If your company is filing with the SEC, you’re responsible for maintaining effective internal controls and preparing a public company audit report in line with SOX 404 compliance standards. While the process can feel daunting, proper planning—especially around internal controls—can help ensure a smooth audit experience.
1. Hire an Independent Auditor
As your company prepares its public company audit report, your first step is to confirm you’re working with an independent auditor and evaluating internal controls in line with SOX 404 requirements. Since every audit requires ample time for planning and documentation, hiring an independent certified public accountant early on will help ensure that your company is ready to go when the audit begins. If you need help finding a PCAOB-registered firm, you can perform a search on the PCAOB website to find CPA auditors who are qualified and experienced in conducting PCAOB audits.
2. Confirm the Timing of the PCAOB Audit
There’s a careful balance that needs to be struck when it comes to the timing of your engagement. On the one hand, you want to ensure that the audit process is completed promptly, as this will allow you to avoid costly delays or disruptions in your business operations. But on the other hand, it’s essential to give your auditor enough time to complete a thorough assessment of your financial systems and records. To stay ahead of the spring deadlines, you’ll need to complete the planning work by the end of the year. In addition to year-end close activities, your SOX 404 compliance partner can help assess whether your internal control testing is complete and documented for the audit cycle.
What do you need to do?
Organize your financial documents, close your books, and reconcile any outstanding transactions or discrepancies well before December 31st. Also, go over the Provided By Client (PBC) request list from your CPA firm and promptly deliver the necessary items to them. Also, confirm the time and date of your PCAOB audit with your accounting firm to ensure you’re all on the same page for the start of January.
3. Upload Documents and Review Public Company Audit Report Requirements
Once you begin your public company audit, you’ll need to upload your supporting documents to your auditor through their secure online portal. These documents typically include your financial statements, tax returns, and information collected from third-party sources (such as vendors or lenders).
You’ll also need to consider the SEC requirements, such as filing information disclosures and what is required for your Form 10-K for the SEC. Ensure your legal counsel is in place to help prepare your Form 10-K for the SEC and that you’ve hired an EDGAR Agent to take your financial statements and upload them into the SEC system. You’ll also need to confirm the time and date to send those documents to the EDGAR agent, as the files will need to be uploaded by the end of March to be in your public company audit report.
4. Perform an Inventory Check (If Applicable)
Inventory controls are a key part of SOX 404 compliance. Be sure your procedures for inventory tracking and valuation are properly documented and tested. If your business controls and distributes inventory, you must perform an inventory observation to meet SEC requirements. You will also need an inventory audit performed by an independent auditor. Speak with your PCAOB auditor to discuss which inventory calculation method your company has adopted and when to schedule an inventory observation and audit as part of your engagement.
5. Evaluate Major Transactions
As you prepare your financial documents for your PCAOB audit, take a close look at any major financial transactions that took place over the course of the year. This includes transactions such as acquisitions, complex debt, new equipment or property investments, warrants, loans or repayments, employee compensation changes, and any other significant expenses that could affect your company’s financial position.
Prepare Early for your Public Company Audit
PCAOB audit preparation is a complex and multifaceted process that requires careful planning, communication, and collaboration with your SOX 404 compliance team and your auditors. By following these steps, your PCAOB audit is more likely to run smoothly and efficiently without disrupting your business operations or delaying the release of your financial statements.
At Assurance Dimensions, our team specializes in helping companies document and test internal controls in preparation for their public company audit report. Contact us today to learn how our SOX 404 compliance services can support your audit readiness.
