Audits can be anxiety producing but they don’t need to be. You just need to be organized.
Before or After Year-End:
- Expect a Risk Assessment, performed by the auditors to determine what they want to review. They provide a list of what they want to see in advance of the visit.
- Auditors to be in your office for a day.
As Soon As Possible After Year-End:
- Finish your year-end close
- Enter necessary Journal Entries for insurance, payroll, depreciation, and other year-end adjustments.
- Review every account on the balance sheet:
- Bank/credit card accounts agree with bank reconciliations (check all uncleared transactions).
- Accounts Receivables agree with Open Invoices
- Accounts Payable agree with Unpaid Bills
- Verify Loan, Prepaids, Payroll Liability, Fixed Asset and Investment balances
- Check all bills received after year-end. If bill relates to prior year, record a Journal Entry to include the expense in the prior year (only if on an accrual basis).
- Complete the Quick Audit Checklist to make sure you didn’t miss anything during your close. Make the necessary corrections and your QuickBooks will be clean.
- Ask for closing entries from the prior audit and enter them.
- Look over your filing system so you are confident that everything is easy to find. Each file should be complete. For example, if a check to pay a vendor is voided, document the replacement check information.
- Make sure supporting systems agree with your financial software. For example, separate invoicing or merchant service system must agree with QuickBooks.
Two Weeks Before the Audit:
- Consider holding 8-16 hours on your calendar in the two weeks preceding the audit to compile information.
- Expect a lengthy Audit Request List from your auditor one to two weeks in advance of the field work that include bank confirmation letters you send to your banks.
- Determine with the Auditor the date when no more changes can me made for the year being audited.
- Start compiling information for the Auditors.
How To Organize Information Before the Audit:
- Clearly note on each document you provide the number from the Audit Request List.
- Keep a list of everything that you hand them, they may ask for the same document twice.
- Provide only electronic or copies when possible. Information may not be returned.
- Don’t file Audit Request List documents away until the audit is completely done and financial statements are issued. Auditors may want to see an item again.
Other Helpful Hints:
- Make sure you keep check stubs or get bank statements that include copies of the check.