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Facilitating a smooth audit process

How do you run an efficient audit process? This was the subject of workshop ran by Farrah Kitabi, our Senior Audit Manager at the Charity Accountants Conference.

Farrah said, “Running an audit can be challenging for finance managers, particularly as this have to be fitted in around the day job. Managers have to ensure business as usual, but also plan effectively to ensure deadlines are met and the whole audit process is as stress free as possible.”

Farrah said audits should be treated as projects, with a system and processes in place to ensure deadlines are met, that audit fees are carefully managed and don’t escalate, the process is smooth and that a quality document is produced on time.
She explained the three components of a good project are the planning, the resourcing and the action plan.

Planning
The first step is to create a timetable, which should include key deadlines spanning the entire project. These would include planning meetings with auditors, the date of the year-end close down of the finance system, when the first draft of the accounts will be sent to the auditors and senior management team, , the start of the audit fieldwork, the clearance meeting with the auditors to review key audit issues, draft management letter and draft financial statements, the board and sub-committee meetings to approve the financial statements and the submission to Companies House and the Charity Commission.

Farrah said charities need to think carefully about the time frame, work backwards from the deadlines and be realistic about the amount of work and the resources needed. Think about who will be involved in the process and the time required for you and others to review the accounts and information given to the auditors.

Learning from experience
She said, “If you have done an audit in the past, you can learn from experience. Where were the pressure points? How long did the process take? What were the key challenges? Are there any processes that can automated this time?”

Farrah recommended establishing a timetable as soon as possible after the previous year end so lessons learned from the previous years’ experience could be incorporated. For example, could the time between the audit and final circulation of accounts be extended if needed. She said charities could organise a debrief with their auditors following an audit to see what worked well and where improvements could be made and feed that into the next audit.

Planning with auditors
It is a good idea to plan with the auditors. This could include reviewing the auditors’ information from the previous year, discussing the information required and areas where you or the auditors could do better. The planning meeting with the auditors is also the place to discuss any issues, as the audit will be far smoother if there are no surprises.

Resources
Think about who needs to be involved in the audit process and the information, training and support they might need from finance.

Key parties to involve are the budget holders throughout the organisation, the senior management team – who must take ownership of the financial statements and any issues raised by the auditors and the board of trustees – it is their report and accounts.

Other staff include the communications team, who may be able to use the statutory accounts as a communication tool, and they will be involved in developing the trustees’ report. HR and facilities also need to provide information for the notes in the statutory accounts and the auditors will need information from them and may want to talk to them during the audit.

There are also third parties to consider including bankers, outsourced accountants, legal advisers, actuaries and investment managers.

Farrah highlighted the importance of engaging staff outside of finance with the audit and this could be done by presenting the annual report to staff or preparing frequently asked questions they can access.

Detailed task list
Having a detailed action plan and to do list is essential to ensure the smooth running of the project, with tasks listed, key roles and responsibilities and deadlines included.

Farrah said it was all about being organised and automating tasks where possible. Other tips included ensuring that accounts are updated monthly, delegating responsibilities to key people and carrying out internal reviews to ensure and problems are resolved prior to the audit.

She said auditors will always ask certain questions about variances in figures year on year, they will want to see staff contracts that match costs in the accounts, bank statements, breakdowns of all balance sheet items, trial balances that reconciles to the accounts and third party information to support the figures.

At the end of they day, a smooth audit is the result of careful planning and project management and a very detailed to do list.