Conducting a Year-End Audit: Tips for Success

Getting ready to perform a year-end financial audit? Maybe you're wondering whether your business or organization even needs one.

With a better understanding of what a year-end audit entails, the importance of a year-end audit and how to conduct one properly, you and your team can move forward with a better understanding of where your finances stand.

Who Needs a Year-End Audit?

Generally, year-end financial audits should be conducted for all publicly traded companies, nonprofit organizations and any businesses that present financial reports to their lenders and/or investors. In fact, the Securities and Exchange Commission (SEC) actually requires publicly traded companies to submit copies of their audit findings each fiscal year.

Even if your business doesn't fall into one of these categories, an annual audit is still never a bad idea.

The Importance of Year-End Audits

Specifically, a year-end audit can help businesses and organizations ensure the transparency and accuracy of their financial reporting. Audits can be a reliable way to pinpoint any discrepancies or issues with finances that could indicate fraudulent activities or other actions that need further investigation/attention.

Conducting year-end audits also demonstrates to investors, lenders, and other stakeholders that the organization itself takes transparency and accuracy in financial reporting seriously — which can boost the organization's reputation with the public.

Year-End Auditing Best Practices

As you prepare to conduct a year-end audit at your company or organization, there are some important tips and best practices worth keeping in mind.

Get Financial Documents in Order

First, understand that whether you are planning to conduct an internal audit or bringing in an outside party, you'll need to gather all your relevant financial documents from the past year. Specifically, your auditor will need to have access to all financial statements and documents (including tax forms, earnings statements and payroll documents) to ensure that reporting is as accurate as possible. If gathering this documentation proves challenging, then it may be time to revamp your organization and reporting procedures to avoid this headache in the future.

Decide on an Auditor

Your team will also need to decide on an auditor for the process. Depending on the size and experience of your internal team, you may choose to simply conduct an internal audit. However, many businesses and organizations opt to hire an independent and impartial third party to carry out year-end financial audits. By going this route, the rest of your accounting and finance team can continue to focus on the day-to-day operations of the business.

Review Requested Schedules and Documents

Regardless of which path you decide to take with your auditing team, it's important to meet with your auditor one-on-one to discuss the documents they'll need and to go over the year-end request list. This will give you and your team a better idea of what the audit itself will entail, as well as the specific documents and items they will need from your team to carry out the audit.

From there, you'll want to make sure that you review all documents (and make copies of them) before you send them out to your auditor. This is especially important if your audit is being conducted externally, as you may still need access to the documents for other purposes.

Set Up a Dedicated Point of Contact

Last but not least, be sure to follow auditing best practices by having a designated point of contact for your auditor to reach out to as needed with questions or special requests. This will ensure that your auditor has a consistent and reliable source of information. Likewise, it's also a good idea for the auditor and their point of contact to set up regular meetings to review details and discuss progress.

The Bottom Line

While carrying out a financial audit may be a laborious process, the time and effort spent on a year-end audit will be worth it when you're able to gain a clearer picture of your organization's finances and where you stand moving forward.

Remember, you can conduct an audit internally using your own finance team (if they have the right skills and experience) — but if you're in doubt, you can always hire the process out to a third-party service. Regardless, these best practices should be followed to ensure a thorough audit with accurate insights.

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