External audits aren’t required for every business. But whether required or not, they can provide lenders and investors with assurance that your financial statements are free from material misstatement and prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). How can you help facilitate efficient, timely audit fieldwork? The keys are frequent communication and coordination between a company’s internal audit department and its external audit firm throughout the year. Here are four ways to foster this partnership.
Scheduling regular meetings between members of the internal and external audit teams sets the stage for a more efficient audit process. You might discuss emerging issues, such as how the company intends to apply a new accounting standard or the status of internal control remediation efforts. In preparation for an audit, auditors can meet to compare the internal audit department’s work plan to the external auditor’s audit plan. This comparison can help minimize duplication of effort and identify areas where the teams might work together — or at least complement each other’s efforts.
The external audit team can’t rely exclusively on the internal audit department’s reports to plan their audit. But sharing in-house findings provides the external audit with a bird’s-eye view of the company’s operations, including high-risk areas that deserve special attention.Designate an individual on your internal audit team to act as liaison with external auditors. He or she should be charged with sharing reports in a timely manner. This gives external auditors adequate time to review in-house reports and avoids hasty decision making.
During fieldwork, external auditors need access to employees, executives and data dispersed throughout the enterprise. Internal auditors can share key documents compiled during their audit procedures.Examples include the company’s organization charts, copies of audit reports from previous years, and a schedule of unresolved internal control deficiencies. This information helps educate external auditors and identifies employees to interview during audit inquiries.
Both internal and external audit teams require continuing professional education (CPE) to maintain their licenses and improve their understanding of issues they might encounter during an audit. For example, training sessions might explain new accounting standards, emerging fraud scams and technology-driven auditing methods. Joint training sessions help auditors share best practices and forge lasting bonds with members of the other audit team. Plus, it might be more cost-effective for internal and external auditors to share the fixed costs of providing CPE courses.
These four ideas are just a starting point. Let’s brainstorm additional ways to foster collaboration between your internal audit department and our external auditors. This exercise will allow both teams to improve efficiency and increase the likelihood of producing timely, accurate financial statements.