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Higher Ed Schools: Here’s How to Prepare for an Audit (and Even Enjoy It!)
Audits are inevitable for higher education schools. But even though they are part of life for a college or university’s finance staff, they never seem to take on the familiar comfort of other workaday regularities; there’s just something menacing and disquieting about them. Well, I’m here to tell you that they don’t have to be the daunting, angst-ridden antagonisms we all seem to think they are.
What’s the trick? Preparation, of course — and a little humility. Don’t think of your audit as a judgment; consider it a learning experience. Accounting and finance aren’t static disciplines. They are always changing, and an audit gives you the chance to keep up. With that shift in perspective, you’ll find it to be a lot less unnerving and a lot more interesting.
Clients ask me specifically what they can do to bring about this mindset shift, so I’ve identified a few steps that can help you transform the audit process into an experience of discovery and improvement.
Meet your auditors in advance
Arrange a meeting between your auditors and your team at least two months ahead of the scheduled audit. This is a critical step whether the audit team is new to you or you’ve worked with them before.
An advance meeting will accomplish two important things: First, there’s the mutual benefit of getting to know each other and appreciating your shared humanity. Your team members will feel more at ease with the people inspecting your books when they get to know the names, faces, and voices of the inspectors. Your auditors, in turn, can learn about your school and finance team so they can ask more informed questions and be efficient throughout the entire process. Second, you can establish specific expectations that will help you thoroughly prepare.
Ask your auditors for preparation checklists and templates, and then pepper them with all the questions you could possibly have. The more information you get, the better. Show them your workpapers and go over your internal control processes so they get a sense of how you operate and what personnel will be involved during various stages throughout the audit process. The auditors are often satisfied with the documents you’ve already produced and might not require redundant paperwork, saving time and possibly reducing fees.
Regard this meeting as an essential two-way information-gathering session, and be exhaustive in your search for answers and expectations. This will get you started off in the best possible way.
Keep the questions coming
Begin preparing the audit documents as soon as possible after your initial meeting. Now that you’ve developed a relationship with your auditors, ask them for clarification and guidance as questions arise. Your earnest inquiries will help build trust between them and your team, and this fluid process approach will better prepare you and make your audit go more smoothly.
Anticipate accounting issues
Think back to your accounting challenges during the year. If, for example, your school is undertaking a merger, entering into a multifaceted debt agreement, or constructing new facilities, complex accounting standards are very likely applicable. Recording these correctly is imperative, and you can be certain they will draw attention during the audit.
So get ahead of the curve and ask your auditors for verification that you have correctly recorded these complicated transactions. Determine what additional documents they will need to review, and have them ready in advance. This can go a long way in preventing an audit adjustment and subsequent finding. Plus, you’ll probably learn something while you’re at it.
Own up to GASB and FASB change fatigue
Whether your higher education school follows FASB or GASB rules, you’ve no doubt experienced the annual onslaught of new and revised standards. These are often accompanied by significant adjustments in your financial records. (Fair value hierarchy and net pension liability are just two that come to mind.) Auditors can be sympathetic to these major fluctuations in accounting procedures and rules, and they appreciate it when you ask for guidance in implementing them. Their insight and instruction will likely prove invaluable. You might even ask that the audit timing be adjusted to give you time to catch up and make the cumbersome changes correctly. This shows the auditors you are sincere in your efforts to be compliant and may mitigate findings.
Learn from the process
Immediately after the audit, ask for constructive feedback and be receptive to your auditors’ critique and insights. Find out specifically what steps, documents, or protocols will help you facilitate a better audit next year, then take the audit team’s guidance to heart in making constant and continuous improvement.
In my experience, schools that take this open-minded approach and build rapport with their auditors shed a great deal of audit-related anxiety and stress. Even better, their audits are more productive and enlightening, resulting in welcome process improvements.
How we can help
In today’s intense regulatory climate, a strategy of cooperation and compliance is your best approach to preparing for an audit. Our higher education industry professionals are privy to a host of audit review procedures. We can guide your institution with best practices that keep you in line with the regulations and help minimize findings.