Ways to Prepare for an Accounting Audit

By: Alison Schinner, Staff Accountant

Financial Statements

Overview

• Prepared by Client List

• Internal Controls • Separation of Duties

• Bank Reconciliation

• During the Year • Reports

• Fixed Assets

• Documentation

• Just Prior to Audit

Prepared by Client List

Internal Controls

• What is internal controls?

• Fancy Definition: “Internal Control is a process effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following three categories:

1. Reliability of financial reporting

2. Effectiveness and efficiency of operations

3. Compliance with applicable laws and regulations” (pg. 173)

Louwers, T. J., Ramsay, R. J., Sinason, D. H., Strawser, J. R., & Thibodeau, J. C. (2015). Auditing & assurance

services – With CD (6th ed.). New York, NY: McGraw-Hill. ISBN: 9781259197109.

Internal Controls

• Separation of Duties • Why is it important?

• It’s not just about fraud prevention, it’s good practice. • By separating duties among different people, you are more likely to catch

minor, as well as some major, errors.

• Two heads are better than one.

Internal Controls

• Bank Reconciliations • Monthly

• Proper Separation of Duties

• Good way to detect fraud

Reports

• Employer Contribution Report

• Schedule for Long Term Obligations or Notes Payable/Receivable (if applicable)

• Schedule for any Prepaid Expenses

• Schedule for Book and Administrative Fees

• Schedule of Accrued Vacation

• Monthly Financial Statements

Financial Statements

Fixed Assets • What is a Fixed Asset?

• How is it different from an expense?

• What Auditors will want to know: • Any newFixed A ssets added

• Any Fixed Assets that have been disposed of • Gain/Loss

• Invoices

Fixed Assets

Fixed Assets

Fixed Assets-Hyperlinked Invoice

Documentation

• Files • Organized

• Easy to Understand

• Easy to locate

• Electronic Files • Ensure integrity, accuracy, authenticity and reliability

• Maintained in safe location

• Easily accessible for inspection

Just Prior to an Audit

• Ask for the Prepared by Client List • Enables you to prepare for your audit better and faster.

• Match to General Ledger

• Look for anything that looks goofy

What they might ask for: Bank Reconciliations, Bank Statements, Deposits,

Disbursements

Invoices, Customer/Contractor Payments, Confirmations

Investment Statements/Reconciliations

Schedule of Additions/Disposals, Accumulated Deprc.,

Vendor invoices

Schedule of Note Payable, Confirmation from Bank

Disbursements

Schedule of Accrued Vacation

Deed/Other Doc., Confirmation from Bank on Note

Payable

Questions?