The way to Prepare for the Annual Audit
Many people think of the 12-monthly visit of the auditors as a stressful and worrying time frame, but it doesn’t have to be like this. Whether you’ve had the audit before or this can be your first audit then, there are numerous things you can do to prepare and make sure doing this goes as smoothly as possible.
An audit is a way of giving confidence to the investors that their money is being found reasonably. It won’t be an assurance to uncover fraud, but instead, look to see if there are enough supervision controls in place to minimise scams. External stakeholders can also use audits to ensure the company they are looking at provides accurate and fair addresses.
Many companies in the UK don’t require a great audit if your company includes a turnover of less than £6. 5 million and assets of less than £3. Thirty-six thousand and an average of fewer than 55 employees, then an examination isn’t required. You will need to fill an Audit Exemption Assertion, and some types of companies may still be required to have an examination anyway, or their investors can ask for one.
The time will come, however, when a firm can no longer have enough time for an annual check and the new round. This can seem like an overwhelming prospect.
The very first thing to do should be to choose an audit agency. Many companies will have accountants who already deal with issues, including taxation, so the apparent response is to use the company you already have a relationship with. It is a little understood fact that not all accountancy techniques can carry out an exam.
Planning the audit
On the list of cornerstones of auditing is planning and your auditors will probably set an audit preparation meeting to enable them to sit down with you and discuss your company to get a bit of background. This will help them to understand any specific issues that may need looking at and work with you on timings and locations. You can use this specific meeting to find out how they mean to approach the work and what assets they’ll need. Remember that the complete process should be seen as an effort; the auditors aren’t presently there to catch you out there, so approaching it as any conversation will produce a far more helpful outcome.
Your auditors will need some space to be effective; you’ll need desk space together with power so they can plug in notebooks. They will be using files and folders, so a good size workspace is valuable, and they will need access to your accounting team, so somewhere near finance is vital. Remember that that you are paying for their time. Consequently, anything that reduces the amount they’re on site is a reasonable matter from a financial and a waste point of view.
For most companies, it will probably become clear that they will have to have an audit long before the bottom of the year and preparation should start before the start of the financial year in question.
Receiving things in order
Regarding the health care data, your auditors will verify accuracy, controls and treatment method. Make sure that all invoices are usually authorised, recorded and kept correctly, that payroll adjustments such as salary increases have an obvious audit trail and that this decision around the accounting remedying of items in the books usually are fully documented.
All of your data need to be marked in logical order. Please don’t expect the audit staff to search through random piles connected with paper, as they will likely identify that as a lack of control. Cardiovascular disease searching they have to do, your audit will cost cardiovascular disease, particularly if you have not negotiated a fixed service charge.
It is worthwhile producing the audit file throughout the year. This could contain copies of accounts for fixed asset shopping and sales, contracts applied for in the year, leases, board mins, and management accounts for the year, including the minimum final test balance for the period ending. If you do this as you complement during the year, then it becomes a reduced amount of a chore.
For the ultimate period end of the 12 months, finance should prepare a finish of year trial equilibrium. This will form the leaping-off point for the examination team, so it’s worth using a review and making virtually any adjustments in advance of the go-to. Think about balances that are the wrong method round (debit balances that need to be credited and vice versa) and things that might seem weird, like large directors’ health care data. Each of the balances should have a unique schedule showing what makes these individuals up, which should undoubtedly match what is shown inside Trial Balance.
Again, this can be merely a jumping-off position, so you’ll need to expect the will lead to more checks but giving as many facts up front increases the impression of a professional finance team. To produce things easy, speak to the auditors often and find out how they would choose to have the documentation. Usually, you may expect they will want at least the particular trial balance in digital form but may also desire schedules and other items this way.
Take a look at all areas of the addresses that require management judgement. Will the fixed asset policy seem to be reasonable? Has the accruals method been applied consistently? Do the actual prepayments stack up? If you are satisfied that things are as they should and that you have sound thought behind your decisions, then there is no problem; if you have uncertainties, speak with your examination partner.
Once the financial addresses are in order, then you’ll have to appoint a member of personnel as the point of getting in touch with. Let the audit firm understand who to speak with and their other details. This will keep disruption down with the audit team nearing one person when they need info rather than any random person in the finance staff. Make sure the point of contact is roofed in the audit planning conferences.
Finally, ensure employee members know that a review is being carried out. The Review field staff may be upon the site for a while, so it’s organic that people will wonder who the new guys in accommodates are. Unfortunately, this technique may start negative rumours, even if it is a relative regimen accounting task. Permitting non-finance staff to know very well what is happening beforehand will scalp these rumours before they start.
Taxation can be a tricky and high-priced time, but only for organizations that don’t prepare. Using the tips above will help the task go smoothly and should lessen stress and costs.