Your First Audit: Simple Tips for a Smoother Process
Your startup has officially launched, and you’ve been in business for a while now. At this point, you’re expanding your customer base, protecting your data security, improving your product, and managing your team. You’re also monitoring your balance sheets and making sure that your tax filings are accurate and your reporting procedures are in line with SEC and IRS requirements.
A smart move, because sooner or later, you’ll face your first formal audit.
If you’ve been partnering with an experienced legal team during your launch and initial growth, your team will be there for you on the day you receive notice of your audit. If not, you’ll want to respond with a critical first step: engaging with a team that can help you survive the process with minimal headaches and workflow disruptions.
But what will you do next? In order to make the most of your time, money and resources, you’ll want to prepare your team and organize your documentation as efficiently as possible. Here are a few things to keep in mind.
The importance of scheduling
Within certain parameters, you have the ability to control when your audit takes place, so focus on scheduling before you make a commitment. If you’re behind on some of your active accounts, that’s okay; you’ll just need some time to update your balance sheets. If you haven’t performed an inventory in a while, you may need to do this too. Most important, you’ll need to prepare you staff and organize a workflow and communications structure around the process, and this can take time. Factor these things into your scheduling decisions.
Your PBC list
You can ask your auditors to provide you with a PBC, or “prepared by client” list, which will include all of the documents, flowcharts, process descriptions, accounting records, HR information, and other details that the auditors will need to have in hand in order to do their jobs. Obtaining this list can save time and prevent hassles, since you can review and assemble the items on the list a long time before the audit begins. Once you have your list, provide your team with clear instructions so everyone knows which person will take responsibility for preparing which items.
Clarify issues during your preliminary meeting
In the interest of maintaining your workflows and making the process easier for the both the auditors and your company, determine well beforehand how the auditors will obtain the information they need. Will they confer with you only, or will they present certain questions directly to your staff?
Don’t worry, but move quickly
Always keep in mind that auditors (tax, financial, and/or data security auditors) are not your enemies. They are not trying to create problems for your business or hold you back. They’re just looking for compliance gaps, security weaknesses, reporting anomalies or other concerns that need to be identified so they can be addressed and fixed. Work together with your auditors and you’ll have better results. As always, keep your legal team close and you’ll know exactly what to expect and how to move forward.