An important part of the planning process for a financial statement audit is having quality discussions with clients regarding how their year went. However, this is just one part of the puzzle when it comes to planning for an audit.
The purpose of planning for an audit is to gain an understanding of the organization’s changes throughout the past year. A risk-based audit approach is the result of the planning process. This approach is applied throughout the audit in a consistent and easy-to-follow format. When planning, auditors work to understand what happened to their clients during the year in both quantitative and qualitative fashions. The quantitative form is a preliminary analytical review of non-finalized financial data from their client. This can be as simple as taking interim financial statements and comparing them to previous audited statements. The qualitative form is continued discussion with the client throughout the year and several formal conversations with those charged with governance and management. Discussion with the client is extraordinarily valuable in the planning process and should not be overlooked.
Beyond the inquiry of client personnel and review of financial information as part of the planning process, client personnel are provided a “Prepared by Client” listing which is an inventory of the documents the client is responsible to provide to the auditors as well as to provide the client bank and investment confirmation requests that are mailed by the auditor to the organization’s financial institutions. Other key elements of the planning process include scheduling field work site visit dates and developing a mutually acceptable timeline for completion of the audit. Communication is particularly critical in the phases leading up to and after field work.
When people think of auditors, many think of a person crunching numbers and not interacting with anyone. Planning for an audit takes a lot more than being silent behind a desk. Some auditors thrive by crunching numbers and analyzing data, while others are in their element when it comes to interaction with the client. Planning for a smooth audit takes a combination of both skills to help the audit be successful. Contact Audit Senior, Michael Prall, CPA, at 651-483-4521 or mprall@otcpas.com with your audit planning questions.