Appointing new auditors is a normal process that all providers are prepared for but, as with most procedures, a smooth auditor transition depends on advance planning. Think about who you would like to invite and engage with them early. Being proactive will give yourself and your new auditors realistic timetables. Be clear about your expectations (including deadlines) and explain what you want from them. Ideally, you should appoint a new firm before the start of the financial year.
Think about what you would like to be included in your request for proposal (RFP): firm and team credentials; audit services including technology, global coverage, and teams; auditors' approach to quality and independence; and timelines.
Ask bidding firms if they've run conflict and independence checks. This should be done prior to tender. You don’t want to discover a conflict after you've appointed your new auditor.
First steps with your new auditor
Appointing an auditor is not the end of your involvement in an efficient transition. Facilitating early communication by planning meetings between the new firm and the incumbent will enable the outgoing firm to share as much information as possible – so both sides can discuss areas of interest: systems, audit approach, and timelines. It will also give the new firm an opportunity to review prior- year audit files. You can also introduce them to other people within your business, so they can understand how it operates, for example, supply chain director, HR director, property director.
Your new auditor should also perform an early review of your systems and relevant controls, and do walk-throughs of audit risk areas and financial reporting processes. This should be done before the year-end date.
Prepare essential management papers on complex accounting areas, as well as estimates and judgements before the year end, for example, stock provisioning, impairment review of fixed assets or right-of-use assets, and going concern. This will help your new audit team raise any queries early on.
Most importantly, you need to set expectations, and communicate if there are missed deadlines. This will help get you and your audit team back on track to deliver in accordance with the plan.
So, what do you need to know about auditor transition? Planning and communication are key.
For more information and guidance, contact Emily Cheevers.
