This post originally appeared on the Humentum blog on 5/05/2020.
Many of you with a December 31 year end are preparing for your annual external audit. For many, this isn’t a time you eagerly anticipate. However, I challenge you to ask yourself why not? I understand it takes additional work to prepare for the auditors on top of your standard workflow; however, there can be many benefits that come from a good relationship with your external auditor. My goal in this blog is to challenge any negative views of the external audit process and give you tips to make the most of your audit.
Hopefully, you have a good relationship with your audit team. If you don’t, ask yourself why not? Yes, external audits may be the product of enforced requirements. However, remember you have a choice of who you hire as your auditor! Cultivating a good relationship with your auditors is key to a successful audit and comes with many benefits for you and your organization.
One thing I love about being an auditor is the perspective I get to bring to all my clients. I get to dive into the inner workings of organizations and observe how you accomplish your work. Early on in my career I was able to learn from the organizations I audited that multiple roads can lead to the same result. This knowledge auditors gain through the organizations they work with is an asset to you, as you can utilize your auditor as a resource. Does a process seem clunky, or are you perhaps considering changing to a new software provider? Your auditor is a great connection to talk to about these issues and glean their feedback/input based on what they’ve seen at other organizations. I will not claim auditors have all the right answers, but we can provide key insights that can be utilized to help make decisions for your organization.
Do you ever get nervous at audit time about how the auditor will view that crazy one-off transaction you had last July? Why? When unusual transactions come up throughout the year, why not talk to your auditor about it at that point? Your auditor will likely examine it during the audit, so save yourself the stress and get their input up front. I love when clients take this approach because we’ve worked through most of the tricky issues together and we avoid surprises. You get comfort throughout the year, and as a result, your audit is more straightforward with these issues out of the way.
One of my least favorite things to hear when talking with an organization about a process or control is “my auditor told me to do it.” While it’s likely that is true, the answer tells me that the organization doesn’t agree with it or doesn’t understand why the control/process is necessary. With any recommendations from an auditor, ask questions! Understand what the auditor is recommending and why they believe it is necessary. Sometimes, I start discussions with clients and by the end of the discussion I learn of other mitigating controls that protect the organization. Without a dialogue, then they might implement a recommendation based on incomplete information that duplicates what is already done elsewhere. Often, the recommendation still applies, but the further discussion allows the organization to understand the risk we see and how the process/control helps reduce that risk.
Hopefully some of this information helps you enhance your relationship with your auditor. Our job requires us to scrutinize your work and look for risk; however, that does not mean it cannot be a friendly, collaborative relationship.
If you’d like to discuss the contents of this article further, please contact me.
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