Make the process as smooth as possible by being open and honest with your auditor
Few company directors would claim to enjoy the audit process, but all accept that it is as necessary as a kitchen deep-clean. The audit tests the financial controls within a business and provides a detailed anatomy of financial performance.
The audit report tends to get poured over by any private-equity firms or other investors backing the business. Likewise, if it's a family concern and the finance director is someone from outside the family circle, they also appreciate the external perspective.
In these circumstances it would be wise to get any issues on the table early. Leaving things, in the hope they will somehow be overlooked or missed, just means that you will get backed into a corner at the 11th hour.
The best approach to an audit is to be up front and honest. Provide the necessary documents as quickly as possible so the auditor can perform their job and move on.
By addressing problems at an early stage there's a chance to come up with some solutions. If a hospitality group, for example, has an under-performing hotel, it may need to write down the overall value of the business as a result. But it may transpire that there were operational issues that would allow the auditor to isolate and handle the issue differently while remaining within the regulatory framework. Perhaps there was a spell of particularly severe weather or a manager who drastically under-performed.
Waiting until the 11th hour makes it appear as though you are trying to conceal something and certainly leaves very little room to manoeuvre.
Three ways to make the company audit run smoothly
1 Speak to your auditor â¨Have an early discussion with your auditor and establish what reports need to be prepared by your team. Make sure the required work is completed in good time.
Also, make sure the auditor does the majority of the work on your premises - which will improve the speed and quality of the work.
Some executives approach the audit with the objective of spending as little time as possible with the auditor - an attitude that's unlikely to help the process proceed quickly and smoothly.
It's also important to test your IT systems. Much of the work involved in an audit these days involves the financial software systems, such as Sage, being interrogated by our systems. In many cases we find it's not being used fully, with processes such as payroll that can be automated being handled manually.
The process is designed to test financial systems so it inevitably throws up problems and weaknesses. We might find systematic failures, such as a pub that fails to bank takings in a timely fashion and also has protocol breaches such as failing to set the alarms.
2 Agree a timetable and stick to it â¨Hold regular meetings with your team and the auditors so that the required information is supplied. Information blockages will only create delays, and good communication will help the audit firm to keep costs under control. You should also discuss a form of communication that works for you. Is it a 15-minute face-to-face session in the morning or a daily eâ'mail where queries are handled in a timely fashion?
3 Regular face-to-face meetingsâ¨ Ensure you diarise catch-ups throughout the year. You should be viewing your auditor as someone who needs to understand your business, and whose output can provide some value. The accurate reporting of figures tends to come under more pressure during a downturn - people, anxious to protect their jobs, are afraid to report disappointing figures.
Carl Williams is a partner at the Liverpool office of accountancy firm Grant Thornton