Audit Survival Guide

Facing an audit may feel like a daunting prospect, but with the right preparation, it can be a straightforward and valuable process for your organisation. Our external audit team have put together the following guide that outlines the key steps your organisation can take to effectively prepare for your audit. 

Understanding the Audit    

Before you begin preparing, it is important to understand why the audit is being conducted and which areas it will cover. Whilst you may be familiar with your obligations and understand the scope of our external audit work, for some organisations, navigating reporting requirements be it under the Corporations Act or Incorporated Associations Act, Australian Accounting Standards, or even grant reporting requirements, can be confusing. If you are unsure of your audit requirements, please reach out to us and we can help.  

We will work with you to understand your business. Through our audit processes, we will assess your business risk, internal control framework, key transaction workflows as well as your management structure and reporting lines. We will complete detailed risk-based testing on areas such as your income and expense streams, payroll and on material balance sheet accounts. If there is an unusual transaction that occurs during the year, such as a sale or acquisition, we like to know at the time of the transaction. This allows us to provide timely advice on how this should be treated in accordance with Australian Accounting Standards. 

Collaborative Approach  

We will engage with you to commence the audit planning process. Where possible, appoint a primary contact within your organisation who will be responsible for coordinating with us throughout the audit process. 

It is important to consider the arrangements of your team when booking the audit with us. It is best, for example, that the audit does not coincide with significant changes to staffing structure / key personnel, or off-site strategy days. Our fees are based on required staff being available to the audit team at the agreed time, let us know well in advance if you are having difficulty meeting agreed dates and we can work with you to reschedule. 

Preparation is Key

To assist in creating a seamless audit process, ensure all financial records are complete, accurate, and up to date. These records should be easily accessible, organised and logically filed. Where possible, we recommend providing digital documentation and access to your accounting system – this allows us to get started as soon as you are ready. We complete our testing using the information you provide so, if there are delays in receiving documentation, this may create delays in the overall audit process including our ability to meet agreed timeframes and may have an impact our audit fee.  

During the planning phase, we will provide you with a list of relevant audit documentation, either in our agreed audit plan or via email. Some of the key documents that we generally require year on year include:  

• Financial policies and procedures; 

• Invoices and receipts; 

• Bank statements; 

• Contracts and agreements;  

• Financial statements; and  

• Budgets and forecasts. 

Make sure to prepare the general ledger by reconciling all accounts with external supporting documentation. Extracts of the general ledger alone, generally, do not satisfy our requirements under Australian Auditing Standards to obtain ‘sufficient appropriate audit evidence’. To assist us with our enquiries, documenting and substantiating accounting estimates and judgements, will also create efficiencies. Common examples of these include: 

Estimates 

• Depreciation of assets: estimating useful lives and the residual value of property, plant and equipment, including requirement of annual review of estimated lives 

• Provision for doubtful debts: Estimating the trade receivables that may not be recoverable, through a detailed work paper identifying basis of determining recoverability 

• Inventory obsolescence: Estimating the value of inventory that may become outdated or unsellable, through reference to stock ageing reports and management assessments 

Judgements 

• Identifying a lease: Determining if a lease meets the definition of a right-of-use (ROU) asset under AASB 16. 

• Revenue recognition: Judging when control of goods or services has transferred under AASB 15. 

• Impairment of assets: Determining whether there are indicators of impairment and estimating recoverable amounts. 

Inform Your Team

Preparing for an audit takes a team effort. We recommend that you notify relevant staff about the audit and their role in the process. We will work with you to minimise disruption to your day-to–day operations and will coordinate with your primary contact regarding staff availability.  

Address Previous Recommendations  

You can also prepare for the audit by reviewing past management letters and implementing audit recommendations. Take the time to ensure actions taken to resolve previous findings have been clearly documented. We will consider the steps taken in relation to these previously reported findings and provide a status update in the subsequent management letter we issue. 

Stay Audit-Ready

Finally, to avoid last-minute stress, it is important to keep financial records up to date throughout the year. This includes updating your accounting practices for changes to Accounting Standards or prior audit recommendations. Maintaining open and transparent communication with us year-round ensures that we are aware of changes in your organisation and allows us to provide practical advice and recommendations that are tailored to you.  

An audit is not just a compliance requirement – it’s an opportunity to strengthen your practices and internal controls. With early planning and preparation, we can help your organisation navigate the audit process with confidence. 

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Disclaimer

This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, WLF Accounting & Advisory and its related entities, does not accept any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.