Aimee
Morning everyone and welcome to our second episode of RSM Audit Unlocked. We're very excited to have you here in Brisbane. I'm Aimee and I'm a partner from the Melbourne office where the coffees are strong and the audits are stronger.

Jess

And I'm Jess, a director in the Brisbane office and Brisbane is turning it on today for us.

Aimee

We'll be your co-hosts where we explore the world of audit and assurance, everything from technical updates to career journeys, hot topics, and some behind the scenes moments that make audit a little bit more interesting. Between us, we've worked between the US, Australia, and the UK gaining firsthand insights into how audits are approached around the world and building great relationships along the way. 

Whether you're working for an ASX listed company, fast-paced startup or not-for-profit, we know that financial reporting comes with its fair share of complexities and we want to make that a little bit easier. In each episode, we'll unlock what auditors are really looking for when we're dealing with complex accounting areas and providing practical solutions that we see. So whether you're a CFO, a financial controller, or a part of an audit committee, this series is for you.

Let's help you level up your next audit and make financial reporting feel a little bit less daunting and maybe a little bit more fun. 
 

Aimee

So let's get into it, Jess. Today's episode is Preparing for Audits - a CFO's guide of how to make an audit efficient. So how many times have you heard, we thought that we gave you this already?

Jess

So many times. Honestly, it probably happens two to three times per audit. And it's usually for something super important, such as a technical memo or a key reconciliation.

Aimee

And look, we always work closely with the finance team and we understand that there's always priorities and conflicting deadlines with the finance team. But when the audits are not a top priority, that's when they drag on and are really inefficient and painful for everyone. So today we're going to be talking about what actually slows down audits and go through top five common inefficiencies as part of an audit. Let's start with number one.

Jess

So number one today is around the classic supporting documentation, not tying into anything and it being late. So the classic example is, the bank reconciliation. It's reconciled, but reconciled to what? It doesn't agree to anything.

Aimee

PPE register. Not playing with the general ledger, that's always a good one.

Jess

That's a good one. It's so common to get a trial balance from a client subject to this account, this account, this account, and this account to be finalised and adjustments to be processed.

Aimee

And look, if the financial statements are provided three days before the sign off and our numbers, what we've been auditing don't actually tie, that makes our job very difficult.

Jess

It means we might need to go back and recalculate materiality, flow on impact as we're sending you requests for things you think you've already provided, but we've had to top up samples. Really, the key takeaway from our side of things is ensure that you know what information needs to be provided to your auditors. Have a clear timeline that's realistic for you. If you don't think you're going to be able to meet it because you've got other duties such as month end or board reporting that you need to do, it's really important to let us know so we can tweak the schedule a little bit and line up timetables better.

Aimee

It's all about communication.

Jess

So number one today is around the classic supporting documentation, not tying into anything and it being late. So the classic example is, the bank reconciliation. It's reconciled, but reconciled to what? It doesn't agree to anything.

Aimee

PPE register. Not playing with the general ledger, that's always a good one.

Jess

That's a good one. It's so common to get a trial balance from a client subject to this account, this account, this account, and this account to be finalised and adjustments to be processed.

Aimee

And look, if the financial statements are provided three days before the sign off and our numbers, what we've been auditing don't actually tie, that makes our job very difficult.

Jess

It means we might need to go back and recalculate materiality, flow on impact as we're sending you requests for things you think you've already provided, but we've had to top up samples. Really, the key takeaway from our side of things is ensure that you know what information needs to be provided to your auditors. Have a clear timeline that's realistic for you. If you don't think you're going to be able to meet it because you've got other duties such as month end or board reporting that you need to do, it's really important to let us know so we can tweak the schedule a little bit and line up timetables better.

Aimee

It's all about communication.

Aimee

Second one is around unclear management, judgments and technical papers.

Jess

Love a good technical paper, Aimee. I think this is a great one. We, as auditors, we love to see somebody's had the time, they've sat down, they've thought about the technical side of things, they've written up a memo.

Aimee

What does the memo include?

Jess

Love when it includes a good objective. This is the background of the standards. This is how I've applied it to the transaction. And this is my conclusion on how things need to be accounted for. Worst case, you get the one-liner. Management says this.

Aimee

Absolutely. Yeah because I suppose from an auditor's point of view it's not our job to provide the conclusion, it's our job to review the memo but provide guidance even when the transaction is occurring so that could be before the audit starts and provide guidance throughout so we can get to the conclusion that everyone's happy with and compliant with the accounting standards.

