Best Practices for the Annual Audit: How to Stay Organized During Busy Season
Despite months of hard work, file boxes full of documentation, and teams of talented accountants working together, the annual audit often devolves into chaos that could have been avoided.
Complicating the audit process are a new set of accounting standards that all but guarantee new challenges for overworked accounting teams and the audit firms they work with.
Recently, FloQast’s Blake Oliver moderated a webinar where audit experts from KPMG and TaskUs discussed the new accounting standards in 2019, potential roadblocks for engagement teams in 2019, and general best practices for the annual audit.
Here are a few key points from the discussion.
What’s new with the audit for 2019?
While recognizing revenue might not seem like pressing concern for some private companies, KPMG Audit Partner Stuart McMullen strongly advises not underestimating its effect on the company. Having experienced the process while working with public companies over the last year, McMullen’s message is clear: Don’t sleep on revenue recognition.
“It’s an interesting year to be an auditor,” said McMullen. “Public companies had the revenue recognition standard in 2018, and private companies are adopting that in 2019. Some might think that it has minimal to no impact, but — having gone through this process with public clients — I would argue it’s more significant than you think. As you dive into it, you discover how much it affects the organization. It could have a significant impact to the way you budget and forecast your business.”
For an overview of ASC 606 Revenue Recognition and what accountants and controllers need to be doing to get started adopting the new standard, see “What Controllers and CFOs Need to Know About ASC 606”.
What is the most common reason for audit delays?
Audits can be delayed for a plethora of reasons, from clients failing to respond to PBC requests to reconciliation work papers not being tied to the trial balance. For Mary Tripp, a senior audit manager at KPMG, the solution isn’t all that difficult: Set clear expectations for both parties and maintain an open channel of communication between the auditors and the client.
“Continuity helps on both ends, but we can’t guarantee that, either on the client side or the audit side,” said Tripp. “It is really beneficial for both teams to maintain a repository of detailed documents that were used in the previous year’s audit. Adding detail for all six assets and maintaining consistency in naming documents allows us to reference all documents without any confusion. I think it’s really helpful to have that starting point of, ‘This is the exact document I’m looking for,’ and it helps with coaching on both sides. Everybody knows exactly what the expectation is.”
What are your best practices for a smoother year-end audit and better auditor/client relationship?
“Short-term pain, long-term gain,” might sound as corny as the slogans on motivational posters in doctors’ offices, but it’s particularly sage advice for accounting teams.
“Over the four years that I’ve been at TaskUs, we’ve implemented a 10-day close,” said Steven Amaya, Financial Controller at TaskUs, a FloQast customer. “It’s not a soft close, we try to close each month as if it was year-end. Leverage close management software and try to move away from Excel spreadsheets or Word documents that have a calendar and a listing. You’ll see that it drives better behavior and better performance during your month-end close. That way, when the actual year-end comes, you’ve already done a lot of the heavy lifting.”