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Typical audit findings and how to avoid them
Most findings repeat year after year: source documents, stock counts, accounting estimates, disclosures. A list of areas worth checking before the auditors arrive.
Where findings come from
During an audit, evidence is collected for every material line of the statements. Where documents or calculations do not support a figure, a finding appears. Material uncorrected misstatements affect the type of opinion — see “Types of audit opinions and what they mean”.
Where questions arise most often
- Source documents: missing, unsigned or filled in with errors.
- Stock count: not performed before the annual statements, or its results not booked.
- Accounting estimates: bad-debt allowances, provisions (for example, for unused vacation), useful lives.
- Revenue and expenses recognised in the wrong period.
- Balances with counterparties not reconciled, long-outstanding receivables and payables.
- Related-party transactions not identified and not disclosed.
- Accounting policy not updated for changes in legislation.
- Incomplete notes to the statements.
What to do before the audit
- Go through the document list sent by the auditor and collect the documents in advance.
- Perform the stock count and book its results.
- Revisit accounting estimates and provisions.
- Reconcile balances with key counterparties.
- Update the accounting policy and check the notes to the statements.
This material is general and does not replace advice on a specific situation. TODO(content): add anonymised examples from the firm’s practice.