Audit Readiness: The Essential Guide to Streamlining Your Next Financial Statement Audit

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Many companies need help with first-time financial statement audits under GAAP and recurring annual audits. A financial statement audit can be very intimidating and time-consuming for the internal accounting department. If a company has yet to be audited, its books are likely not entirely compliant with GAAP (Generally Accepted Accounting Principles). Auditors have lengthy request lists, and the audit can take months to complete. The accounting and finance department must work through the audit responsibilities and their typical day-to-day responsibilities. 

Additionally, there needs to be more accountants entering the workforce. The number of U.S. accounting graduates with a degree dropped by 7.4% from 2021 to 2022 (Wall Street Journal). Some companies, such as Tupperware, have delayed issuing their annual reports due to inadequate personnel and continuity in their accounting department. Furthermore, a company’s financial statements can have complex technical matters, and the accounting department may not have the requisite expertise to address all of these technical issues. The controller/CFO should focus on operations and growing the company, and it cannot be expected that the controller/CFO will be well-versed in all accounting guidance and updates. Audit firms, in general, are also becoming less tolerant if their clients are not ready for audits as they also face staffing pressures. Therefore, these external forces are putting pressure on your finance team. We believe it’s important to offer “audit readiness” services that can relieve you of some of these responsibilities.

What is audit readiness?

Audit readiness refers to the process of preparing a company for a financial statement audit to ensure smooth and efficient completion. An audit readiness assessment is typically conducted months before the actual audit to evaluate the company’s preparedness. It involves identifying gaps, testing controls, and ensuring compliance with GAAP.

How Wiss Can Help with Audit Readiness

As a service provider, Wiss can help you through your year-end audit of financial statements in various ways, including the following:

• Wiss can act as a liaison for the client when communicating with auditors – we speak the same language
• Draft accounting policy memos
• Assist with technical accounting such as revenue recognition, software capitalization, stock compensation, and lease accounting (ASC 842)
• Propose journal entries to comply with GAAP
• Write internal control memos through interviews with the internal team and identify key controls
• Prepare tax provision
• Financial statement preparation
• Advising on issues that arise during audit
• Prepare work papers and account reconciliations to be provided to auditors

Allowing Wiss to assist in the audit readiness will enable our clients to focus on running their business and growth. Wiss can do it all or help in an ala carte fashion as you may not require help with all of the aspects above, but for example, you may need help only with addressing your revenue recognition policies and accounting. 

What can go wrong when you are not ready for an audit?

• Delays of report issuance, which could result in covenant failures with a bank or investors, delays in getting funding, etc
• Unexpected issues that have to be communicated late to investors or lenders
• Significant audit adjustments that cause significant variances from previously internally prepared financials which were disbursed to management and/or board
• Cost overruns and additional invoicing from auditors.
• Auditors are there to audit and are less likely to help you work through issues that are your responsibility
• Not passing the audit

Why Audit Readiness Matters

Companies must prioritize audit readiness to ensure smooth and successful financial statement audits in today’s fast-paced business environment. By partnering with a trusted service provider like Wiss, businesses can navigate the complexities of GAAP compliance, streamline the audit process, and mitigate potential risks.

Wiss’ comprehensive audit readiness services, ranging from acting as a liaison with auditors to providing technical accounting expertise, empower clients to focus on their core business operations and growth strategies. Investing in audit readiness saves time and resources and helps maintain strong relationships with stakeholders, such as investors and lenders, by delivering accurate and timely financial reports. In an era of increasing regulatory scrutiny and evolving accounting standards, proactively addressing audit readiness is no longer an option—it is necessary for long-term success and financial stability.

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