How to Reduce Financial Statement Audit Costs
Posted by Jason Kruger on November 19, 2008 in Business Financing, Financial Services [ 1 Comment ]
Because of the economic conditions that are currently facing our economy, many businesses are struggling to remain cash flow positive. In order to accomplish this, the first thing that companies look to do is to reduce expenses.
As we approach the end of 2008, companies are also in the process of completing their 2009 budgets. While the prospects of reducing salaries and headcount, advertising costs, or a host of other costs can be frightening and painful, reducing the fees that you are paying to your financial statement auditor can save your business thousands of dollars and can be easy and painless. So what are ways to reduce audit fees and create a more efficient audit? The following strategies can be used by businesses of any size to assist in creating a more efficient and less costly financial statement audit.
- – Manage your Auditor. As a former Audit Senior Manager with a “Big Four” San Diego accounting firm, I know firsthand the enormous amount of pressures and time constraints that the typical auditor is facing during the audit process. The typical auditor is juggling multiple engagements of all complexities, all while working 60+ hours per week. Because of this, it is the proactive companies that will get the best service and most attention. Being proactive and asking questions during the audit process will keep your auditor focused on you and your company. In addition, you will be more aware of what to expect during the process and will be more prepared for any obstacles that may arise.
- – Start early. Request a planning meeting with the auditor BEFORE year-end. Preferably this meeting would take place at the company’s location and would include Company management and all relevant parties. Depending on the size of the company being audited, this could include the company’s CEO/President, the individuals responsible for overseeing the progress of the audit (CFO/Controller/Accounting Manager), Audit Partner, and Audit Manager. Ask for a copy of the list of items that they will request of the company in order to begin the audit. Become familiar with this information and plan accordingly. Make sure that your team and accounting department is adequately staffed to take on the rigors of an audit. If you have any questions of the auditor, ask them now and any time prior to the start of the audit. By becoming familiar with the information prior to year-end, you will be in a position to appropriately prepare the information correctly, with no errors, when it is due. Remember, the auditor will send a bill for this meeting, but in the end, it will be well worth the extra few hours.
- – Be Complete. Fully complete the year-end close process AND the list of items and schedules requested by the auditor prior to the beginning of the audit. This is the cause for most inefficiencies during the audit process and as a result, the result of the increased fees. Many companies feel that they can complete the list of requested items during the completion of the audit. This is rarely the case. Unexpected questions will arise from the auditor during the audit process. These questions will create additional questions that Company management may have not been prepared for and will delay the preparation of the other items on the list. In order to maximize efficiencies and to support their accounting department, many companies these days will hire an outside specialist or accounting firm to work with the company and their auditors to assist in the year-end close process, preparation of all auditor requested schedules and documents, preparation of financial statements, and assistance with research and resolution of any complex accounting issues that may arise. These firms work with the company to put a plan in place that is in the best interest of the company. These services typically result in a reduction of audit fees that exceed the fees charged by the accounting firm. These firms also assist in offloading management time by providing an extra layer of expert review to reduce the number of audit adjustments and to make sure that all schedules, source documents, and sub-ledgers tie back to the final trial balance, thus providing Company management with additional flexibility to attend to their regular daily responsibilities. In San Diego alone, there are several San Diego accountants and San Diego accounting firms of which to choose from.
To summarize, an efficient audit results in the reduction of audit fees. To accomplish this, a company must be organized, prepared, and must have the infrastructure in place within their accounting department to appropriately prepare and complete the requested information, along with the time to answer all audit related questions.