Chartered Accountants

Turning the cost of your audit into a positive investment

When you hear that you need an AUDIT, most business owners and not for profits groan.

You have two choices:

1. Find a chartered accountant who is going to deliver the cheapest service possible;

 2. Find a chartered accountant who will deliver an audit and offer advice on how you can operate more efficiently.

 For many years lenders offered large amount of business credit supported by the simplest of financial statements either internally prepared and compiled or reviewed by a chartered accountant together with a copy of the last income tax return.

Company’s that needed audits in those days tended to shop around for the lower cost services.

Companies gave minimal weight to the potential benefits of expanding and benefiting from the audit. It was simply a cost.

Not for profits only undertook an audit because it was in their Constitution or because they required an audit when making applications for funding.

The benefits that could be provided to not for profits by a chartered accountant overseeing their financial systems was overlooked. This leaves the not for profit venerable to fraud or mismanagement.

Your audit is an independent verification of your company or not for profits financial results. Creditors use audits to provide a certain level of assurance regarding the financial results of the business.

Funding organisations use audits to provide a degree of comfort that the funding supplied will not be misused.

The audit is an important that can help a business or a not for profit obtain proper financing and comply with the appropriate regulatory agencies.

As auditors we evaluate the internal controls associated with business or not for profit transactions such as revenues, payroll, disbursements and investments.

We query staff personnel and management on these transactions, the safe guards and established internal controls.

We then select a sample of transactions and trace them through your systems. Our goal as auditors is to prepare the systems you tell us you have to the way the business transactions actually take place.

Often an auditor finds areas where the company or not for profit can enhance its business or not for profit activities and establish better controls. Other areas that can benefit from an audit include a computer back up and security, insurance coverage, financial information, internal controls and owner and management issues affecting the future success of the company.

Most business should find it beneficial to have an open business relationship with an auditor. With industry experience, the auditor often has recommendations to reduce costs or improve cashflow. These added benefits usually don’t come with the lowest price audit because that order only has one goal?.get it done on budget?.don’t think or waste your time inquiring.

Unfortunately this is all done in accordance with current standards.

Here are some tips to make your audit go smoothly and give you a better return on your investment:

1. The owner of the business or treasurer of the not for profit should take an active role in working with the auditor. This will enhance the audit and produce something potentially more valuable than simply an audit certificate.

2. Plan ahead and establish a timeline with your staff and your chartered accountant to start and finish the audit. A well-executed audit is just like a well-executed game plan or construction project. There are a variety of tasks involving key people within your company or not for profit and this has to fit into the timeline. The finished date is typically based upon the timeframe set by the forthcoming annual general meeting. The staff finish dates ideally should be managed to coincide with your current workload and your teams ability to prepare the necessary schedules and work papers required by the auditor.

3. Work with your staff to get the working papers to the auditor on a timely basis. Work with your auditors on any unusual areas or new areas otherwise these types of things can delay completion of the audit.

4. Be upfront with your auditor and advise them during their planning process of any deadlines or potential fines, penalties or other compliance issues, which are likely to impact on the audit.

5. Arrange for a pre-balance date inspection of your records by the auditor or even a mid-term review. This means that the auditor can identify items your staff should address before the audit is started. These items could include changes in property and equipment, new financial arrangements, legal issues. The pre-audit briefing will result in a more effective audit for your company or not for profit because it gives you time before the end of year to make changes or gather the appropriate information.

6. Have your auditor prepare audit confirmations to your solicitor, bank and so forth in advance, if possible, and have them ready to mail at year-end. Confirmations are a necessary part of a good audit.

Mailing these confirmations promptly on balance date should ensure that the third parties receive them and are able to reply in a timely manner.

Typical confirmations that fall into this area include bank, legal and accounts receivable. All confirmations should be sent within a week of the year-end. This is a time sensitive matter where appropriate planning can help both parties due a better job.

Many audits are held up waiting for third party confirmations. A pre-balance briefing with the auditor will give you an opportunity to identify what year-end confirmations are required.

CONCLUSION

You can have a positive influence on the outcome of an independent audit. Not only can you plan for a better, cost effective audit, but you also achieve valuable feedback from a professional familiar with similar organisations.

 


 

Miller Gale & Winter
Level 6, 293 Durham Street, PO Box 270, Christchurch 8160

Phone:+64 3 379 5566
Fax:+64 3 365 6915

Email: accy@millergale.co.nz
www.millergale.co.nz

 

Produced by Index Media Limited


 

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