year; when contracts are entered into, add a copy to the audit file; when a new Director joins, add their employment contract to the file; new fixed asset, add it to the file. It should be treated as a living record. Then your year-end prep is much reduced and you will be able to turn your Audit around in record time.

If you would like to know more about how to create your Audit file, contact us on [email protected] and we would be happy to assist.

Find out More

Client Case Study- Datawatch Download audit checklist