Now that your financial statement audit is complete you are most likely breathing a sigh of relief. Before you jump back into work, there are a few things you should do to benefit from the audit. Here are five simple steps to follow:
1. Review the journal entries again – Take the entries that you reviewed and approved at the end of the audit and review them again. You’ll want to make sure you understand the approved entries so that your company can make the entries in the following year. If you have questions on the entries, call the auditor up and have them explain and provide support for the entry.
2. Record the journal entries – Once you have reviewed the journal entries and are comfortable with them, record the entries into your company’s trial balance.
3. Review and compare final numbers – Once you have made the journal entries, request a final trial balance from the auditor. Then compare your company’s final trial balance numbers to the trial balance report provided by the auditor. Also compare your company’s numbers to the final audited financial statements. By comparing against both reports, you’re making sure that everything the auditor did, and is reporting on, is correctly reflected in your company’s yearend numbers. Make sure to research and ask questions of the auditor for any numbers or balances that do not match up.
4. Review the internal control letter and communication with governance letter – These two letters are important to read over and make sure you understand. You will want to read the internal control letter and review the significant deficiencies, material weaknesses, or additional internal control items that were noted as areas for improvement. As you review these areas, consider whether implementation of a control would be practical for your company to implement. Also, reach out to your auditor and ask them for help on how to best apply what was suggested. The communication with governance letter highlights the significant matters that those responsible for the financial reporting process should be aware of. You should review this letter for any areas of concern and contact your auditor with any questions you may have.
5. Review all the work papers that the auditor asked for during field work – Normally, the auditor will provide a client assistance list before each audit begins, followed up by asking for extra information during the course of the audit. Review this information you provided and add that to your folder of information related to the audit. In doing this, you can better prepare yourself for the following year’s audit.
By following these steps, you are ensuring that your company’s yearend numbers agree with the audit report. You are also ensuring that any improvements that can be made to your company’s internal control process are completed. Finally, you are setting your company up to have a smooth and easy audit the following year. The more you understand about this year’s audit, the easier next year’s audit will be and the more the audit can benefit your company.
MKS&H has CPAs on staff who are well-versed in financial statement audits. Please do not hesitate to contact us should you need assistance with any of the above policies or the current procedures you have in place for your company.
Article contributed by Megan Baker, CPA, MBA MKS&H A&A Manager
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.