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How To Prepare For Your Upcoming Audit

How To Prepare For Your Upcoming Audit

Daniel Papaphotis – Francis A Jones

An audit can be a stressful time of year, especially if you haven’t been keeping up with the necessary accounting tasks within your club. It is important that you are prepared in advance.

While the audit is in progress, it can increase the stress levels if you are chasing down paperwork and financial details. Instead of waiting for the audit to start, you can be prepared by gathering the information that will be needed for the auditor.

  1. Plan ahead.

Devote additional time both prior to and in connection with year end tasks to adequately prepare for the audit, to be available during audit testing, and to communicate with those involved in the audit process. Proper planning and clear expectations will help minimise anxiety and frustration. To be ahead of the curve, treat audit preparation as a year-long process. By keeping schedules and reconciliations up-to-date throughout the year, you can reduce the time it takes to prepare for the audit at the end of the year.

2. Stay up-to-date on accounting standards.

New accounting standards, as well as legislative and regulatory requirements, may affect your clubs audit. You will want to stay up to date because you may need to manage or track data in a different way in order to implement new standards.

3. Assess changes in activities.

Did the organization start a new program or receive a new grant? Are there any new reporting requirements? Were any programs or activities started or discontinued? Were there significant changes in internal control systems or the clubs structure? Were there any changes in leadership? Such changes in activities may trigger accounting and reporting considerations that should be communicated to the auditor during the planning process.

4. Learn from the past.

Take stock of any prior year audit adjustments, internal control recommendations, or struggles encountered during prior audits. Look at the documentation for such prior issues, including the plans for how they would be addressed. These can be a starting point for self-review to ensure these issues were in fact addressed and are not repeated.

5. Develop timeline and assign responsibility.

Review the list of work papers and schedules requested by the auditors, making sure to obtain clarification of requested information when necessary. Assign each item from the list to a responsible person and include a due date. Make sure to allow adequate time for review and correction of schedules if necessary. Tackle the most difficult, complex, or time-consuming areas first when possible.

6. Organise data.

Consider creating subfolders for significant transaction cycles or categories, such as cash, revenue and receivables, expenses and payables, investments, property, plant & equipment, payroll, etc. to make it easier to manage and retrieve schedules. Schedules and workpapers containing sensitive information, such as payroll, may need to be password-protected or maintained in an appropriately restricted network location.

7. Ask questions.

If an item requested by the auditor is unclear, ask for clarification prior to the start of fieldwork to avoid potential delays and additional fees. Auditors are generally happy to answer accounting questions regarding unusual or infrequent transactions the club may need assistance in accounting for.

8. Perform a self-review.

Once all year end closing entries are made, review schedules and workpapers to ensure amounts agree or reconcile to the year end reports. Take a step back and assess the overall financial statements for reasonableness.

9. Be available during fieldwork.

Avoid key personnel scheduling time off during and right after the audit, and consider rescheduling or postponing non-critical meetings for finance and accounting staff heavily involved with the audit. Although most of the schedules and work papers will have been requested by the auditors prior to the start of audit fieldwork, understand that the auditors will be asking for additional information, including supporting documents and explanations.

10. Evaluate results.

Maintain communication with the auditors during the time between audit testing and the issuance of the audit report. If there are any open items at the end of audit testing, establish agreed upon dates for the information to be provided to the auditors whenever possible. If the auditor has agreed to attend meetings with the committee and/or board of directors, confirm that the auditor has the date, time, meeting location and other details of the meeting. Document the conclusions of the post-audit meeting to help guide the subsequent year’s audit.

 

Francis A Jones is a Silver Partner of Clubs WA and is the auditor for Clubs WA. We currently provide support to many of Club WA members on their financial reporting obligations, as well as providing information on financial matters to all club members through editorial in industry newsletter Service Bulletins and e-news updates. If you would like to discuss your auditing needs in more detail, please contact Daniel and the FAJ audit team directly on 9335 5211 or at daniel@faj.com.au.