How to Reduce Financial Statement Audit Costs

Because of the economic conditions that are currently facing our economy, businesses are struggling to create additional revenue streams, while at the same time, minimize expenses.    As we approach the end of 2008, companies are also looking toward the future in creating their 2009 budgets.  While the prospects of reducing salaries and headcount, advertising costs, or a host of other costs can be frightening and painful, reducing the fees that you are paying to your financial statement auditor can save your business thousands of dollars and can be easy and painless.  So what are ways to reduce audit fees and create a more efficient audit?  The following strategies can be used by businesses of any size to assist in creating a more efficient and less costly financial statement audit.

-     Manage your Auditor.  As a former Audit Senior Manager with a “Big Four” San Diego accounting firm, I know firsthand the enormous amount of pressures and time constraints that the typical auditor is facing during the audit process.  The typical auditor is not only working on the audit of your company, but multiple other companies at the same time, all while working 60+ hours per week.  Being proactive and asking questions during the audit process will keep your auditor focused on you and your company.  In addition, you will be more aware of what to expect during the process and will be more prepared for any obstacles that may arise.

-     Start early.  Set up a planning meeting with the auditor BEFORE year-end.  Preferably this meeting would take place at the company’s location and would include all relevant parties.  Depending on the size of the company being audited, this could include the company’s CEO/President, the individuals responsible for overseeing the progress of the audit (CFO/Controller/Accounting Manager), Audit Partner, and Audit Manager.  Ask for a copy of the list of items that they will request of the company in order to begin the audit.  Since most of the items on the list relate to year-end financial information, you will have to wait to gather this information together, however, you will now have time to become familiar with the information that the auditor will be requesting, so that when it comes time to prepare the information, you are in a position to do so.  Remember, the auditor will send a bill for this meeting, but in the end, it will be well worth the extra few hours.

-     Be Complete.  The greatest cause for inefficiencies and increased fees during an audit is a result of the auditor beginning the audit process before the company has completed the year-end close process AND has fully completed every single item on the list of items and schedules requested by the auditor.  Many companies feel that they can complete the list of requested items as the auditor is working on other areas of the audit.  This is rarely true.  As the auditor is working through the audit, they will have questions.  These will create additional questions that Company management may have not been prepared for and will delay the preparation of the other items on the list.  In order to maximize efficiencies and to support their accounting department, many companies these days will hire an outside specialist or accounting firm to work with the company and their auditors to assist in the year-end close process, preparation of all auditor requested schedules and documents, preparation of financial statements, and assistance with research and resolution of any complex accounting issues that may arise.  The services that these firms provide end up paying for themselves in the cost that is saved as a result of the reduction of audit fees.  These firms also assist in offloading management time by providing an extra layer of expert review to reduce the number of audit adjustments and to make sure that all schedules, source documents, and sub-ledgers tie back to the final trial balance, thus providing Company management with additional flexibility to attend to their regular daily responsibilities.  In San Diego alone, there are several San Diego accountants and San Diego accounting firms of which to choose from.

To summarize, an efficient audit means the reduction of audit fees.  To do this, a company must be organized, prepared, and must have the infrastructure in place within their accounting department to appropriately prepare and complete the requested information, along with the time to answer all audit related questions.