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10 Tips for a Smooth Audit 

​Want to ensure your audit goes as smoothly as possible in 2013? We know this may sound a bit self-serving (hey, here are some ways to make our life easier!), but there really are some key benefits for you as well, such as:

  • The auditors will likely ask fewer questions meaning they might be there for less time!
  • You may be able to minimize or reduce the number of items that need to be reported in the auditors' “end of audit” correspondence.
  • You may identify some problem areas that can be fixed immediately, saving you from the stress of dealing with changes late in the audit process.

Here are some strategies to think about in order to facilitate the smoothest audit possible:

  1. Finish Making Your Journal Entries Prior to the Start of the Audit
    Posting journal entries after your audit has started creates inefficiencies.  Your auditor spends additional time updating account balances and reviewing updated schedules.  Completing all your year-end journal entries prior to the start of the audit will help the process move much more smoothly. If there were auditor-proposed journal entries identified during your last audit, one great tip is to save a listing of these and revisit them before your next audit to ensure the issues are corrected.  Another bonus is that going through this process will reduce the risk of the auditor identifying any Significant Deficiencies. 
  2. Get in the Habit of Tracking Capital Assets Throughout the Year
    A common area that often delays the audit is the completion of capital assets schedules and journal entries.  Oftentimes, this is one of the last things to be completed when preparing for the audit.  A recommended best practice is to either track capital assets through a tracking system as they’re purchased throughout the year or to identify and track them on a more frequent basis, such as quarterly.
  3. Gather and Copy Any New Agreements and Contracts
    Your auditor will need to review any significant new agreements or contracts that were entered into during the year under audit.  This would include documents like employment contracts, grant agreements, intergovernmental agreements, and service-sharing arrangements.  Instead of tracking down these documents as they’re requested during the audit, try saving copies in a separate “auditor” folder as the year progresses.  There’s also no need to wait until audit time to provide these documents to your auditor.  Sending them over throughout the year will allow your auditor to review them ahead of time to identify any potential accounting or financial reporting changes.
  4. Make it a Priority to Update Internal Control Questionnaires
    To reduce year-end audit preparation, consider updating these questionnaires throughout the year as internal control processes are revised or new personnel are involved.  In addition, if control processes are decentralized, create a process to coordinate with other departments such as information technology or human resources to ensure they provide needed information in a timely manner.  This could include a year-end memo or update meeting with other departments to request and share information.
  5. Know Whether You’ll Need an A-133 Audit
    Entities that spend more than $500,000 in federal grant monies during the year are required to have a separate federal grants audit under OMB Circular A-133.  Early identification of the need for an A-133 audit will allow your audit team to ensure the appropriate staffing and time is allotted to complete this additional testing.  Early communication with other departments to identify new grants will help ensure you have the appropriate information to evaluate your need for an A-133 audit.  Remember that grant thresholds are based on dollars spent, not dollars received!
  6. Be Sure to Request Updated Actuarial Reports
    Accounting standards require actuarial valuations to be utilized for pension systems as well as retiree health care plans.  The accounting standards also set requirements for the timing of these valuations.  Actuaries need appropriate lead time in order to complete their valuations (sometimes up to six months).  Early identification of the need for a new valuation can help ensure these are completed prior to the start of your audit.  
  7. Advanced Planning May Circumvent a Deficit
    Most states require some form of follow-up if you have a deficit in any particular fund.  Please be sure to understand exactly what constitutes a deficit as it may not be as readily apparent as you might think.  For instance, in Michigan, Numbered Letter 2012-1 provides guidance on identifying a deficit and how to file a deficit elimination plan.  The Michigan Numbered Letter 2012-1 can be located at the following link: http://www.michigan.gov/treasury/0,1607,7-121-1751_2194_2196---,00.html. In Ohio, the level of the deficit determines whether a community is put on Fiscal Watch or is deemed to have a Fiscal Emergency.  Please see this link for the criteria used to determine if a deficit exists:  http://www.auditor.state.oh.us/services/lgs/fiscalwatch/AOSCaution%20Guidelines122111.pdf. One suggestion is if there are any funds with small deficits at year end, consider making a transfer (if funds are available) to eliminate the deficit so you do not spend time formally addressing small deficits. 
  8. Get Your Commitment Resolutions Passed
    With the recent implementation of GASB 54, fund balance categories have changed.  Commitments of fund balance in particular require governing body approval prior to year end.  Planning ahead with the governing body to determine what fund balance should be committed and taking the appropriate action prior to year end will ensure this will be handled prior to the audit.
  9. Review Your Board or Council Minutes Through the Lens of the Auditor
    As auditors, we take time to review your board or council meeting minutes to identify any items that could have an impact on the accounting or financial reporting.  In order to be prepared for these questions, consider implementing a process to review these minutes on a regular basis, or as they become available.  This will identify any items that may require follow up with other departments or may need to be reflected in the accounting records.
  10. Make Necessary Budget Amendments
    Tracking your budget variances as year end approaches is an important process.  Budget amendments impacting the year under audit should be done prior to the end of the year.  Ensure you’re reviewing budget variances regularly close to year end and anticipating entries that will be posted after year end.  If any budget overages are anticipated, ensure budget amendments are processed on time.

In Conclusion

Thoughtful attention to these items will make things easier on you, your staff, and your auditors.

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