For any business approaching a year-end audit effective external audit preparation comes down to timing and organisation. Wilson Partners’ audit readiness checklist outlines everything you need to do before, during and after your financial year-end to ensure a smooth audit. By preparing proactively, you can transform the audit from a stressful compliance task into an opportunity to strengthen your business.

To read our full article you can read our blog showcasing the ultimate guide to Year-end compliance.

Audit Readiness for Year-End Compliance – Audits Without the Headaches

Before year-end.

Get ahead of issues by closing any gaps before the financial year closes, you’ll set a solid foundation for the audit and avoid unpleasant surprises during the audit itself.

• Reconcile all accounts early: Before year-end, reconcile all balance sheet accounts and carry out a full stock take as close to the reporting date as possible.This ensures your ledgers are clean, accurate and ready for audit, without unresolved errors or value discrepancy.
• Organise your paperwork: Make sure every transaction has supporting paperwork filed and easy to retrieve, which will speed up the audit and demonstrate transparency.
• Perform an internal audit review: Conduct an internal review of your financial records and controls to catch and correct any discrepancies ahead of the external audit, also verify that all compliance obligations are met so that no regulatory issues crop up.
• Document your processes: Write down key financial processes and policies to show auditors that you maintain strong financial controls and provide confidence in your management, helping address their queries faster.

After year-end

Once your year-end date passes, it’s time to finalise the numbers and work closely with your auditors. With organised records and open communication, the audit can proceed efficiently, even adding value to your business rather than disrupt it.

• Close off the year’s accounts: Finalise your year-end trial balance by posting all accruals, deferrals, and adjustments. Prepare your draft financial statements and ensure they reflect the year’s performance accurately, with notes ready to explain any unusual or significant items.
• Set the audit plan with your auditor: Early in the audit process, agree the scope, timing and logistics with your audit firm. Assign a point person in your team to liaise with the auditors and clarify what areas will be in focus.
• Be ready to discuss big changes: Prepare explanations for any major events or transactions from the year that auditors will want to understand. By briefing them on these upfront, you can address their questions proactively.
• Gather all audit documentation: Create an audit pack with all supporting schedules and documents the auditors are likely to request. This includes reconciliations for all balance sheet accounts, detailed schedules for significant balances, bank statements, legal documents, and so on. Having everything assembled and accessible will save everyone time.
• Anticipate auditor focus areas: Think about the common areas auditors pay extra attention to, for example: revenue recognition policies, tax provisioning and compliance, asset valuations and impairments, management estimates and judgments in the accounts. Going concerns assessments are also key, ensuring you’ve reviewed forecasts, budgets, and funding to confirm your business can continue to operate for at least the next twelve months. Review how you’ve addressed these in your financials and gather the calculations or evidence to support them.

Group specific steps

Multi-entity businesses face extra complexity in an audit. Consolidating accounts and coordinating across all entities is critical to present a true and transparent picture of the overall organisation. This section highlights additional preparation steps for group audits.

• Unify accounting across the group: Ensure all subsidiaries follow consistent accounting policies and, where feasible, use the same financial year-end date. If some entities have different year-ends, prepare bridging figures so you can include them in the consolidated accounts. 
• Prepare consolidated financial statements: Ensure your accountant prepares a full set of consolidated accounts covering the entire group, including a combined profit & loss statement, balance sheet and cash flow statement for the parent company and all subsidiaries.Review these to confirm they accurately reflect the group’s position before year-end.
• Reconcile intercompany balances: Ask your accountant to reconcile all intercompany transactions and balances between your entities before the audit, ensuring these are eliminated  in the consolidated accounts. The auditors will check that no intra-group sales or balances are overstated, so it’s best to resolve any mismatches between companies in advance.
• Handle goodwill and minority interests properly: Make sure you have accounted correctly for any investments in subsidiaries, including goodwill arising on acquisition. If your group includes minority interests, ensure those non-controlling interests are recorded and disclosed appropriately in the group accounts.
• Coordinate with subsidiary auditors: If any subsidiaries are audited by other firms, for example, overseas units with local auditors, work with them ahead of time.

Ready to get started? To dive deeper, speak to Wilson Partners’ audit team for a no-obligation chat about preparing for your next external audit. We’re here to help make your audit process as painless and beneficial as possible.