External audits usually provide companies with a fresh perspective on their financial health and reporting practices.
It’s important that your board, or more specifically, that your Audit Committee asks the right questions in order to make the most out of the findings you receive.
Here are some of our suggestions for queries we think you should address with your auditor or auditing firm:
1. Did you have any difficulty interacting with employees or accessing information while collecting data?
It’s important that companies establish a culture of forthcoming reporting. If a member of your internal team was not cooperative with the auditor, or if records were extremely hard to locate, you may have some internal issues to address. Additionally, if auditors are unable to obtain thorough records, it could lead to an incomplete report.
2. Do our accounting processes and documentation methods stack up?
In other words, does the auditor feel like your internal financial team is well equipped and able to provide a clear understanding of your current economic status. If the auditor has concerns or suggestions, ask them to share them. Consider implementing changes that will make your processes stronger year over year.
3. What are the business and industry risk areas for our company, and how would you suggest we address them moving forward?
Auditors can offer valuable information about which areas of your company’s business or industry-specific challenges could pose future risks. Use this knowledge to help guide the development of your strategic planning.
4. Did you discover any issues that could be considered unethical or that might be disputed with the IRS? If so, what steps should we take to correct them?
Don’t be afraid to ask if the auditor believes you need to make some corrections to the way your company currently functions. Their job is to provide you with a thorough and nonpartisan report, so you should extract as much information as you can.
If a significant negative finding is brought to light, be sure that you address the issue(s) with the entire board. Negative audit findings should not be taken lightly as they can lead to serious legal or monetary consequences if ignored.
5. From an IT risk perspective, where does our company stand?
These days, IT risk is such an integral part of overall financial risk. It’s important to ensure that your external audit firm addresses this topic in particular. Ask for any and all suggestions if they believe your IT controls are lagging or inadequate.