“An audit, or independent review, engagement no longer needs to just be an annual grudge purchase” says Wendy Simmons, Audit Manager at Hobbs Sinclair Incorporated, a Cape Town-based accounting and auditing firm.
“When we engage with a client for an audit, or independent review, [depending on your “Public Interest Score”, as defined in the Companies Act (2008)], we plan meticulously upfront, and in advance, in order to ensure that there is as little disruption of the daily business as possible – we understand that the normal business operations need to proceed as usual,” says Simmons.
Simmons gives some suggestions to the owner-managed businesses to pre-prepare for their audit / review:
- Have a properly established finance department.
Depending on the size of the organisation, this can be one person, who is a suitably qualified accountant or bookkeeper, who can prepare and reconcile the accounting records up to at least trial balance level (and in the case of a statutory audit – prepare your annual financial statements).
- Review your monthly management accounts.
“Management accounts” can be as simple as an income statement and balance sheet printout. This ensures accountability from the accounting staff, and also makes sure that the owner knows what is going on in their business, ultimately putting them in a position to make informed, and accurate, business decisions.
Within the management accounts make sure that (inter alia)
- there is a debtors list; reconciled to contain only real, collectible debtors.
- there is a creditors list; that it is complete and reconciled to third party statements.
- there is a bank reconciliation; that reconciles to the underlying bank statement.
- there is a VAT reconciliation; that both the control account and the sales reconcile to the financial records.
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