Jess

Absolutely. So our top tip in this area is, step back, think about how did you get to that conclusion? What support have you got to provide to the auditors to ⁓ line up what you're saying? If you're looking at historical data to provide an estimate, have you got that data there and easily accessible? Because we will be asking for it.

Aimee

And I think that kind of flows into the third one around timing of when the technical areas papers have been provided, because that really, really means that if we get those early, it can have a massive impact on the efficiency and how the actual audit goes in the end.

Jess

Number three is definitely around having those discussions with your auditors early as well. Some technical areas can be quite complex and, not everyone has seen everything under the sun before. So I think it's a really good opportunity to understand your own transaction first, loop in the auditors either as the transaction's occurring or just afterwards, discuss what is the best approach, what standard does it fall under and work together to come to a resolution.

Aimee

Absolutely. And look, I think this is not necessarily relevant for all companies, but when it's the first year audit, sometimes, depending on timing, we sometimes work with clients providing different sort of engagements instead of a full year audit. I've done this with a few of my clients. So that's where we provide an agreed upon procedure around getting ready for audit, where we might do specific scope of how you can be ready for audit. You'll see how all your numbers in your financials are compliant with the accounting standards and make sure when you do have your full year audit then it will go perfectly efficiently and a lot more streamlined.

Jess

I think it's a great opportunity to really get into some of those technical areas early and making sure that you do have the data behind and the controls and processes to collate the data early. There are so many times we go out to a new business that has never had an audit, they don't have any accounting records lined up, they don't have the systems in place to recognise revenue at the right times. And I think this is a great way just to go before you start preparing full statements to get in early and make sure it's all aligned.

Aimee

Definitely with the first year audit, it's not what is there, it's what's not there. And we definitely see a lot more audit adjustments throughout the audit process in the first year, naturally, because they've never been audited before, never really looked that it's compliant with the accounting standards.

Jess

Yeah, classic ones. Sharebase payments, connerts treatment, Revrec. Have they deferred any revenue? 

Aimee

So fourth one is, lack of internal coordination across departments. Tell me about this one.

Jess

So we see this a lot with our larger clients that might have a really decentralised accounting function. Everything might be going to one person, but they may not be the person actually providing the information and that can create delays. If other teams aren't prepared, they don't know what time the audit's happening - they don't know when the requests are required by, they don't understand what is the timeline to get the information back to the auditors.

Aimee

Absolutely. I think sometimes in larger organisations where they have the manpower, sometimes having more people involved in the audit can make it a little bit harder and more inefficient because there's a lot more people involved.

Jess 

Yeah, and that's where we get the whole, we're still chasing it loop situation going. So I think our top tip around this is really make sure you've got an internal timetable, make sure you've got someone centralised who's coordinating everyone and that they're staying in contact with the auditors to make sure everything's turning along.

Aimee

That's generally the CFO and they'll also have sometimes, depending on the timeline, daily meetings or weekly meetings to make sure there’s transparency and everyone's on the same page
 

Jess

Reactive communication - we don't expect if we send you a request, you have the information back to us in 10 minutes, but going silent for anywhere between three days and two months is an inefficient way of dealing with us.

Aimee

Well it's all about communication, communication, communication.

Jess

Aimee, you're very right there. Again, assigning that central audit liaison and having that coordination is really important. 

Jess

So Aimee, if you're a CFO or financial controller watching this, what's the takeaway?

Aimee

The key takeaway is get proactive, communicate early, document well, and provide looping the right people before the clock starts. Having that key timetable for us to have a planning meeting before the audit starts, before we even do any interim - all about planning, all about being organised, and having regular communication throughout. We want to make sure that everyone is communicating really well throughout the process so there's no surprises right at the end so it's a win all round.

Jess

We've even made it simple for you guys in the link below. You'll find a great checklist that'll give you a good starting base to prepare for your next audit.

If you've got any questions on the back of today's episode, please feel free to reach out to either myself or Aimee. We'd love to hear from you. If you have found the help episode helpful, we'd really appreciate you sharing it with people who you think might benefit from it. Our next episode is a good one. We'll be unpacking the question, what does going concern mean to your company?

It will drop next month, so keep an eye out for it. Thanks for tuning in.

Aimee

See you next time.