An audit is often viewed as a compliance exercise that doesn’t offer much value to management other than satisfying a reporting requirement. A proper audit process is often described as one that was completed on time and with few surprises. A bad audit process breeds the mentality that the audit is to be tolerated, endured and celebrated when finally finished. Although the latter is a common perception, the good news is insurance companies can get more from the process. An effective auditor conducts more than an audit and goes beyond to act as a go-to resource for technical questions, issues, and concerns that may arise throughout the year. They value their client relationship, and it shows not only during the audit but throughout the year. To help clients, prospects and others transform their audit process, JLK Rosenberger has outlined a list of questions to consider when evaluating potential auditors.
Key Questions to Consider
Do You Know Your Audit Team?
It’s a wonderful thing when there is consistency across the audit team because they are familiar with your company, processes, procedures, have the historical and contextual knowledge, and can “plug in” more effectively. Working with the same team each year makes it easier for the Chief Financial Officer (CFO), controller and their accounting team to establish trust and develop the relationship. When the audit team changes annually not only are these important benefits absent but there is the additional burden of having to train new people. If your auditor has high turnover, it’s likely your team is routinely investing extra time to train new people.
Do You Experience the Same Problems Each Year?
Nothing is perfect, and in certain situations, problems can arise. In some cases, they can be prevented and in others, perhaps not. No one expects perfection, but a good auditing firm will evaluate problems and work with you to recommend solutions that minimize the opportunity for future issues. If your audit process seems to experience the same problems each year, it’s likely that corrective measures are not being implemented.
Does Your Auditor Meet Deadlines?
Delivering the audit report on time requires the auditor to meet established deadlines. While it’s not uncommon for delays to occur, what’s important is how quickly they are identified and resolved. Often audit firms will wait to raise issues or cause unexpected delays because the partner or audit manager is unable to return calls in a timely fashion. If your auditor is consistently unable to meet deadlines, it’s likely there is an issue with communication.
Are You Unpleasantly Surprised by Issues?
Effective communication is essential to an audit process. This is especially true when teams are working at multiple locations. A common issue that many experience during the audit is a lack of communication resulting in unpleasant surprises. A thoughtful audit process will feature regular check-in calls allowing the auditor and management to review issues, address questions and resolve concerns during fieldwork rather than at the end of the audit. This allows items to be resolved immediately, when possible and keeps the audit process moving forward. Proactive communication will reduce the potential for issues and make the overall process more efficient.
Is There Open Communication?
For most, it’s common to have the bulk of auditor communication occurring during the few weeks when the audit is performed. Once the audit report is issued, there is a drop off in the amount of communication. While some of this is expected, it’s important to understand that a strong relationship with an auditor naturally features multiple touches throughout the year and open dialogue when issues or changes occur. This is important because waiting until the end of the year to determine if the auditor will approve of the way something is handled can be a recipe for issues. Open communication prevents this situation from happening and results in a smoother audit process at year end.
While compliance driven, the annual audit process doesn’t have to be a painful experience. If you answered yes to one, or more, of the questions above, it may be time to make a change.