Are Common Audit Mistakes Slowing your Audit Down?

Nothing sends chills down a business owner's spine, quite like being notified that you are being audited. The worry that you have accidentally overlooked something critical or done something incorrectly can be extremely nerve-wracking. Furthermore, trying to understand why you are being audited can cause business leadership to fret from the very beginning. Even before the audit has begun, the entire process can be confusing and stressful.

Preparing for and weathering an audit is a lot of work for business owners that likely have too much on their plates already, especially when the audit is dragging on. Therefore, it is crucial to have an accountant (especially a CPA) or consulting CFO to lean on throughout the audit process, no matter how long it takes. But if your audit seems to be taking longer than it should, it is essential to understand what the hold up is to mitigate your future audit risk.

---

If your audit is moving slowly, it can result from financial errors, improper documentation, weak internal controls, or poor company culture around compliance.

Errors
The most common issue that auditors find is financial errors, and the more errors they find, the longer it takes to finish the audit.
​
Giving too much responsibility to inexperienced employees increases the likelihood of errors, as does entrusting overworked employees with detailed financial activities. But utilizing the wrong employees is not the only cause of financial errors. Not having a process in place to review work being done or sweep periodically for mistakes allows mistakes to go unnoticed as well.

Remember, even the best employees make mistakes, especially when they are forced to do things manually instead of using software to streamline these financial activities. However, while using too many manual processes can exacerbate the opportunity for errors, even outputs from financial software should be checked periodically.

As our team explains, 

Data entry and bank reconciliation errors can occur in even the most fastidious financial environments. Occasional human error is unavoidable, which is why financial records should be regularly reviewed by a third party to look for mis-keyed or improperly transcribed items. Like people, technology is not perfect either. Errors can also occur with automation when system glitches occur, settings are changed, or software updates are pushed. Most errors are simple mistakes, rather than the result of malicious intent. However, irrespective of intent, errors can affect cash flow as well as financial records.

​What is Slowing your Audit Down?

• Mistakes resulting from manual work
• Software calculation errors or glitches
• A failure to check or regularly audit financial work that is being done

Poor Documentation
Just like you, auditors want to get the audit over with as quickly as possible. So, when they need to sift through the messiness, they are less likely to be on your side because it means they must work harder to get the job done.

Being too disorganized to find what you are supposed to provide is a surefire way to make your audit drag on and increase the chances you will need to pay penalties or fines after the process. Businesses that use multiple systems to keep financial records like customer invoices, vendor receipts, sales tax payments, payroll calculations, and benefits statements may have even more trouble pulling everything together when requested if none of these systems are tied into each other.
It is imperative to maintain thorough documentation in your financial dealings with business partners and investors. If they have been or are currently being audited due to unethical tax avoidance strategies, auditors will look more closely at your association with them.

What is Slowing your Audit Down?

• Failing to issue the correct W-2s and 1099s to employees and contractors in a timely manner
• Not keeping receipts, bank statements, petty cash vouchers, and other financial documents long enough
• Incomplete or incorrect documentation related to expenses, vendor transactions, investments, and partnership agreements

Inadequate Internal Controls
Without the proper framework to guide financial activities and reduce the risk of fraud, an audit can drag on because auditors need to examine any vulnerabilities they find closely.

It is crucial to regularly do risk assessments to understand which internal controls are most important to implement or update. Staying informed about the most common types of fraud is a key strategy for understanding the ongoing types of threats your business is facing.

What is Slowing your Audit Down?

• Failing to implement the proper internal controls to prevent fraud and reduce future audit risk proactively
• Entrusting a small number of people (or a single individual) with all the financial oversight for the business
• Ignoring patterns of supposed errors that may hint at fraud
• Lacking consistency in maintaining internal controls after a previous audit has ended because the spotlight on the business has been turned off

A Missing Culture of Compliance
When employees do not prioritize financial accuracy, they are more prone to cutting corners and doing sloppy work, which can slow down an audit because it creates more auditors' issues to review.

Company culture is handed down from the top, so management needs to make financial accuracy and compliance a top priority for employees to comply. Management must lead by example – abiding by their policies and ensuring employees take them as seriously as they are intended to be.

What is Slowing your Audit Down?

• Management brushing off formal internal control procedures and compliance themselves
• Management ignoring employees' lax behavior around internal controls

Please find out more about what auditors are looking for when they evaluate your business financials.