3 tips to gain the most from your post-audit pain!
Accounting warriors! Suffering from post-audit syndrome?
Most folks that have worked in accounting do — audits are super exhausting. Getting feedback on your whole year’s worth of work at once can be tough. The best time to reassess your audit readiness is right after an audit, when the pain and insights are still fresh.
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Tip 1: Identify completeness and accuracy and the validity of data from order to cash systems
When were they sufficient? And when weren’t they? Understanding that you have gaps in your source operational data is one of the most common points of failure. When I first worked with ERP in one of my first audits as a Finance Manager overseeing some of the accounting operations, some end-of-the-year invoices were backdated. But there were partial invoices. Some of the line items were invoiced but some of them weren’t. Many of the line items invoiced were revenue-related, and a disproportionate amount of the cost was still on the balance sheet. There was a gnarly adjustment that happened during audit season. We learned a lot about the type of data we needed to get out of our order to cash systems and how to design some control tests.
Tip 2: Use the pain to optimize your process for the future
Audits are time-consuming; a ton of your effort goes into a small portion of your workload for the year.
There’s often your normal workload, which is full-time or more. Then there are extra duties on top of that to get past your audit. Ask yourself, how are your resources allocated? You’ll feel a lot of pain during the audit season. There are a lot of challenges from messy processes from all of the closes and getting audited for a year’s worth of month-end reports. Ultimately, you want to avoid the mad dash for data, so you want to your experiences rushing through month-end reporting and audits to figure out which part of your process you need to optimize.
I remember a story from audit season where I applied this approach. There was a subledger to ledger reconciliation between our accounts payable and our expenses on the income statement for the cost of goods sold. Ultimately, we made a big adjustment for a big write-off. We had some expenses where the estimates were much higher than the actuals that came through.
This gave us an opportunity to optimize our month-end close processes. We started doing that reconciliation monthly and taking those write-offs monthly rather than waiting until the audit at the year-end. Using our learnings from a rough audit process enabled us to eliminate month-end inefficiencies and cut off a few days off the close process.
Tip 3: Automate control testing!
Tracking issues uncovered during your controls testing of your audit is incredibly valuable. Those are always where the biggest risks can happen. Keeping track of those findings and remedying them in a timely fashion is critical.
You want to automate your controls as much as possible. The more controls you automate, the more controls and mitigations you build over time during your monthly closes. Each control that you have is a tax that you have to pay. You need to build up a repository of great controls by automating them to avoid manual errors. You’re going to feel a lot of pain during your audit and you may identify areas where your controls didn’t pass controls testing. This insight can help you find novel ways to automate or redesign your control processes.
My experience has taught me to take those control test results seriously and automate as many controls as you can. That way both the controls testing of your audit and the library of controls that you build over time becomes more formidable.
Treat the disease, not the symptoms!
Ultimately, the message is: there’s a disease, and you don’t want to treat the symptoms. The monthly close, quarterly reporting, and audits are all going to be a much healthier experience if you treat the underlying disease. If you found this helpful, or if you have stories to share, reach out to me. I’d love to talk to you.