Throughout the audit process, auditors see consistency in deficiencies from job to job. Below, we identify common areas where errors arise and how to minimize the effect on having them occur year after year.
Lack of Support Evidence
Organization and proper filing of all invoices, purchase orders, and receipts goes a long way in an audit. These requests from auditors are typically made early in the audit process and if received timely, can be a springboard for the rest of the audit. On the other hand, if these items remain outstanding for long periods of time then it will hold up other aspects of the audit. Having all documents organized properly in the same location or having electronic copies handy (preferred) and accessible is a great start to the audit process. Recommendations for retaining most records is three to seven years depending on the specific document, so having them ready for auditors is another good step in maintaining compliance with norms.
Lack of or Unreasonable Management Accounting Estimates
A study found by Independent Audit Regulators found that close to 30% of all audit deficiencies arose from management accounting estimates being inconsistent or unreasonable. Auditors will look at estimates with professional skepticism and determine whether they paint a fair and reasonable picture relating to the estimate. Having a consistent dialogue throughout the year with a specialist or your accountant regarding new estimates or adjusting existing estimates is a good way to keep added scrutiny during the audit to a minimum.
Communication internally for companies as well as between the client and auditor is the most important aspect of the audit. Typically, first year audits have the most issues as there is no prior experience between the client and auditor in regards to information that is being requested. If at any time throughout the process you become confused as to what is being requested, it is always better to be upfront and reach out ASAP to eliminate any confusion. This will help the audit process progress and operate efficiently.