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External audits are a powerful tool that provide lenders and investors confidence that the financial statements of a business are free from material misstatements and are prepared in compliance with the U.S. Generally Accepted Accounting Principles (GAAP). Some companies are required to use external audits, but all companies can benefit from them. One of the keys to an efficient external audit is communication with a company’s internal audit team. Here are four steps in facilitating this communication:
1- Encourage Frequent Communication
Scheduling frequent meetings is a first step in ensuring that your internal and external audit teams are communicating. These meetings can be used to discuss issues as they arise such as how a company plans to apply new accounting standards or the status of internal control remediation policies.
Before an external audit begins, the two teams can meet to discuss both of their work plans. This meeting will help to prevent redundancy and identify areas where having the teams work together could be beneficial.
2- Provide access to internal audit reports
While the external audit team won’t exclusively use the internal audit teams reports for their audit, having access to these findings can streamline the process. Having internal audit team records can clue the external team into areas that might deserve special attention, and provide familiarity with company operations.
Having one individual on your internal audit team assigned to act as a liaison with the external team is a good place to start. He or she should manage the sharing of reports in a timely manner. Helping the external audit team access records will ensure them plenty of time to review reports and avoids the possibility of rushed decision making.
3-Familiarize external auditors with the organization
External auditors will need access to employees, executives, and data dispersed throughout the company. Having internal auditors share key documents can help make this process more efficient.
Documents that might be shared with the external audit team can include organization charts, previous years audit reports, and schedules of unresolved internal control deficiencies. Having this information helps the external team to be familiar with the company’s operations and know which employees to talk to during fieldwork.
Continuing professional education (CPE) is required for both internal and external auditors to maintain their licenses, and to improve understanding of issues that may arise during an audit. These trainings can include an explanation of new accounting standards, fraud scams, or technology driven auditing methods.
Joint training sessions allow audit teams to learn together and form working relationships. Training teams together can also be more cost effective for both teams, as CPE classes are generally delivered at a fixed rate.
These are just some ways that you can foster relationships and collaboration between your internal and external audit teams. Contact us, and we can help to come up with other ways to ensure efficiency for your next external audit, call us at 949-860-9902 or click here, and we will contact you.