This article originally appeared in FEI Canada. It’s a 5-minute read.
When it comes to the audit, it’s rare to hear clients and audit teams finish up the exercise and declare, “Well, that was easy!”
Experience has shown that the year-end audit can be a painful ordeal. It can mean weeks or months of digging up information from applications, shared drives, spreadsheets, and paper binders across multiple locations and time zones.
It can involve an endless back-and-forth between accountants and auditors over email, in on-site meetings, and on conference calls. Accountants chip away at the audit team’s PBC list, but discrepancies can trigger more sampling and testing—and anxiety over a potential material error.
And for accounting teams, the audit burden often comes on the heels of already tight month-end close deadlines. Accounting professionals have invested a lot of time and effort into generating clean financials, and don’t exactly relish the idea of their work being scrutinized.
Unpleasant though it may be, the year-end audit is a necessary fact of life. So are the audit activities that go on throughout the year, with periodic walkthroughs, quarterly 10-Q reviews, and SOX 404 controls testing. All the while, both clients and auditors are under pressure to stay current on ever-changing regulatory requirements and audit standards.
What isn’t necessary is the stress and inefficiency that surrounds audits. Minimizing the pain requires rethinking manual processes and embracing technology for finance automation.
With financial close technology, clients and auditors move from detective, reactive audits to a proactive, automated approach that delivers these three key advantages.
Transparency & Trust in the Client-Auditor Relationship
Neither company management nor the auditor wants a contentious relationship, yet the client-auditor relationship is somewhat uncomfortable by design. The auditor, after all, must be independent, and is tasked with verifying, validating, and forming their own opinions—regardless of how trustworthy and cooperative the client may be.
But despite a naturally adversarial component, the client-auditor relationship doesn’t have to be strained. In fact, both sides would prefer to collaborate and support one another. This starts with a foundation of mutual respect and transparency and is supported by modern financial close technology.
Transparency doesn’t exist when vital information is hidden away in spreadsheets or binders that are difficult to access. This approach leads to a lot of manual work for both client and auditor when it comes time to extract and review that data.
Sometimes it’s a devilish detail: a paper document is missing a date or a signature is illegible. A small oversight like that can cascade into a major problem. Electronic timestamps and signoffs on information aggregated in a finance automation solution eliminates that risk.
Transparency builds trust. Auditors love it when they can easily assess the who, what, when, where, why, and how behind any account balance or journal entry. The hassle of back-and-forth exchanges and piecing together details is replaced by confidence that information is documented and accessible in a single location.
Easy PBC Management
Even the client-audit teams with the healthiest relationships have experienced challenges around the process of requesting and providing information to support audit procedures. Before the audit can even get started, the Prepared by Client (PBC) process is often the cause of a decent amount of “he said, she said.”
This adds stress and inefficiency beyond that which is already caused by the actual review and testing. Without a centralized process, and without a centralized record of which items were requested, by whom, and when, it’s too easy for requests and responses to get lost in the shuffle.
With everything stored and accessible in a single cloud solution, both staff and auditors have a unified place to request and provide PBC items, as well as monitor status. Rather than recurring meetings to hash through a list, both parties can readily see what’s done and what’s in progress. And better yet, documents themselves can be attached to their corresponding request. No more finger-pointing.
Less Prep Time
F&A teams no longer need to spend days manually pulling, preparing, and aggregating spreadsheets and paper files when financial close technology is in place. Instead, auditors are given read-only access to a platform where the most critical activities are performed.
Whether it’s testing individual journal entries, ensuring proper approval, or sampling balance sheet accounts for substantiation, integrating the audit trail and the related support saves time. Companies can attach back-up documentation and use rules to limit or automate approvals.
For a client, providing hard copy files either requires copying—and therefore wasted paper and time—or parting with the only version of something and risking that it could disappear. The same is true for sharing files on flash drives or other hardware. Though less time is wasted, the risk is increased.
With everything in the cloud, there’s a single source of the truth, and auditors can sample and review the records they need, anywhere, and anytime.
Read this white paper to learn more about how you can transform your audit with technology, minimizing your audit pains, improving controls, and reducing costs.