How to Make Your Life Easier in 2024 and Manage Your Audit Process

Unfortunately for all large corporates, financial audits are a necessary evil. There are lots of articles about effectiveness and value for money but at the end of the day you must do an audit, and you need to make sure you get that letter that does not mention the word… “qualified.”

All our LOIS clients go through the joys of audits. While we are not well placed to comment on the wider permit of the entire audit, below I have listed what we see as best practice around IFRS 16 to try and make your job as easy as possible around this area.

Control your information

Primarily it is your data, your judgment, and your information. Make sure you control this information to ensure the auditor gets a clear, easy to access pack of information to do what they need to do as easily as possible.

Have an IFRS 16 policy

This contains all your major judgements and how you subsequently process these in your system. This should cover your IFRS 16 IBR methodology and how you apply this to different lease terms, geographic regions, and asset classes. Make sure you have socialised this with your auditors well before year-end, as you do not want to be redoing all your IBRs.

Have a system

Obviously, we are biased, but good luck convincing an auditor that your own purpose-built spreadsheets are robust. As soon as you have a credible system the auditor will heave a sigh of relief and look for the outputs.

Qualify the outputs

Make sure you can qualify the opening and closing positions of the period.  You should have your opening position tied to your general ledger (so the two are corroborating) and have this data in summary and detail. Luckily for our customers, due to the robust reporting in LOIS, this is all in the IFRS 16 report, which is a carbon copy of the IFRS disclosure standard. The same data can then be provided for the closing position, which will reconcile the movement.

From here you could also add audit reports around the control environment (new users, GL changes, new leases etc.). Finally, I would look to provide the audit reports of the modifications (if required) and proactively manage the communications to the auditor if these are complex.

With all this detail, which obviously ties through to the ERP, it makes the entire process much easier to reconcile and becomes a simple tick box exercise for the auditor.

Testing

Lastly, there will be substantive testing. If using LOIS, the auditor can simply select a sample from the data already provided, and then you can give them access to the system so they can review the data in detail.

We often see auditors ask for proofs of system calculations, obviously this can be provided for LOIS, but in general you should push back. LOIS has an ISO and SOC to ensure that the calculations do work. So why would a fresh-faced auditor need this detail for a system with 100’s of clients, which is certified and has gone through 1000’s of audits worldwide?

And just like that your audit is done. Although, I would note that if your current system cannot do all this you really should be reviewing if it is fit for purpose.

LOIS is, so give us a call!