To get the most out of your company’s year-end audit, you need to view your CPA firm as a long-term partner and not just as a commodity that provides an audit opinion.
“If you’re just looking for a commodity, you’re always going to be disappointed with what’s delivered,” says Michael Benjamin, a partner in the assurance services practice at Burr Pilger Mayer. “But if you’re looking for a long-term partner, you’re going to be a lot happier. You should look for a firm that really wants to partner with you, that understands your business and your risks and that wants to take the time upfront to get to know your company.”
Smart Business spoke with Benjamin about how to get the most out of your CPA firm to ensure a successful year-end audit.
How should a business approach a year-end audit?
Audits should be viewed with a team approach, as a partnership between your company and your CPA firm. Too many businesses tend to look at it as a process that happens to them, and instead, they should be looking at it as a process that they participate in and have control over.
Part of that is meeting with the engagement manager of the audit firm before the end of the year and really making sure that the audit firm understands your business and the risks that your CFO sees in the day-to-day of running your business. The auditors should audit through the eyes of your company, meaning that they need to understand your company, should want to understand what you see as the risks and then try to audit the information as you see it from your business’s point of view.
Many times, when companies end up producing extra reports for their auditors, it’s because they haven’t really sat down with them and explained their business properly.
What can a company do in advance of an audit to make the process go more smoothly?
The biggest mistake people make is thinking they can get everything ready just before the audit, and they underestimate the amount of time it will take them and their staff to gather that documentation.
Before an audit, a company should receive a ‘prepared by client’ list from the auditor. But a lot of times that list is very generic and not everything on it may apply to your company. So you should request a meeting to go through the list, asking things such as, ‘Why do you need this? This doesn’t pertain to our company,’ or ‘Instead of providing this, can we provide this instead?’ That leads to a more efficient audit and can save time and money on both sides.
An audit is a great burden on a company, especially if you have to provide extra reports for auditors and your employees are spending time answering auditors’ questions, so the better you can link what you produce on a daily business to the auditors’ requests, the more you can speed up the process.
Then, after you make sure the auditors are asking for the right things, come to an agreement on what they’re going to receive from you, what that information is going to look like and what that timeline is going to be. That stops the process of the auditors asking for something, you delving into it, then having them come back to say that’s not exactly what they needed. By setting expectations and timelines upfront, you can avoid this waste of time.
How can building relationships with your CPA firm further improve the process?
By staying with the same firm year after year, you develop those relationships and that team spirit. The auditors train the clients, and the clients train the auditors. There’s a lot of efficiency that can come out of this in future years as both sides get a better understanding of what they’re looking for and learn to ask for it better.
Who should participate in an audit?
All key players in a company should participate. A lot of those people have been through audits before and they know what it’s going to take to prepare.
You don’t need all your key players to be there for a two-hour meeting. Instead, plan it so you’re talking about assets in the first half-hour and can have the people involved who work in accounts receivable. In the second half-hour, you can work on liability and bring those people in.
That way you don’t have people sitting around idle for a couple of hours, and everyone gets a chance to meet one another, really understand the audit process and build a team spirit. You can also talk honestly about when certain things can be delivered to the auditors so that everyone can stick to the schedule.
Once the audit is complete, is there any need to follow up with your auditors?
You should always try to have a follow-up meeting within a couple of weeks of when the auditors leave the field. That way, the process is still fresh in your mind, you know what the successes are and you know what went wrong. It’s a great time to talk about what happened during the audit and start thinking about next year so that everyone can begin to prepare.
Michael Benjamin is a partner in the assurance services practice at Burr Pilger Mayer. Reach him at firstname.lastname@example.org or (415) 288-6294.