With year-end close just around the corner, CFGI has assembled a few best practice tips to manage your year-end close and audit process.

YEAR END CLOSE AND FINANCIAL REPORTING

  • Perform a close calendar walkthrough with stakeholders to ensure dependency alignment and coordination.
  • Prepare a financial statement shell for management and auditor comments in advance of the year end close process. Highlight key changes and provide a disclosure checklist for these areas in order to support the completeness of the disclosures.
  • Prepare an account reconciliation for every account, even accounts with no activity.
  • Prepare activity roll-forwards for accounts receivable and bad debt reserve balances.
  • Reconcile annual employee payroll costs to third-party summary payroll reports.
  • Assess your reserves from a fresh perspective to ensure compliance with historical approach but also appropriateness based on current circumstances.
  • Document the accounting for unique, non-recurring, and significant accounting transactions in the form of white papers – provide well ahead of the audit to proactively engage your auditor.
  • Review Board of Director meeting minutes to verify all actions taken that require accounting are identified and accounted. Sometimes accounting is the last to know about transactions.
  • Perform an internal review of shipment cut-off.
  • Internally perform post-close disbursement testing to be ready for auditor inquiries.

ORGANIZING THE AUDIT

  • Work from ahead by preparing supporting documentation and analytics in advance of your audit team arrival.
  • Ensure that any reliance on third party reports (valuations, etc.) are properly understood, inputs are verified, and calculations re-performed where appropriate for your controls.
  • Document your thorough understanding of current industry hot topics for this year in order to drive organizational alignment and coordination with your audit team on these critical areas.
  • Proactively manage the auditors, take ownership for timelines, and objectives – request weekly status reports / meetings to understand progress.
  • Compile your financial statement tie-out in a hard copy binder with copies of all information to support your financial statements and disclosures. Paper tie-outs are still a best practice to evidence completion.

CONTROLS IMPACTING FINANCIAL REPORTING

  • Ensure sign off on control design and interim effectiveness testing in advance of year end to prevent additional work during the critical post-close period.
  • Review designated annual controls and perform process walk-throughs with their owners in advance of year-end testing to identify changes or concerns as you only have one opportunity to perform annual controls.
  • Review internal control findings stemming from interim testing with control owners to ensure that the root cause of testing exceptions is not repeated during year-end testing. Assessing control deficiencies at year-end is a significant time and energy drain.
  • Review Service Organization Control “SOC” reports as they become available in order to identify any deficiencies that need to be addressed.
  • Ensure the performance of internal controls testing is aligned with the external auditors’ expectations to drive efficiency with control owners and to leverage testing evidence between those relying on the data.
  • Advanced coordination with Tax. The calculation of the annual provision is highly complex and requires key judgments and assumptions that impact both the close and control documentation process at year end.

This sampling of recommendations is an accumulation of the firm’s experience working with clients to manage and drive efficiency in the annual close, audit and control assessment processes. Please reach out to our professionals in Boston, New York, and Philadelphia offices to discuss how we can help drive optimization across these processes.