How to Plan Your Audit to Minimise Disruption and Cost
As we approach another audit season, business owners and managers might dread the cost and disruption of conducting their period end financial audits. Fortunately, there are things businesses and auditors can do to make the process run as smoothly as possible and minimise the costs.
Here we look at what businesses and auditors can do before and during an audit to minimise the cost and disruption.
What can businesses do to facilitate the audit process?
Start with the previous year’s audit management letter or board report. It’s important that the findings from the previous year have been acknowledged and that steps have been taken to address the recommended remedial actions before the next audit.
Communicate with auditors early. Find out what changes have occurred in the past year – such as regulatory, financial reporting and accounting standards – and how these may impact your organisation in the current audit year.
Plan ahead with auditors. Planning your audit in advance will help it run smoothly and effectively, so have a planning meeting well in advance to set dates for interim audits, site visits, final audit, audit committee meetings, close-out meetings and signing off the financial report. Having these dates in advance will help you prepare for audits better.
Get a checklist from your auditors. This should include an outline of the required information and when it should be ready according to the agreed timetable set out during audit planning meeting. Ensure that the work papers, documents and other required information have been reviewed internally before submitting them for audit. Missing the timeline and providing insufficient information could delay finalising the audit.
Lodge report with ASIC on time. Make sure you have the ASIC portal login details to avoid delays. If the audit is for an Australian Financial Services Licensee (AFSL), you will need access to more than one ASIC portal access for various lodgements. Having the login details ready and submitting on will prevent you from paying late fees.
Communicate with your auditors. Open and ongoing communication with your auditors will help avoid delays, disruptions and additional costs. Let your auditors know if any accounting issues arise during the financial year or if you expect any delays in providing information. Waiting for auditors to uncover issues you already know about may cause delays and disruptions, adding to the cost of the audit. So be forthright with any potential problems before the audit begins.
What can auditors do to ensure audits are efficient and cost-effective?
External auditors can also take steps to ensure the audit process is as efficient as possible.
Keep your audit team consistent (where possible). Having consistent team members ensures they know the business, its environment, its people and any issues that have been uncovered previously. New audit team members will have to take time to understand the specific issues and get up to speed with the audit.
Audit strategy and Audit planning meeting with all audit team members. This offers an opportunity to review prior year's financial statements and board report and discuss key audit focus areas. Discuss impact of ASA 315 Identifying and Assessing the Risks of Material Misstatement (and any other regulatory changes) on current year audit. Based on the meeting with the client and the internal audit team meeting, create an audit strategy. Ensure audit strategy and plan has been reviewed by an audit director/partner in a timely manner.
Be proactive in communicating with clients. As mentioned above, an audit meeting makes it possible to agree on a timetable for deliverables (reports, documents and other information) from the client. If the client delays providing information, it should be communicated that this will delay other audit milestones and can result in additional costs.
Schedule audit team progress meetings. Have progress audit catch-ups. Address any issues with clients early and progressively. By being proactive, the audit team can avoid delays and additional costs for the client.
Staying ahead of accounting skills shortages
The skill shortage in Australia has impacted auditors and clients. Chartered Accountants ANZ estimated there are 9,000 accounting vacancies in Australia. Given these shortages, it’s essential to maximise efficiency when conducting audits. Following the steps above will help auditors and clients maximise the resources they have.
Get in touch to discuss your audit challenges
LNP Audit and Assurance is one of Australia's largest specialist audit and assurance firms. We work with a diverse range of clients – start-ups, SMEs, businesses seeking to list, and small listed groups – in delivering independent audit and assurance services.
If you have questions for your next audit or are looking for specialised audit and assurance services, contact LNP Audit and Assurance today.