This sample audit report reviews an organization’s financial close process and identifies ways to improve its accuracy, completeness and sustainability.
Steps in the review process include benchmarking the current state of the close process and techniques compared to common practices; reviewing areas and processes outside the finance department’s control that could positively impact finance operations; reviewing the critical path of the financial close and identified improvement opportunities; evaluating the timing, format and completeness of account reconciliations; and evaluating the inventory costing and revenue recognition processes.
The following recommendations were noted during the review:
- Management should re-organize the finance organization into three principle functional areas:
- Financial reporting (general ledger, internal and external reporting)
- Financial operations (accounts payable, accounts receivable, fixed assets and inventory)
- Treasury and finance (cash management, planning, budgeting, financing and strategic projects)
- Management should prioritize hiring the following positions:
- SEC and generally accepted accounting principles (GAAP) financial reporting manager
- Inventory analyst
- Accounting manager
- Management should implement a formalized plan to phase out the reliance on contractors for day-to-day operations.
- Management should review employee knowledge for assigned responsibilities and supplement gaps with additional training.