While checklists and templates are staples in the auditor’s kitbag, an inquisitive mind and good listening ear are at the centre of a successful audit. That’s the view of Elisha Ricetti, General Manager of Finance at Regis Resources an ASX200 company with market capitalisation of $1.5 bn. She says;
“There can be so many obligations and procedures to complete, that companies and auditors alike risk losing focus on the real meaning of an audit. That is to identify company risk. Falling into the ‘checklist trap’ can leave you vulnerable to missing the obvious.”
Elisha believes that the identification of key risks is the duty of both the auditor and the company’s management team.
Arriving at Regis Resources after eight years as an auditor at Ernst and Young, Elisha has experienced the audit process from both sides of the fence. As the key conduit between the auditor and the Board, she shoulders the responsibility for managing the audit process.
And while Elisha admits that the audit process can be ‘mildly annoying’ at best, when managed appropriately, it should prove to be a useful tool, adding value. Elisha explains;
“I’m a bit of an accounting nerd and take great pride in preparing accurate financial reports. The board relies on these reports to make sound commercial decisions. It’s important that the audit addresses the key issues in our financial reports and picks up any discrepancies. Rather than fear an audit, I relish having someone check my work.
With over 16 years of experience in the field, Elisha knows a thing or two about managing the audit process. Here’s her top tips for finance executives looking to get the most out of the audit process.
- Start off on the right foot
“For me it all begins at the kick-off meeting. This is our opportunity to bring the audit team up to speed on changes to our business and sets the tone and expectations for the rest of the audit.” says Elisha.
Too often overlooked, adequate preparation in advance of the kick off meeting should be undertaken by both the management team and auditors.
Your auditors will likely request a number of documents such as policy and procedure manuals, organisational charts and details of key contracts. Distributing these in advance will allow more time on the agenda to discuss the scope of the audit, high level objectives, the audit process and communication expectations.
Elisha and her team put substantial time into developing an audit pack ahead of the kick-off meeting which includes the financials and environmental reports for every one of Regis Resource’s mine sites.
- Build a good rapport
Your auditors may be in your business for as little as couple of days or as long as a couple of months. Either way, it’s important to build a good rapport. A strong personal connection will result in better communication and fewer surprises along the way (more on this later).
Yet building rapport is where many a good auditor can become unstuck.
“I’ve had auditors email me questions from 10 feet away” Elisha laments “Email has become a poor substitute for conversation. Sure, I could answer the questions via email but our auditors can learn more about our business and processes by talking face to face.
It’s down to me and my team to make our auditors feel welcome. The audit process always runs more smoothly where everyone feels comfortable together.”
- Prepare quality documentation
Documenting transactions throughout the year will make life easier for you and your auditor. This is particularly true where an unusual transaction has taken place; ensure that you have documented not only the outcome but the decision making process.
Keeping good records extends to ensuring that they are logical and easy to follow. Doing so will minimise the number of questions from your auditors and streamline the whole process. Elisha explains;
“Having done my dues as an auditor, I know what it’s like to receive sloppy documents that raise more questions than they answer. At a bare minimum documents should be indexed with numbers that match your auditors ‘prepared by client’ listing.”
- Be prepared for questions
While many CFOs and General Managers feel that their auditors are watching over their shoulders, ready to catch them out. Elisha welcomes and expect lots of questions.
“I feel nervous when the right questions aren’t being asked. This shows me that the auditors are simply following last year’s template. In the resources sector things move so rapidly that simply following the same process as last year isn’t good enough – this is how risks are missed.” Elisha says.
It’s not just the management team that should be prepared for questions. Questions may be directed at other stakeholders through the audit process. Management enquiries around fraud, for example may also be asked at board level. After all, your company’sfraudster could be part of your management team.
- Allow for no surprises
“No one likes surprises” says Elisha “Receiving an audit committee report with issues that haven’t yet been brought to my attention is a sure fire way to get me off side”
Be upfront with your auditor. Make it clear that you expect continuous communication throughout the process and that issues should be addressed as they arise, not at the end of the audit.
Being as candid and transparent as possible in return will allow the process to move forward swiftly.
- Choose an audit team that understands your business and industry
A good auditor will assemble thet team that understands your business and your industry. In this regard, consistency can be a real bonus. Working with the same team each year saves time and resources upfront. However, even with the best laid plans, issues can arise. As Elisha explains;
“A previous auditor once sent us an Irish secondee who couldn’t get her head around the hundreds of kilos of lime that are used in the refinement process. She estimated that production would slow down in the winter when citrus fruit was in short supply!
While this example might be extreme, it shows how much time can be lost if your auditors don’t truly understand what you do.”
Elisha Ricetti General Manager- Finance at Regis Resources joined William Buck’s Audit & Assurance Focus Group in May 2016 year, sharing her experiences as a General Manager in the fast moving resources sector.