Working with Auditors Guide
Understanding the audit process helps you get maximum value from this regulatory requirement.
Working with Auditors
When your business requires an audit, working effectively with auditors makes the process smoother, faster, and less expensive. This guide explains what to expect and how to prepare.
Understanding the audit process helps you get maximum value from this regulatory requirement.
Audits are required for public interest entities, companies meeting the public interest score threshold (350+), or when voluntarily required by shareholders. Many SMEs don't require audits—check your Companies Act obligations.
Understanding Audits
Audit
Independent opinion on financials.
Review
Limited assurance engagement.
Compilation
Accountant prepares financials.
Agreed-Upon
Specific procedures only.
Choosing an Auditor
Requirements
Registered AuditorRequired
IRBA registered, mandatory.
IndependenceRequired
No conflicts of interest.
Industry ExperienceRecommended
Knows your sector.
Size MatchConditional
Appropriate for your company.
Selection Process
Get Proposals
Request quotes from 3+ firms.
Evaluate Experience
Industry and size fit.
Check References
Talk to their clients.
Meet the Team
Who will do the work?
Appoint
Board/shareholders appoint.
Don't just choose the cheapest. Audit quality matters. A cheap audit that misses issues creates problems later. Evaluate based on quality, experience, and value, not just price.
Preparing for Audit
Before Audit Begins
Close BooksRequired
Complete year-end closing.
Prepare Trial BalanceRequired
Accurate, reconciled balances.
ReconciliationsRequired
Bank, debtors, creditors complete.
Supporting DocumentsRequired
Invoices, contracts, agreements.
Document Preparation
Bank StatementsRequired
Full year plus confirmations.
InvoicesRequired
Sales and purchases.
ContractsRequired
Major agreements.
MinutesRecommended
Board and shareholder meetings.
PoliciesRecommended
Accounting policies documented.
Ask your auditor for their specific document request list (PBC list) well in advance. Being prepared reduces audit time and therefore cost.
During the Audit
What to Expect
FieldworkRequired
Auditors review documents and records.
InquiriesRequired
Questions about transactions and policies.
TestingRequired
Sampling and verification.
Walk-throughsRecommended
Process explanations.
Your Role
Respond PromptlyRequired
Answer queries quickly.
Provide AccessRequired
To records and personnel.
Be TruthfulRequired
Never mislead auditors.
Assign ContactRecommended
One person to coordinate.
Never obstruct or mislead. Obstructing an audit or providing false information is a serious offense. If you're unsure about something, say so—don't guess or hide issues.
Common Issues
Typical Audit Findings
Missing DocumentsRequired
Incomplete supporting records.
Reconciliation DifferencesRequired
Unexplained variances.
Policy Non-ComplianceRecommended
Not following stated policies.
Control WeaknessesConditional
Internal control gaps.
Handling Issues
Understand IssueRequired
What exactly is the problem?
Provide ExplanationRequired
If there's a valid reason.
Correct If NeededRequired
Make adjustments if required.
Document ResolutionRecommended
Record how issue was addressed.
After the Audit
Audit Deliverables
Audit OpinionRequired
Clean, qualified, or adverse.
Audited FinancialsRequired
Signed financial statements.
Management LetterRecommended
Findings and recommendations.
Representation LetterConditional
Your confirmations to auditor.
Follow-Up Actions
Review OpinionRequired
Understand what it means.
Address FindingsRequired
Implement recommendations.
File FinancialsRecommended
Submit to CIPC if required.
DebriefConditional
Discuss how to improve next year.
Use the management letter. The management letter contains valuable insights about your controls and processes. Address the issues raised to improve your business operations.
Managing Audit Costs
Cost Factors
Company SizeRequired
More complex = higher cost.
Preparation LevelRequired
Better prep = lower cost.
Control QualityRecommended
Good controls reduce testing.
Issues FoundConditional
More problems = more work.
Reducing Costs
Be PreparedRequired
Complete PBC list on time.
Respond QuicklyRequired
Don't delay queries.
Good Record-KeepingRecommended
Organized, accessible records.
Strong ControlsRecommended
Reduces audit procedures.
Frequently Asked Questions
What's the difference between audit and review?
An audit provides reasonable assurance through extensive testing. A review provides limited assurance through inquiry and analytical procedures. Audits are more thorough and expensive; reviews are suitable when audit isn't required.
Can my accountant also be my auditor?
No. Auditors must be independent of the preparation of financial statements. If your accountant prepares your financials, a different registered auditor must audit them.
What if I disagree with audit findings?
Discuss concerns with the audit team. If you have valid explanations or can provide additional evidence, the finding may be resolved. However, don't pressure auditors to change valid findings.
How long does an audit take?
Timing varies by size and complexity. Small company audits might take 2-4 weeks. Larger companies may take several months. Preparation quality significantly affects duration.
Next Steps
Learn more about working with professionals: