How to Prepare for an Audit: Year-Round Readiness

Your finance team(s) should close the books, double-check the records, and gather supporting documents. Whether it’s an audit for SOC 2, ISO 27001, or another framework, this process involves gathering documentation, understanding new frameworks, and ensuring your organization is set up for success. There are many ways to accomplish your audit preparation including readiness tools, consultants, and more. Keep reading to explore these audit preparation methods and decide which is the best fit for your organization. Audit preparation should begin three to six months before the official audit date.

Practical Steps to Prepare for a Seamless Year-End Audit

This helps prevent situations where fieldwork is completed but doesn’t address the key concerns. One of the key steps to take before starting an audit is ensuring that all required documents are prepared and up to date. These records should include income statements, balance sheets, cash flow statements, and other relevant documents for the period under review.

b. Clarify the Auditor’s Expectations

Audit readiness assessments can vary depending on the type of audit and the industry or regulatory standards involved. See our blog articles on SOC 1 or SOC 2 readiness assessments, HITRUST readiness assessments, and FedRAMP readiness assessments for more information on readiness assessments for those specific audits. After you’ve identified and remediated your readiness assessment gaps, it’s time to prepare for the audit. Rather than waiting for audit season, update and organize financial records on a regular basis. Keeping documentation current ensures that everything is accurate, complete, and easily accessible when needed—saving time and stress later.

The Ultimate Survival Guide for Financial Audits

Their insights can help refine financial processes, improve documentation, and ensure adherence to compliance standards. Technology has revolutionized the audit process, making it easier for businesses to manage financial data and improve accuracy. Digital accounting software, cloud-based financial management systems, and automation tools help streamline record-keeping and reporting.

Continuous control monitoring

• Prepare internal control documents, the employee handbook, accounting policies and procedures, and corporate structure documents for auditor review.
• The platform provides numerous other tailored solutions, such as a GRC suite and a public-facing Trust Center, to support virtually every aspect of your security and compliance program.
• Establishing and maintaining clear, comprehensive, standardized, and intuitive documentation in a centralized repository allows an organization to easily reference and retrieve information when needed.
• There are three primary types of readiness partners, or the option to rely on internal resources to ensure proper readiness.
• The entities under the Sikich brand are independently owned and are not liable for the services provided by any other entity providing services under the Sikich brand.

The objective of the planning meeting is to obtain a high-level understanding of Suspense Account the goals and objectives of the process or department and the key steps to the process. The planning meeting is usually held with the most senior manager of the process, the in-charge auditor of the project, and at least one more auditor to take detailed notes. If you really want to impress, consider inviting your subject matter expert to the planning meeting.

Importance of Proper Audit Preparation

A Quality Management System (QMS) is a structured framework of policies, processes, and procedures used to plan and implement an organization’s key business areas. Thorough audit preparation elevates the entire audit https://www.bookstime.com/ experience by proactively resolving challenges, aligning controls, and optimizing transparency. Businesses that invest in preparation gain accuracy, efficiency, and stakeholder confidence. Strong upfront readiness smooths the audit process, reduces surprises, and reinforces robust financial reporting. An audit preparation phase sets the foundation for an efficient, credible audit. Careful planning ensures that internal controls and financial data align with auditor expectations before fieldwork begins.

• It does save a company money when they retain the same auditing services annually.
• Controllers or outsourced CFOs guide audit preparation, reducing blockage and optimizing workflows.
• The Institute of Internal Auditors’ Code of Ethics requires Certified Internal Auditors to undergo a QAR at least once every five years.
• This is huge as recent survey findings show that workload is the top stressor for employees.
• This credibility can open doors to new opportunities, including funding, partnerships, and expansion prospects.
• Lauren works closely with higher education institutions, associations, voluntary health and welfare organizations, healthcare entities, civic and community organizations and religious organizations.

Improving risk management and supporting external auditors are two more benefits to look forward to when you are correctly utilizing a proper checklist. According to a 2021 finance and audit technology survey by KPMG and Forbes Insights, most finance executives consider technologies like cloud computing, AI, and smart analytics essential for audits. Integrating technology into audit preparation checklists enhances efficiency and helps ensure compliance. Digital checklists, for example, standardize procedures, reduce errors, and enable real-time collaboration among audit teams.

• Centralize all policies, procedures, vendor agreements, access logs, and training records.
• For example, an IT specialist can be helpful for a financial audit to assess the security of financial systems.
• By viewing preparation as a strategic advantage, you position your organization for audit success and demonstrate a commitment to ongoing improvement.
• Businesses should routinely evaluate and strengthen their internal control measures to avoid complications during the audit.
• Proper documentation provides transparency and supports the legitimacy of these transactions during the audit.

Review and Test Internal Controls

• One of the most crucial steps in preparing for a Single Audit is establishing a comprehensive timeline.
• Seeing is believing, so auditors sometimes verify the existence of assets through physical observations and inspections.
• Your auditor will likely ask you to prepare an analysis of the collectability of aged accounts receivable balances.
• Laura Hartley, CPA is a Partner at DMJPS CPAs + Advisors in Assurance Services.
• Many companies have an internal audit department that tests whether the organization is accurately reporting financial results and complying with U.S.
• Reasons for disclaimers may include significant scope limitations, material doubt about the company’s going-concern status, and uncertainties within the subject company itself.

Thorough audit preparation demonstrates a commitment to transparency and accountability. This proactive approach builds trust with auditors, creating a more collaborative environment. When you can easily provide necessary documentation and confidently answer questions, it indicates a strong control environment and a dedication to best practices. This not only simplifies the audit process but also strengthens your organization’s reputation with stakeholders. By viewing preparation as a strategic audit preparation advantage, you position your organization for audit success and demonstrate a commitment to ongoing improvement.

Simply put, you’ll need financial statements, documentation of internal controls, and specific records related to transactions. Preparing for an external audit can be complex and time-consuming, but proper audit preparation is essential to ensure the process goes smoothly. Start by categorizing findings based on their severity and potential impact. High-risk findings, such as serious weaknesses in internal controls, demand immediate attention. Moderate-risk findings, like minor documentation gaps or policy deviations, need prompt action, but are often less urgent. Low-risk observations can typically be addressed through simple process tweaks or staff training.