Accounting firms are often responsible for completing audits, which ensure that an international company is currently following international financial reporting standards (IFRS). An IFRS audit is often a frequent event for companies that are publicly held or work in specific industries. To prepare for an IFRS audit, a company should meet with the accounting firm to determine the scope of the audit, ask for a prepared-by client (PBC) list, and prepare employees for the audit and potential visit by the accounting firm. Not all audits are the same; therefore, a company may need to prepare differently for each audit. The type of audit and scope are usually the most important factors for audit preparation.
All audits should start with a meeting between the client and the auditors who will be conducting the accounting review. This allows the company to create a specific focus for the audit and prepare initial documents. An IFRS audit can be quite intense; creating the scope and breadth before agreeing to it can also help a company know how much the audit will cost. Audits are not cheap, especially for companies that must pay for them more frequently due to compliance rules or other external regulations. In some cases, a company may need to meet with several auditors in order to feel comfortable about the audit scope and individuals competing the work.
The PBC list is a set of documents that a client must hand over to the auditors as part of the entire review process. Putting together this information prior to the auditor’s arrival ensures that the company is properly prepared. The IFRS audit may also require specific sample documents taken from the company’s historical records. Taking too much time to put this information together can increase the audit cost as auditors spend more time gathering information than reviewing it, at least initially. In some cases, the company may be able to select the items that go on the PBC list as auditors generally provide a basic outline of documents needing inclusion in the IFRS audit.
Employees in the company need to understand the audit process and be aware of the auditor’s upcoming visit. Companies may need to educate each employee on the purpose of the IFRS audit and what role — if any — the employee will play in the process. Some employees may be questioned by auditors or be under observation for certain processes. These employees need to understand their roles in completing the company’s entire audit.
