What do you call an accountant with an opinion? An auditor.
And auditors form this opinion during the final phase of the audit process. This phase builds upon preliminary testing and produces a report card on operations for the organization being audited. It’s what people think of when they hear the word “audit.”
During final testing, auditors verify a number of different account balances and transactions, as well as confirm compliance with the organization’s contracts, loans, and/or taxes. Their work assures banks, government agencies, stakeholders, and other key players that the organization’s financial statements are accurate and within professional standards.
To make a long story short, audits and their related reports reveal how competent the organization is at reporting financial information.
Gathering Information for Final Testing
At the heart of every audit is a folder stuffed with documents. Though every final request list is different, here’s an overview of what your auditors will likely need to complete their audit quickly.
- Bank statements and reconciliations
- Accounts receivable report with proof of subsequent payments
- Prepaid insurance and prepaid expense schedules
- Fixed asset and depreciation reports
- Accounts payable reports (for services performed during the fiscal year and not yet paid)
- Bank and investment statements year-to-date
- Insurance policies showing coverage amount, period, and premiums
- Internal revenue service forms (w-2s, 941s, 1099s, etc.)
- Loan covenants or other regulatory-related documents
- Information on new owners or board members with dates of changes
- Minutes from board of directors or owners meetings (at least one meeting per year is required)
- Information on any legal matters, agreement violations, or investigations from any regulatory agency
- Copies and estimated time of approval of anticipated new loans or leases (if applicable)
Setting aside these core documents as your team closes the books and enters a new fiscal year can save you time and hassle during the final phase of your audit.
Final Audit Timeline
The clock starts ticking on crucial deadlines as soon as the clock strikes midnight at the end of your fiscal year. Though gathering the documents will understandably take time, the sooner you can send documents to your auditors, the sooner they can start working, and the sooner you’ll have your financial statements.
The final phase of an audit represents 55–60% of the whole thing, and typically begins about 3 weeks after the fiscal year ends. When it wraps up depends on a number of factors, including the communication skills, level of service, and competency of your auditing firm.
Key Conversations to Have During Final Testing
Audits are about more than just spreadsheets and account balances. They involve responding to probing questions about your organization’s commitment to compliance standards as well as accounting practices.
Because these conversations can be tough at times, it helps to have auditors whom you trust and who keep a positive attitude toward you and your team. With a strong relationship, you can learn and grow each year as you have conversations like these:
- Agreeing on a practical timeline that works best for your team
- Sharing how your organization compares to others in the industry (general information only)
- Learning best practices for financial reporting
- Staying ahead of upcoming changes in accounting or professional standards
- Reflecting on successes and areas of potential improvement among those involved with the audit
Find Time to Evaluate the Final Phase
When all is said and done and your audited financial statements arrive in your inbox, you have an opportunity to reflect on these conversations and the audit process as a whole. What did this year’s audit teach you about your audit team? What did it teach you about yourself? What actions can you take to make the next fiscal year the best chapter in your financial story?
If you have questions about audits, or want another perspective on the quality of service you receive, feel free to contact our friendly auditors. We’re here to serve you!