Choosing the correct timing of audit procedures makes the difference between an audit started and an audit completed. Many businesspeople think of an audit as a process that only happens after year end, but properly planning and timing audit procedures to occur throughout the year can make audits more effective, more efficient and reduce strain on client support personnel.
Year End Procedures
One major objective of an audit is to verify year-end account balances. As such, some audit procedures can only be completed at year end. For example, if an auditor found it necessary to confirm a balance of a cash account on the last day of the fiscal year, then that confirmation cannot be completed until the day after fiscal year end, at the earliest. Other financial statement analytic tasks and procedures involving the balance sheet usually must wait until after the company's financial records close for the year as the information may not be available until after close.
For companies that have high transaction counts, auditors may be able to start gaining assurance over income statement accounts during interim testing. Interim testing is usually testing that occurs concurrent with fiscal Q3 review procedures. While the auditor is performing review procedures, he is able to perform detail testing of transactions that the company has already completed. Using this method, provided the auditor has assurance over the company's system of internal control and information processing, he may be able to complete reduced testing at year end. This also serves to reduce strain on client personal at the end of the year.
Larger public companies that are required to be in compliance with Section 404 of the Sarbanes-Oxley Act must include an attestation report of the company's internal control over financial reporting. These "SOX audits," as they are more commonly known as, are an auditor's concurrence with management's opinion that internal control systems are operating effectively as of the balance sheet date. Procedures are completed during quarterly reviews, interim periods and year-end audits to support this assurance.
While not technically an audit, accountants perform procedures to assess financial information that is published as part of their client's quarterly financial filings. These procedures occur after the close of quarterly books and are only reviews of significant events and transactions that occurred during the quarter. Auditors do not attest to the accuracy of the financial statements during these reviews, but only express that they did not encounter any evidence that the company's financial statements are materially misstated. Because of the lower level of assurance, these procedures do not take as long to complete as audit procedures.