How to Prepare for Your Annual Financial Statement Audit

The year end is fast approaching. It is almost time for your independent auditors to come in and perform your annual financial statement audit again. Are you ready for it?

Here are some helpful hints on how to be prepared and make the process go smoothly and, hopefully, be less costly and more timely for your company.

1. Do you have adequate staff within your accounting department who have the time to prepare the required schedules and analyses of the general ledger accounts?
2. Have you maintained accurate subsidiary schedules throughout the year so you have addressed issues as they come up and not waited until the end of the year to resolve all the issues?
3. Are you ready to take an accurate physical inventory at the end of the year? Have you removed all slow moving/obsolete inventory so it is excluded from the inventory count? Have you selected and trained the staff who will observe the physical inventory on the procedures they are to follow? Do you have written instructions for the inventory teams to follow? Are the inventory teams organized and well supervised?
4. Have you reviewed the accounts receivable aging report and determined any accounts that may not be collectible and a reserve for bad debts that should be established?
5. Have you established the shipping cut-off date for orders to be shipped around the end of the year?
6. Have you established a procedure to capture all the accounts payable that are owed at yearend?
7. Have you maintained the equipment and property records so that all new assets have been properly recorded and dispositions of old assets have been properly recorded including any resulting gain or loss?
8. Is the company in compliance with all of its debt covenants?
9. Are there any outstanding lawsuits or other legal issues that must be disclosed?
10. Have you reviewed repair and maintenance expense accounts to be sure there are no capitalizable assets that were misclassified during the year?

These are just some of the issues that you should be addressing at this time of year to prepare for your financial statement audit. For more information contact Greg Lewis at 714.569.1000.