Every financial audit comes with the risk of errors that can go beyond your finance department. Consistently producing audit-ready financials takes a system of well-documented checks and balances that starts with having purpose-built financial software to trace all activity from beginning to end (and back again!). Having this kind of full circle accounting process in place sets the stage for a positive—and error-free—audit experience.
I’ve discussed how to establish effective internal controls for a smooth auditing process previously, but that was only one piece of the puzzle. The right accounting platform will also provide you with a solid foundation in between audits. For starters, your financial software should be able to:
- Streamline and automate daily accounting tasks and financial closes
- Eliminate the risk of manual spreadsheet errors
- Reduce the time required for an auditor to recheck your calculations
For audits specifically, your software should be able to provide an auditor with specific permissions to assess all data within the accounting system, but not to edit or create data. Cloud-based accounting systems are ideal for this because you can grant your auditor read-only access to the complete accounting system, with the ability to log in at any time, from any location, and only for specific periods of time, such as during quarterly and year-end review periods.
Cloud-based accounting systems can deliver many other audit-friendly capabilities.
- Allow you and your auditor to click on any figure in the financial statement and drill down to the general and sub-ledgers, reports, reconciliations, and original transactions—exactly what the auditor needs to test key accounting processes
- Enable the auditor to run built-in reports and reconciliations to confirm your accounting process is effective and compliant. This provides a level of confidence that all transactions are complete and accurate
- Let you attach supporting documents to each transaction, so the auditor can click to view them. This self-service model for reports and documentation speeds up the audit, allowing the auditor to investigate all reconciliations and transactions without having to come to you for every single document request
As a bonus, here are some additional tips to get your organization audit-ready that you may not be thinking about as you prepare your financial statements and documentation:
- Make it easy to test the accuracy of numbers coming into your general ledger from external applications, such as payroll expenses and stock option accounting. Ensure the audit trail is well-documented and the calculations are accurate
- Make sure your key foundational documents are available, including articles of incorporation, long-term lease agreements, and other legal agreements
- Document approvals. Since the auditor must ensure that a system is in place for approvals for purchase orders, employee expenses, sales contracts, and more, you should be ready to demonstrate that certain transactions can’t be completed without proper approvals
One last tip for companies thinking about going public—get ready for SOX. You need to start acting like a public company well before you actually go public and SOX readiness is a big part of the IPO process. The best cloud accounting systems help you establish strong, auditable internal controls by providing a central configuration area for easily setting controls, such as thresholds for transaction approvals and rules for ensuring certain transaction types (e.g. revenue and prepaid expenses) are always posted to the proper accounts. And with a cloud-based system, you can do this without expensive, time-consuming custom programming. With all the controls in one defined place, a SOX auditor can easily review, test, and verify them.
Cloud-based accounting software can greatly improve your audit-readiness by automating processes, streamlining consolidation, reducing errors, and improving transparency into your accounting. Cloud accounting software will save time for your finance team and your auditor and prove to your key stakeholders that your financial statements are audit-ready.
For a more in-depth look at getting your financials audit-ready, download our Whitepaper or watch our webinar titled Preparing Audit Ready Financials - Best Practices to Avoid Common Pitfalls.
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