Preparing for a successful statutory audit

3rd December 2020

It has been an interesting year for all of us, aside from getting used to the ‘new normal’ of working from home, there have been a number of developments to auditing standards and, accordingly, the required audit approach, which will change the way in which you prepare for a statutory audit. Serena Desai, Audit Supervisor, covers the key considerations below:

1. Communication with your auditors

Regular and clear communication with your auditors before, during and after the audit process will help it run smoothly and effectively.

Ensure that you have been provided with a deliverables list in advance of the audit. This will cover a significant amount of the initial documentation required by the audit team. Compiling this information upfront will enable the team to ‘hit the ground running’ during the scheduled audit fieldwork and help to reduce the time spent by you collating information during this time. Providing the audit team with a list of key individuals/contacts to whom certain queries should be directed to, as well as details of their availability during the audit will also be of assistance.

The earlier your team is able to prepare balance sheet reconciliations and finalise the draft year-end numbers, the better. This will put you in a strong position to identify any anomalies early on and allow good time to obtain accounting advice if necessary.

2. Remote auditing

Cloud-based data analytics and file-sharing software are now commonplace, and not only provides a secure platform for sharing audit deliverables, but also helps to facilitate the remote auditing process. Our software of choice, Inflo, enables us to request, and you to upload, audit documentation – avoiding the transmission of confidential information via email.

Only named individuals are provided access to this software to ensure that the information remains ringfenced and secure. If used to its full capabilities, the software also enables the audit team to select transaction samples based on our risk assessment, these can be sent to you in advance of the audit fieldwork to expedite the process.

The engagement team will discuss file-sharing options with you on your planning call, and the possibility of integrating your data to utilise Inflo’s full capability.

3. Timetable and service provider liaison

We will agree a timetable for the audit with you. It is important to notify any third-party service providers of the relevant deadlines, including:

  • Bookkeepers
  • Payroll providers
  • Corporation tax compliance advisors
  • Fund administrators

This will ensure that they will be ready to provide any documentation required for the audit and help prevent delays. Note: where haysmacintyre also provide these services there is no need to communicate these deadlines as we will do this internally on your behalf. 

4. COVID-19 implications

The impact of COVID-19 has varied across our client base. What has been consistent is the level of monitoring required and the financial statements. As we continue to deal with the fallout of COVID-19, your directors/members will need to consider the impact on the financial statements from a financial and disclosure perspective. We have listed below key areas of consideration:

  • Going concern implications
  • Impairment of investments
  • Allowance for potential irrecoverable debt
  • Fair value measurements of financial instruments, eg options
  • Onerous lease contracts

Management are required to carry out an assessment to ascertain whether the entity is a going concern. The assessment should consider all relevant information about the future which is at least, but not limited to, 12 months from the date the financial statements are approved. This should include detailed budgets and cash flow forecasts.

The assessment as to whether an entity is a going concern takes into account events that occur after the end of the reporting period. For entities that are affected by COVID-19, it will be necessary for management to consider the appropriateness of preparing financial statements on a going concern basis. Where management are aware of material uncertainties that may cast doubts on the entity’s ability to continue as a going concern, the entity should make full disclosure of the material uncertainties within the financial statements. Having such an assessment prepared in readiness for the audit will help to inform the auditor’s consideration of the going concern basis.

If you require further guidance on the preparation of the assessment for going concern or how COVID-19 may impact your entity’s activities, please speak to your engagement partner or manager.

Having these recommendations in mind and starting preparation before the audit process begins will ensure you are in a favourable position for the upcoming audit. We look forward to working with you in the coming months.

Awards and Accreditations

Accounting Excellence Large Firm of the Year 2023
eprivateclient top accountancy firm 2023

Get in touch