Annual audits: faster, better, and cheaper!

7 Oct

Is it possible to have your year-end audit done faster, better, and cheaper?

Yes, it is very possible, but it takes some planning.

First, remember this number: 90, as in 90 days from start to finish.

You should want and expect to have your audit completed within 90 days of the end of your fiscal year.  If, for example, your fiscal year-end is June 30, then you should have your final audit report in hand by September 30.  If your year-end is Dec 31, your auditors may say they cannot meet this schedule because they are too busy during tax season to have your audit done by March 31.  If they say this, get new auditors (unless they are giving you a huge discount in their fee).

There are some significant benefits to getting your audit done in a timely manner.  First and foremost: financial information is most helpful when it is current.  Second, audits performed closer to your year-end generally go more smoothly than audits done many months later because information is more current and easier to come by.  Third, you look better to your major funders who typically request a copy of your audit.  Try explaining to a program officer at a foundation why nine months after your year-end you still don’t have your audit done.

Getting your audit done quickly, however, will not magically happen by itself.  It requires work, planning, and advance preparation on the part of your organization.

First, months before year-end, before signing the auditor’s engagement letter, have a talk with your prospective auditors.  Let them know you want things done quickly and efficiently.  To meet a 90 day deadline you must be ready for field work to begin by week 5 or 6 after your year-end.  The auditors must complete their fieldwork by week 6 or 7.  The auditors will go back to their offices and prepare a draft audit for your review by week 8 or 9.  Your finance committee or board should review the audit with the auditors, and then the auditors make any changes and present to you the final audit by the 90th day.  If the auditors agree to this schedule, then you can sign their engagement letter, provided of course that you are happy with all other aspects of your auditor selection.

There is one major caveat for this to work: you must be 100% ready for the auditors when they walk in the door to begin their field work.  100% ready means all schedules and workpapers must be complete, accurate, and they must tie (i.e. agree) to the trial balance.  You cannot feed information piecemeal to the auditors.  If you are not ready, the entire 90 day schedule breaks down, the auditors will have to delay their work, costs go up, and the audit will be delayed.

If you follow this approach you will likely get your year-end audits done faster.  A more timely audit is better for you and for your donors.  And because you are better prepared, the auditors won’t need as much time, so your audit fee should be cheaper.

Faster, better, and cheaper.

Trust me when I tell you the above scenario is very reasonable.  We do it all the time for our clients.

Comments welcome.

Eric Fraint, President and Founder
Your Part-Time Controller, LLC

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