Q: What does audit preparation as listed under your services include?
A: When entities need a financial statement audit or review, their accounting records must be in an “auditable condition”. Prior to the start of an audit or review, there is preparation work that is necessary. Audit preparation occurs prior to the fieldwork portion of the audit and includes, but is not limited to:
- Reconciling all balance sheet general ledger accounts and preparing supporting schedules.
- Examining all income statement accounts to ensure account classification is correct.
- Examine accounts receivable and accounts payable subsidiary ledgers to ensure proper cutoff procedures have been implemented.
- Reclassify current portion of debt from long term.
- Calculating and recording all closing journal entries; i.e., depreciation, accruals and prepaid expenses.
- Provide copies of all pertinent company documents; i.e., insurance binders, loan and line of credit documents and W-2 and 1099 filed forms.
It is important to keep in mind that no two entities are the same and special attention should be taken for accounts that have a materially high dollar balance, that are unique to your entity or that have an excessive number of transactions.
Please contact us if you would like further information.
*Please note that we have combined both audit and review preparation services under the term “audit preparation” for this article. It should be noted that audited and reviewed financial statements are two distinct and different services. An audit provides the highest level of assurance and a review only provides limited assurance. *