Whether your organization is audited on an annual basis or you’re preparing for your very first one, there are a few things you should always do to get ready for an audit. Following these steps in advance will help save time and keep costs down.
1. Hold a Pre-Audit Meeting
Before the audit officially kicks off, your organization should meet with the auditors to determine who on your staff will be working with the audit team, and in what capacity. This is your opportunity to assign audit responsibilities to your staff and communicate those to the auditors. The audit will move more quickly if the audit team knows exactly who can answer their questions about certain topics. The auditors may also ask specific questions during this meeting to gauge what documentation might be required. For example, they might ask if your organization has made any major changes this year, or if you are planning on changing accounting methods.
2. Gather Documentation
Your auditors will provide you with a specific list of required documents, some of which will be unique to your organization. However, most audits will also require some standard documents which you can gather in advance. These documents include year-end reconciliations and bank statements; grant funds received and those expected but not received, along with grant award letters; fixed assets and depreciation schedule; financial policies; general ledger detail/summary; payroll reports and related forms such as 941s, W-2s, 1099s, etc. Make sure you have these documents on hand before the audit begins.
3. Get Organized
One of the most important factors in a successful audit is strong organization. It’s not a good use of your auditors’ time to ask them to dig through piles of crumpled receipts or sort a random stack of bank statements. Before the audit begins, you should conduct your own mini-audit of your organization’s financial documents. Digitize as much as you can, organize everything chronologically, and make sure that all of your documentation is clearly labeled and filed with distinct names (i.e. TB1300 – Inventory). If anything is missing, now is the time to chase those documents down. Make sure to give yourself enough time to get all your documents in order before starting the audit. This will alleviate audit adjustments and delays that could have been prevented.
4. Plan for the Auditor’s Field Work
In an audit, “field work” refers to the time the auditors spend on-site at your organization’s office. While the auditors will also be doing plenty of work off-site, both before and after the field work, this on-site time is crucial. It is important to keep the field work as efficient and productive as possible to keep the audit flowing smoothly and to prevent cost overruns. To get ready for field work, have someone at your office prep a space where the auditors can sit and work as they review your documents and conduct interviews. This space can be anything from a spare office to a conference room, but make sure that it covers the basics – tables, chairs, internet access, power outlets, and anything else the auditors may need to work efficiently.
5. Be Ready for Questions and Communication
Your auditors will be asking many questions throughout the audit process to help them understand your accounting environment and test your financial controls. Even after you have provided your initial set of documents, be prepared to answer additional follow-up questions and pull more detailed documentation for their review. The more information you can provide, the better. If you are able to grant the audit team read-only access to your accounting files or bill payment system, this can save time and improve communication. Be sure to answer questions in full and return emails or phone calls as soon as possible, so it doesn’t hold up the audit process. If you are unavailable, make sure the auditors know who to communicate with instead. And if you need clarification or don’t understand a question, don’t hesitate to ask! Your auditors want this process to go just as smoothly and quickly as you do.