The financial statement audit process requires effective cooperation between the company and the auditor. Proper preparation before the audit begins can help ensure that the examination is carried out more effectively, systematically, and efficiently.

Companies should ensure that financial data, supporting documents, and other information required by the auditor are available and easily accessible. Below are several important preparations to make before the financial statement audit process begins.

1. Prepare the Financial Statements

Make sure the financial statements for the period to be audited have been prepared and reviewed in advance. The financial statements generally required include:

• Statement of financial position
• Income statement
• Statement of cash flows
• Statement of changes in equity
• Notes to the financial statements

The financial statements should ideally undergo an internal review so that potential errors can be identified at an early stage.

2. Prepare the General Ledger and Trial Balance

Auditors require information regarding transactions and the balances of each account. Therefore, companies should prepare the trial balance and general ledger used as the basis for preparing the financial statements.

Make sure that the balances in the trial balance are consistent with the financial statements.

3. Perform Reconciliations

Reconciliation is an important step before the audit begins. Companies should perform reconciliations for relevant accounts, such as:

• Bank accounts
• Accounts receivable
• Accounts payable
• Inventory
• Fixed assets
• Taxes
• Other relevant accounts

Reconciliations help companies identify differences or recording errors before the audit process begins.

4. Prepare Supporting Documents

Every significant transaction should be supported by complete documentation. These documents may include invoices, receipts, contracts, proof of payment, bank statements, purchase orders, and other supporting records.

Well-organized documentation makes it easier for auditors to perform their examination and obtain the necessary audit evidence.

5. Prepare Fixed Asset and Inventory Data

Companies should ensure that their fixed asset and inventory records are up to date and reflect actual conditions.

Information such as acquisition dates, asset values, accumulated depreciation, asset locations, and asset status may be required during the audit process.

For inventory, companies should also ensure that stock records are updated and ready in case physical observation or inventory inspection is required.

6. Prepare Tax Documents

Relevant tax documentation should also be prepared, including tax payment records, tax filings, tax reconciliations, and other supporting documents.

Complete tax documentation can help auditors understand the company’s tax position and tax-related transactions during the period under review.

7. Prepare Contracts and Agreements

Contracts or agreements that may have an impact on the company’s financial position should be made available. Examples include loan agreements, lease agreements, contracts with customers or suppliers, and other business agreements.

This information helps auditors understand the company’s rights, obligations, and transactions that may need to be considered in the financial statements.

8. Appoint a Person in Charge (PIC) for the Audit Process

The company should appoint a person in charge (PIC) to act as the main liaison between the company and the auditor.

The PIC can help coordinate requests for information, respond to auditor inquiries, and ensure that required documents are provided on time.

9. Conduct an Internal Review

Before the audit begins, conduct an internal review of the financial statements and significant accounts. Check whether there are unrecorded transactions, unreconciled balances, or incomplete supporting documents.

This step can help reduce potential issues during the audit process.

10. Prepare the Team to Coordinate with the Auditor

An audit is not solely the responsibility of the finance team. Auditors may require information from various departments, including finance, tax, operations, legal, and management.

Effective coordination across departments will help the company provide the required information more quickly and accurately.

Audit Preparation Checklist

Before the audit process begins, companies can make sure that the following items are ready:

• The financial statements have been prepared.
• The trial balance and general ledger are available.
• Relevant account reconciliations have been completed.
• Transaction documents have been collected.
• Fixed asset and inventory records have been updated.
• Tax documents are available.
• Important contracts and agreements have been prepared.
• An audit PIC has been appointed.
• An internal review has been completed.
• Relevant teams have been informed about the audit process.