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What to include in a financial audit checklist

No one likes being audited because it always brings up one or two issues and it takes a lot of time out of the working day, but there are ways to make an audit less painful. One of the best ways of avoiding additional stress is to create a financial audit checklist.

Auditors

Auditors have three jobs to do when they review your books. The first one is to confirm that your firm has the correct procedures in place to account for its financial transactions properly. The second thing they do is make sure that you’re complying with all applicable regulations. Thirdly, they are there to protect stakeholders from fraudulent activity. If you’re doing your job right, you won’t need to worry about the second or third part, so you should be able to concentrate on your firm’s processes.

Checklist

Preparing a financial audit checklist will take time because it must be done properly if it’s to be affective. It means carrying out a mini audit yourself as you’ll have to gather financial information about your business over the past year. Being prepared to show all of your receipts rather than scrambling for each one as they’re asked for will save time and lower your stress levels, and knowing where your firm is at financially will save a lot of heartache.

Financial statements

You’ll need to have all your company’s bank statements to hand. The statements should clearly show each transaction that went through the bank. Where they don’t do so, for example when a firm pays under a parent company name but you’ve invoiced under a subsidiary name, be prepared to explain that to the auditor. They will double check that you’ve allocated the funds correctly, but again time is saved.

Separation of duties

You can argue to the auditor that you’re the most honest of people but that won’t wash if you’re processes don’t suggest total transparency. You’re internal processes have to be designed to prevent mistakes or fraudulent activity. For example, the person who creates a PO shouldn’t be allowed to write a cheque to pay for the work.

Final word

A financial audit checklist has to also include everything covered here as well as your cash receipts, information on major clients (including any financial arrangements you have with them), and information on your firm’s accruals. If you’re not sure what else is required you could review last year’s audit or speak to the auditors ahead of time.

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