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Three Ways to Improve Your Audit, According to Auditors
Public companies have year-end audits to comply with Sarbanes-Oxley (SOX) and the inclusion of Internal Control Reports in their annual reports that generally are completed in the first quarter of the year. For some companies, however, audit season never ends. For example, there are the cases when a SOX control fails in an audit, leading to that SOX control being tested multiple times in the months following. While for many teams being audited, the year-end audits are synonymous with dread and consternation due to the inherent stress of the process, it doesn’t have to be this way. In this blog we asked our ERP Maestro experts who in a past life were auditors themselves what teams, who are being audited, can do to improve their experience and reduce the stressors generally caused by the audit process. Here is what they had to say:
Number 1: Communication
A good relationship starts with good communication. The same can be said about an audit. Communication is key to ensuring the audit process runs as smoothly and efficiently as possible. Communication can help both the audited and the auditor. When starting the audit process, it’s important to communicate with your auditors on how you prefer to handle open items, follow-up requests and the like. Setting this baseline early on can help ensure that requests will be fulfilled in a timely manner. Similarly, staff and other stakeholders involved with the reports and deliverables should be educated on the value of the audit and why it is important, as well as be aware of any deadlines or due dates ahead of time. This can be especially beneficial when auditors have additional impromptu requests.
Number 2: PBC List
Also known as a Provided by Client (PBC) List. The PBC list is a request of information and supporting documents that is needed in order to complete an audit. There are usually two PBC list requests: the first is information needed to complete the planning stage of the audit and the second request is needed to complete the audit fieldwork. It’s important to address each item requested as closely as possible. Following the PBCs as closely as possible reduces the chances of being asked for supporting documents sporadically.
If there are any questions about a request or if any of the requests use unfamiliar language, you should reach out to the audit team for clarification. If a request seems out of place, you can, and should, ask for rationale or clarification. Auditors, in most cases, will ask for a wide array of documents in order to cast a wide net and ensure they don’t miss anything. Asking for rationale can help you understand why this documentation is necessary and it also gives auditors a chance to rescind their request if they feel it is no longer relevant, saving you from spending time collecting documents that are no longer needed. This scenario can be especially true in the first year when starting with a new audit firm.
At the same time, keeping to the due dates of the PBC list ensures that there are no delays and no disagreements over unnecessary additional audit fees. Again, it is beneficial to share and communicate the PBC list and the due dates with your team. You may even want to set due dates a few days ahead to have a buffer in case other projects or priorities get in the way.
Number 3: Help Lighten the Load
Going through manual processes, emails and countless spreadsheets is no one’s idea of a good time, including auditors. Though paperwork is the lifeblood of a lot of what auditors do, going through documents that are unorganized and error-prone as manual processes tend to be, is tedious work that can result in increased audit costs – or even a failed audit.
More and more companies are choosing to rely on automation tools to streamline internal controls management and reporting. These tools can generate digitally certified reports with timelines and notated approval decisions for a detailed audit trail. Automating is not only a more reliable way to generate accurate reports, but it can cut down on audit costs by giving auditors a much quicker way to review and test internal controls. Not only does this reduce the workload of the person who has to generate the report, but it also alleviates some of the work for the auditor.
As you prepare for your next audit, keep these three tips in mind. These tips will not only help reduce the stress of an audit but can also help the process be more efficient and possibly even less costly, improving the overall experience both for your team and your auditors.