Year-end can be a tricky time, with lots for businesses to juggle. But have no fear! Read on to discover some expert tips and 8 recommended areas to focus on when creating a year-end audit checklist.
For all non-plc and plcs, the year-end process is time-consuming and resource constraining – but necessary – as the auditors arrive to scrutinise the annual consolidated accounts from across the business divisions. It can take several months to complete.
Although timings and deadlines for the year-end accounts and audits vary between companies, it is always a “concentrated, busy period with tight deadlines and a lot of pressure on the finance teams”, explained Stephen Barclay, a chartered accountant at Hutcheon Mearns.
He said that due to the impact of Covid on the economy and the uncertainty this has brought to many organisations in 2020 and 2021, companies are experiencing more difficult and time-consuming year-end audit processes.
He added: “There will be continued increases in the levels of workload for finance teams and companies seem to be facing ever more scrutiny and rigour from their external auditors.”
Deadlines and timings around year-end audits
Whether businesses are in the midst of their year-end preparation ahead of 31 December or are working towards a different timetable, it is organisations like Hutcheon Mearns that help get them there.
Once year-end arrives, plcs typically have two-to-three months to announce their results and publish their annual report and accounts. Non-plc Groups often have similar timetables to satisfy their stakeholders. All individual legal entities in the UK then need to submit their audited statutory accounts to Companies House within nine months of year-end, so by the end of September 2022 for most entities.
Stephen is quick to point out that there is no longer the “automatic extension” in place from Companies House which was introduced due to Covid.
“You can, however, apply for a three-month extension to avoid penalties and fines.”
Stephen, who has worked with a couple of the Big Four recently, explained the changes in behaviour of auditors and the impact this is having on businesses: “Whilst the different firms have a different approach to audits it seems clear they have introduced more detailed testing and focus on certain key areas and that’s because of the uncertainty of the current economic conditions.
“Many businesses’ financial performance and position are affected by the impact of Covid and auditors are applying even more rigour and scrutiny in their audit work.”
Things to consider when building a year-end audit checklist
The following areas of year-end reporting have come into sharper focus recently and many companies will require more detailed consideration and analysis of these.
Since they involve greater judgement they will also be subject to increased audit focus.
Below are eight areas to include in your year-end audit checklist:
- Going concern assessments
- Impairment assessment
- Credit loss allowances
- Onerous contract provisions
- Restructuring provision
- Accounting for governmental support
- Key judgements & estimation uncertainties
- Funding covenants
Stephen admits that these extra considerations come at a time where “workloads are higher; time is tight and resources are scarcer.” However, he pointed out, there are ways to ease the burden.
Below is the chartered accountant’s advice.
What year-end audit steps can you take? You are ‘accountable’
1 Plan ahead
Create timetables and draw up a plan. Work together with your auditors during their planning stages and visits.
2 Start working on key areas
Look at the audit focus early and even before year-end. Be proactive and have conversations with auditors on any new, difficult or judgemental areas as soon as you can.
3 Set realistic timescales
Try to stick to deadlines. Monitor progress and react.
4 Ensure there are adequate resources
Do you have enough staff to give audits attention they deserve? Or do you need to provide cover? If so, see next point.
5 Call in external expertise
For everyone, year-end brings in a higher workload so one way to address constrained resources is to call in external help to help with year-end or to backfill financial positions when staff are tied up with audits.
The benefits of getting expert help at year-end
With years of experience in accounting and finance, Stephen Barclay and other specialists at Hutcheon Mearns are well-equipped to step in to assist companies when they are under pressure. They are able to help with time-specific projects at this time of year and throughout.
Stephen, who is about to support a group of companies for a four-month period in January, will add value by taking his best-practice knowledge and expertise into the company until April 2022.
For both parties, the arrangement is a win-win, as Stephen explained: “Because we have worked in a similar situation for a wide range of companies, we are flexible, agile and harness best practice seen from a range of clients as we focus on the task in hand.
Whether it is assistance with audit papers on GC, impairments, CLAs, provisions or your company is needing help with forecasts, budgets or a backfill for other roles in your organisation, Hutcheon Mearns can help.
“It is very rewarding as there is an end goal to work towards.
“And we never walk away from a client at the end of the temporary contract – we are always available to them, so much so, the client often continues to extend our contract as we have proved to be a good resource.”
Discover how your business would benefit from external assistance from the financial specialists at Hutcheon Mearns at this time of year, or throughout 2022.
