Checklist to Prepare for an External Audit

An external audit will protect your
investment and keep your business.

Following is a step-by-step set of instructions intended to aid in the preparation for an external audit.

The guide can also be used for internal audits. Outlined are the planning stage, the entrance interview, fieldwork, the exit interview, and the final audit report phase.

Planning & Preparation:

• Designate an audit liaison person within your organization who will act as the auditors’ main contact. This should be an experienced person with strong project management and communication skills.
• Send a general communication to faculty and staff stating that if the auditors contact them directly, they should notify the liaison.
• Have the liaison develop a list of contacts who must be kept informed of the audit progress.
• Have the liaison develop a list of people who can provide support on technical issues and gathering documentation.
• If necessary, schedule and conduct a general training session with individuals who may be asked to participate in the audit either to produce documents, be interviewed by the auditors or participate in findings discussions.
• Contact auditors and set up entrance conference. Clarify the purpose of the audit and ask that audit requirements be in writing.
• Alert the internal audit department of the upcoming audit.
• Make necessary arrangements for the audit team – meeting rooms, preliminary interview schedule, entrance conference specifics including attendees.

Entrance Conference:

• Develop a list of questions to discuss in the meeting including the purpose, objectives and scope of the audit; the awards to be included and sampling techniques; timelines including beginning and end of fieldwork and expected report date; and communication process.
• Consider giving the auditor(s) a tour.
• Determine staffing and space requirements, including whether the auditor will need internet access during fieldwork; arrange for auditor on site space; modify meeting room needs as necessary.

Fieldwork:

• Obtain the list of requested records and develop an approach for pulling the information on a timely basis. Give a target date for providing records to the auditors.
• Review the records prior to submission to the auditor. Consider if the records provide the necessary support. Anticipate what questions the records may provoke.
• Maintain a list of all records provided to the auditor.
• Meet with auditors at least weekly to learn of the status of the audit and potential issues that are identified.
• Verify the facts on which issues are based; perform re-calculations and review source documents, if necessary.
• Communicate at least weekly with those within the organization who need status updates.
• Liaison should attend meetings between faculty/non-financial staff and external auditors unless the auditor or faculty insist otherwise.
• Set up exit interview.

Exit Interview:

• Ask for a copy of each finding or draft report prior to the interview.
• Based on the nature of the issues, ask representatives from other groups to participate, e.g. general counsel, internal audit, office of sponsored programs, controllers office, etc.
• Agree on valid findings; negotiate those findings where the facts are not representative of the control weakness.
• Discuss with the auditor the disposition of the audit issue, i.e. verbal comment, report item, management letter.
• Escalate any disputed issues to supervisors.

Audit Report:

• Ask for the final draft report for review.
• Draft management responses and circulate to management for approval.
• Understand the follow-up process.
• Perform a post-audit evaluation to determine weaknesses in the process and potential changes to approach in the future.

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READ MORE>> rmas.fad.Harvard.edu: Preparing for an External Audit

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