RSM South Africa

Getting the most from audit readiness

In preparation for an audit some groundwork can be done to aid both the audit team and client staff, which could result in saved time and costs.

Auditors need to know how balances and totals in the general ledger are made up. This is why certain schedules and documents are always requested by the audit team. To assist with planning the most efficient approach and to avoid delays, these schedules and documents should be provided before the audit starts. The schedules usually include the final trial balance, aged analyses for creditors and debtors, listings for invoices and credit notes, the ledgers and any other supporting schedules that summarise the breakdown of accounts or groups of accounts.

It is also important that the schedules that are provided for an audit are reconciled to the information in the accounting system, for example the general ledger, debtors ledger, inventory system, etc.  Review these reconciliations before giving them to the auditors to ensure the information is up to date, accurate and that you are familiar with the contents.

Preparing this information in advance for the audit can save a lot of time on back and forth communication, as well as on extracting information for a second time or more.

Here are some examples of how analysis and reconciliation could benefit the audit and management:

  • A fixed asset register that is not generated or extracted directly from the accounting system should be reconciled to the trial balance accounts – for each asset category, and for both the cost and accumulated depreciation.

This reconciliation is a simple way to identify where there are discrepancies and where these discrepancies originate from.For example, if a transaction was not recorded in the accounting records or the fixed asset register this can be identified from differences in cost or depreciation.

Where differences are identified, these should be corrected before the audit starts.

  • Reconciliations can also be done in instances where the figures that are to be presented in the financial statements are made up of various general ledger accounts. For example, a company that has accounts receivable for multiple branches. The aged analysis could be only one schedule but there is more than one account that makes up the total age analysis in the sitting on the trial balance.
  • Simple analyses can be done to assist in responding by anticipating commonly asked questions.

An analysis can be as simple as a graph with monthly figures for payroll, revenue and cost of sales where the data can be easily extracted from some accounting systems. An analysis that shows the trend in the income or expenditure can help in explaining, for example if an unusual increase or decrease occurred in a particular month.

First prize would be to maintain these schedules and not to wait until the end of the year.  If reconciliations and analyses are prepared as part of each month-end process while the information is fresh, this can save some time in preparing for an audit.  It also acts as an additional internal control, not for audit purposes only but also for management, as it monitors trends and exceptions on a more immediate basis so that corrective action can be taken if necessary.

The added benefit is then that it will also help the audit process to run smoother and eliminate time wasted in extracting information or having to search for answers that are not readily available any longer.

Maxine Hammond

Manager | Audit Readiness & Special Projects, Johannesburg


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