Financial audit season is finally over. However, like many folks in the accounting world, your audit has likely exposed some issues in your accounting. To help you conduct a failproof audit next year and convince your CFO to open up the budget so you can get your house in order, we’ve put together a sample email you can send that outlines the reasons for the requested investment, the amount, and the expected outcomes. Feel free to adjust this template as needed to convince your boss!
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Subject: Post-Audit Action Plan and Recommendations
Hi [CFO NAME],
In light of the recent audit completed by [INSERT NAME OF AUDIT FIRM] and the complexities we encountered, our team, in conjunction with the auditors, has outlined ten recommendations that will significantly improve our audit preparedness for the coming year and beyond.
1. Unified Revenue Recognition Policy: Establish a consistent and uniform policy for revenue recognition that aligns with accounting standards and is suitable for all our lines of business.
2. Consolidation of Data Sources: Implement a comprehensive system that connects data from our different operational systems and payment providers.
3. Detailed Transaction Tracking: Upgrade our accounting system to capture detailed, transaction-level data.
4. Thorough Documentation: Enforce a company-wide policy to maintain thorough documentation for every transaction.
5. Regular Reconciliation: Reconcile our financial records regularly with the underlying transaction data.
6. Consistent Inventory Accounting: Standardize a method for valuing inventory across all product lines.
7. Standardized Depreciation Methods: Apply a standard depreciation method for all fixed assets.
8. Uniform Expense Recognition: Implement consistent policies for recognizing expenses, particularly those related to fixed assets.
9. Consolidated Intercompany Transaction Handling: Standardize intercompany transaction handling to eliminate inconsistencies.
10. Pre-Audit Review: Review the financial records before the audit to proactively identify and rectify potential issues.
As you can appreciate, these recommendations come with certain costs attached. The initial implementation, mainly the system upgrades and consolidation of data sources, could cost around $200,000-$300,000. There will also be ongoing costs related to training, maintenance, and periodic system updates, which we estimate at around $50,000 per year.
However, significant savings and benefits will offset these costs in the future. Improving our audit preparedness can save over $600,000 annually in audit fees. Not only will this result in more efficient audits, but it’ll also reduce our accounting team’s burden and overtime costs during the audit period.
Moreover, by ensuring our financial records meet the highest standards of accuracy and transparency, we’ll be better positioned to pass increasingly rigorous audits as we seek additional investments for growth. The improved financial management will also enhance our credibility with investors, lenders, and other stakeholders, accelerating our growth plans.
Besides audit-related benefits, the proposed changes will provide valuable insights into our business operations. The detailed, transaction-level data will allow us to track and analyze revenue and expenses more precisely and quickly, leading to better-informed, more timely decision-making. It’ll also facilitate improved budgeting and forecasting, tighter control over costs, and more effective working capital management.
We look forward to your feedback and approval of these recommendations so we can proceed.
Best,