Audit Readiness Checklist
Most American companies undergo an annual financial audit to verify their financial records. If your organization is also preparing for the financial audit, you must be prepared with the audit readiness checklist. After all, it is not easy to have someone else looking through the books to find financial problems.
What Is An Audit?
An audit is a comprehensive assessment of a business’s financial statement. It gives a clear picture of the financial standing of a company for stakeholders as well as for the general public.
Audit readiness probes a company’s auditability of the financial reporting process. It is a preliminary test to check how well the processes, systems, and documentation are prepared and ready for action. It also allows you to assess the loopholes in procedures, documentation, and internal controls before an auditor detects them. They may even offer suggestions that could improve the business’s financial management.
What Should You Expect From An Audit Readiness Assessment?
The assessment can help you to:
- Learn more about the business, its goals, leadership, valuation, business processes, accounting systems, and different operating systems
- Examine the ledger for completeness and timeliness
- Review all monthly reconciliations as well as procedures to retain and organize documentation
- Test all the key controls to ensure it is effective and operative
- Discuss implementation standards and application of accounting
How To Prepare For Audit Readiness?
- Update Accounting System: The first step is to prepare and update the accounting systems. Legacy ERP with manual process boosts the chances of inefficiencies and errors. Cloud technologies in today’s time, combined with business applications and reporting systems, forecasting, and budgeting, make it possible to automate an end-to-end business process.
- Bring Everyone On One Page: Larger organizations have multiple reporting units. Each unit should consolidate financials that could be tricky if several accounting systems are involved.
- Do A Monthly Close: Companies often skip this important step. However, this is the best practice and the most promising opportunity to find problems. Develop the habit of monthly close to help your team and business establish the rhythm to follow up monthly work.
- Make An Audit Readiness Checklist: The audit readiness checklist serves as your ready reckoner and a monthly reminder to journal all the entries so that nothing is amiss. An effective and close checklist is not just a list of routine tasks, but it also includes resources responsible for such tasks and related dependencies.
- Document: Rely only on documentation. Tribal knowledge simply adds inconsistencies to the process to make it difficult for auditors to decide if the financial statements are error-free. Documenting everything makes it simpler to introduce new employees, and shift roles when some key people are not available.
- Invest in Labor: Human capital is the most important source of strength in a business. Gather people with the right experience and skills to identify financial problems and cultivate solutions that can streamline reporting and operations.
FAQs
Q1: What are the benefits of an audit readiness checklist?
A: It ensures that you are taking corrective actions in the business operation and accounting processes, and not missing out on anything.
Q2: What is the importance of audit readiness?
A: It leads to a better relationship with the auditors, making it more collaborative while ensuring that it is less confrontational.
