I do several audit and review preparation for my clients which then goes to CPA firms.
Having worked in large multinational companies that have an elaborate F&A function I is equipped to see the inconvenience that such review/audits cause in SMEs and what can be done to reduce the aggravation and expenses.
Most SMEs consider the review/audit process as an event. That is, it usually happens once a year. First, they get a “laundry list” of needs and documents from the CPA firm. Then, they have the task of assembling all this; these include permanent documents, evidence documents, accounting reports, schedules, reconciliations, confirmations and so on. The SMEs are not prepared for this!
This is a huge project and since most of these reports maybe done for the first time, it entails time, which a regular accounting dept. does not have. By this time, the firm’s staff are overwhelmed and/or not qualified to answer questions and the CPA is getting frustrated. The CPA cannot do these them, as he has to be independent! This is the time I get called in to be the 2nd accounting firm to get the firm ready for a review or an audit and then answer questions, in a technical way, while the review is progressing. At this point I take charge and represent the client to the CPA and do the preparation work and answer questions.
The lesson to be learnt from this is good reports and documents by an accounting dept. are the by-product of good systems in place throughout the year and not a onetime event. Focus on putting in and maintaining good systems and habits all year round and this annual ritual becomes far less stressful. To do this, you have to first set up a plan of how and what an accounting dept. does on a monthly basis. This plan breaks down the work that needs to be done in different areas of accounting work and the related record keeping. – AR, AP, Inventory, Revenue, Payroll, expenses etc.
I have been able to reduce audit and review times significantly, when accounting functions are set up this way. This enables for a clean and close relationship with the CPA with timely production of Financials.