Audit readiness: what your auditors will ask for, and how to have it ready

Whether your audit is a statutory requirement, a condition of a loan, or something an investor has asked for, most of the pain comes from the same place. The auditors send a request list, the business goes looking, and every answer raises another question. Fieldwork stretches out, the fee creeps up, and the finance team loses weeks.

The fix is not working harder during the audit. It is having the evidence ready before it starts.

Start with the request list

Auditors usually send a list of what they need from you, often called a prepared by client or PBC list. Ask for it early, well before year-end if you can. Then treat it as a project plan: every line gets an owner and a date.

If you do not have last year’s list, the items below are the ones that come up in almost every audit.

The schedules auditors ask for

The trial balance and general ledger. A final trial balance for the year, with the general ledger behind it, and comparatives that agree to last year’s signed accounts.

Bank reconciliations. One for every bank account at year-end, reconciled to the statement, with old unreconciled items explained rather than carried forward.

The fixed asset register. Reconciled to the ledger, with invoices for significant additions and support for disposals. Depreciation should follow a stated policy.

Receivables. An aged listing that agrees to the ledger, with a view on what will not be collected and why.

Payables and accruals. An aged creditors listing, plus a schedule of accruals showing how each was estimated. Auditors will test cut-off here: whether costs landed in the right year.

Inventory. Count sheets or scan records from the year-end count, how differences were resolved, and how stock is valued. Slow-moving and obsolete stock needs a considered position, not a guess.

Revenue. Evidence that sales near year-end were recorded in the right period, and that the revenue recognition policy is being followed.

Loans and borrowings. Agreements, repayment schedules and any covenants, with a note of whether the covenants were met.

Related parties. A list of related parties and the transactions with them during the year. This one is often an afterthought and should not be.

Tax balances. Reconciliations of GST or VAT, and of income tax and deferred tax balances, to the ledger. We can recompute and check these, but tax advice and lodgement stay with your tax agent.

Payroll. A reconciliation of payroll reports to the ledger, and support for any bonuses or leave provisions.

Minutes and contracts. Board or owner meeting minutes, and any significant new contracts, leases or disputes.

The controls they will look at

Auditors do not only check numbers; they look at how the numbers are produced. The questions that come up most often in growing businesses:

• Who can approve a payment, and who checks that they did? Segregation of duties is hard in a small team, but a second approver on payments over a threshold goes a long way.
• How are supplier bank details changed? A change actioned on the strength of an email is one of the most common fraud routes. A call-back to a known number fixes it.
• Who reviews the journals? Manual journals, especially at month-end, should carry a reviewer’s sign-off.
• Are reconciliations reviewed, or just done? Evidence of review, even a dated initial, is what an auditor needs to see.

If a control exists but leaves no trail, for audit purposes it does not exist.

A workable timeline

Before year-end: get the request list, agree the count date for inventory, and clear old reconciling items while people still remember them.

In the first weeks after year-end: close the books, prepare the schedules above, and have someone who did not prepare them review them against the ledger.

Before fieldwork: put everything in one shared folder that mirrors the request list, so the audit team can help themselves.

When a readiness review helps

An audit readiness review is a dry run. We work through the request list, test the schedules and the controls the way an external auditor would, and tell you what will cause questions before your auditors ask them. It is not an audit and gives no opinion; your external auditor still signs.

It is most useful the first time a business is audited, after a change of finance staff, or when last year’s audit ran long. If that sounds familiar, the finance and controls practice sets out what we do, and you can contact us to ask whether you need it.