Preparing for your organization’s first audit? Follow these five steps
One of the tell-tale signs of an organization growing up and spreading its wings is the independent audit. Whether for a future IPO, a potential sale, attracting capital or compliance, an audit is a significant step toward bigger and better things.
For the uninitiated, though, preparing for a first audit can trigger equal parts trepidation, confusion and maybe even anxiety. But as I’m about to discuss, there’s plenty a CFO or business owner can do to make an initial independent audit a smoother, less stressful experience.
1. Choose the right auditor
First and foremost, you want to be sure you’re using the right auditor in the first place. Organizations have different cultures, needs, skillsets, headcounts and experience, all of which should factor into choosing an auditor that suits your business and people well.
Further, here in Colorado, we have the tech, bioscience, aerospace and cannabis industries, amongst others, that each has unique needs and operations. Whenever possible, you want to choose an auditor with experience in your space. Otherwise, you could step into a scenario where you’re not only trying to get through your first audit but also educating the auditors on industry particulars as you go.
2. Documentation is your best friend
Given the inevitable differences between industries and businesses, it’s always wise to create a manual of sorts for your auditors, something that fills them in on your sources of risk and anything else possibly material to the audit. This is a document you’ll want to revisit throughout the year to make sure it stays up-to-date and relevant.
Similarly, your auditors are walking into a completely new set of processes and procedures on your initial audit. So while everyone on your team understands Joe approves your AP and Susan approves the revenue recognition contracts, your auditors don’t know that. Therefore, by documenting roles, tasks and processes, you’re providing a road map that will make your auditors’ lives — and yours by proxy — much easier.
3. Develop and maintain a relationship
An independent auditor isn’t like your personal tax accountant, where you have an annual meeting, exchange pleasantries and bid them adieu for another year. Instead, a relationship with an auditor should be far more consistent, aiming to develop a solid relationship and continuously open lines of communication.
I recommend assigning a point person from your organization to serve as a conduit between the auditors and your accounting team. This way, rather than just uploading materials to a faceless data portal, your point person interacts with the auditors and, thus, ensures those critical communication lines remain open and fluid.
4. Use a project management perspective
In terms of workflow, it’s usually best to look at a relationship with auditors — and the audit itself — from a project management perspective. Such a strategy lets you proactively account for and manage a laundry list of deliverables, deadlines and the inevitable questions between the two parties…
To read the original article from the Denver Business Journal, click here.