How to Prepare Your Paper Business Records for a Financial Audit



Your business is being audited – now what? 


Whether your industry is subject to annual financial audits, or you have clients that audit your company as part of regulatory and compliance standards, preparing for a financial audit can be a time-consuming and stressful process, but with proper planning and execution, you can easily prepare your business records and enjoy a smooth and successful process. 

For companies that still rely on hard copy documents and financial records, an audit can be a time consuming task for your accounting department. On top of daily responsibilities, invoice approvals, and issuing purchase orders, your accounting team will be busy organizing tax records, past invoices, balance sheets and more. Financial audits are an essential part of maintaining a healthy and transparent financial record for any company, and a financial audit provides an independent and objective assessment of a company’s financial statements, ensuring that they are accurate, reliable, and comply with generally accepted accounting principles.

Assign a point person for the audit

The first step in preparing for a financial audit is to assign a point person to lead the audit process. This person should have an in-depth understanding of the company’s financial records, policies, and procedures, and should be able to communicate effectively with the auditor. Having a point person in charge of the audit will ensure that the process is well-organized and efficient.

Create a record retention schedule for financial records

 

Preparing for a financial audit

Auditors will review your financial records to ensure they’re accurate and complete. Therefore, it’s essential to organize your financial records in advance. This includes bank statements, invoices, receipts, and other financial documents. Make sure they are well-organized and easily accessible. As a standard practice, we advise you keep business financial records for a period of 7 years. In the event that an auditor needs to review statements from previous years, it would be detrimental to prematurely destroy documents that you may need for future audits. Once your financial records have met the standard 7-year retention period, consult with an attorney and you state/federal guidelines before shredding financial records. 
 

Digitize important financial records annually

For financial documents such as invoices, check requests, capital expenses, and purchase orders that will surely be needed for a financial audit, consider a document scanning service that will digitize your accounting and financial records on a recurring schedule. Scanning accounting records is an efficient solution that will allow you to easily retrieve electronic documents during and audit. 
 

Automate accounts payable processes

Before auditors come knocking at your company’s door, Record Storage Systems recommends implementing an enterprise content management software that automates your AP processes. An accounts payable software that automates approvals, invoices, check requests, and payments will immensely improve the accuracy of your accounting department and help the audit process run smoothly. An automated accounting system with AP workflow will track every approval and action taken by staff — so if something ever comes up in the middle of an audit, you can easily look back and verify or confirm information quickly and accurately. 
 

Review previous audit reports and accounting procedures

Your accounting policies and procedures are a critical component of your financial audit. Review your policies and procedures to ensure they are up-to-date and compliant with generally accepted accounting principles. Be prepared to explain any deviations from standard accounting practices to the auditor. Review past audit reports ahead of your next financial audit. This will help you understand the areas where your company may need to improve and the issues that auditors have previously identified. Use this information to develop a plan for addressing these issues before the upcoming audit.
 

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