Your [bankers, board members, shareholders] need the audited financial statements yesterday! The auditors said they would be done by now, but they’re not. Sound familiar?
Audit projects fall behind schedule for a variety of reasons. In our experience, however, the risk of falling behind schedule is easily mitigated. In this article, we explore some of the more common reasons for missed audit deadlines, and ways to avoid the uncomfortable scenario described above.
Reason #1: Poor Audit Planning
The conduct of an efficient and effective audit is dependent on good audit planning. In fact, not only is planning essential for good management of the project, it is also required by the auditing standards promulgated by the American Institute of CPA’s. As a client of an audit firm, be aware that the firm should begin planning for your audit well in advance of the scheduled fieldwork dates. Good audit planning requires communication. If your auditors are not communicating with you during the planning phase, well in advance of the scheduled fieldwork dates, this is an indication that their audit planning process may be seriously flawed.
Reason #2: Surprise Transactions
If you enter into significant unusual transactions during the year, let your auditors know about the transactions as soon as possible. The accounting treatment for many non-routine transactions can be complex, and special auditing procedures may be required. Making your audit firm aware of the transaction as soon as possible allows your auditors to plan whatever audit procedures are necessary with respect to these transactions, and allocate the necessary time to complete those procedures.
Reason #3: Insufficient Partner Involvement
You should expect the partner in charge of your audit to have the authority in his or her firm to make the necessary decisions to keep the project moving forward, particularly when a potential issue or problem arises. For this reason, you should expect the partner to have a significant role in the planning, fieldwork and completion stages of your audit.
Reason #4: Errors, Delays or Omissions in Audit Information
Your auditors should provide you with a written list of informational requirements well in advance of the scheduled audit fieldwork dates. Requests for additional information that arise during the audit should be given to you in writing. Your auditors should be willing to talk with you throughout the process regarding the sufficiency of information you have provided, and the extent to which additional information may be needed. Finally, your auditors should be willing to accept any information you can provide to them in advance of the scheduled fieldwork dates. By providing information to your auditors as early as possible, you can contribute to the early completion of audit procedures.
Reason #5: Unrealistic Staffing
Auditor hours can be a scarce resource, particularly during periods of peak demand, such as during the months of January through May. Talk with the partner in charge of your audit about the sufficiency of the resources allocated to your audit. The partner should be familiar with the amount of work required to complete the project, and the expertise required by your unique organization. You should feel comfortable that careful consideration has been given to which staff members have been assigned to your audit, and for how long.
You should expect the highest level of professionalism from the auditors you engage. Your stakeholders, including bankers, shareholders and board members need to be able to rely on the firm you select. Reliance includes not only having confidence in the auditor’s report, but knowing their report will be submitted on a timely basis. If you have additional questions about how to ensure timely completion of your audit, please contact us. We’d be happy to discuss any specific problems or issues you are experiencing.
by Mitch Perry