Year-end is almost upon us again. Now is the time to get your house in order – it will take a huge amount of stress off the closing process a couple of months from now.
Being truly ready for the auditors can save audit time and fees, reduce stress on your staff during the audit, and maybe make your financials available for lenders and investors a little earlier. Equally importantly, audit-readiness is a good indication that your accounting department is organized and up to date. How many other ways do you really have to determine that? Here are a few things you should consider:
Preparation of Financial Statements
Do the auditors historically require that you make embarrassing changes to the financials? What has been done to avoid that this year?
– Does your accounting department prepare the financials, including notes?
– Have you questioned any balances or accounts that seem surprising or unusual?
– Did you do anything different this year? Are you sure it is accounted for correctly? Now is the time to sort that out, not during the audit.
– Have any changes in accounting rules affected your business? Are there any changes not yet required that you could implement early?
Reconciliations provide explanations for changes in Balance Sheet and P&L accounts, and your accounting department should be able to show them to you every month.
– Do you know exactly what is in every balance sheet account?
– Can you explain every change in the balance sheet?
– Have expenses been calculated consistently every month?
– Can you show how cost of goods sold affected inventory every month?
If you can say yes to all of these items, updating to year-end should be a piece of cake.
Where your monthly accruals and amortization calculations are based on volume or other estimates, have they been updated to be sure the year-end balances are correct? Again, a 2 month update at the end of the year is a lot easier than doing it for the entire year.
Has there been a thorough analysis documenting all significant P&L and Balance Sheet variances from last year? Are the explanations reasonable, and the underlying facts correct?
Documentation of Procedures
– Are the fundamental internal control procedures properly documented?
– The auditors typically make recommendations for improvements in procedures and controls if they find any deficiencies. Were last year’s recommendations fully implemented?
– Have changes in staffing or procedures resulted in changes to the control environment? Now is the time to correct them.
Not sure if you’re going to be ready for year-end? Do you know who to call?