A public company audit, also known as an SEC or PCAOB audit, is not only required by law for publicly traded companies but also helps maintain trust and efficiency within financial markets. To meet SEC audit requirements, financial statements are prepared in accordance with PCAOB accounting standards to provide detailed information for investors, creditors, and other stakeholders. SEC audits can be a lengthy and tiresome process if your company is unprepared for your auditor’s arrival. To ensure a detailed and timely public company audit, take these steps to plan in advance.  

 

Start Early to Meet SEC Audit Requirements

The best thing you can do to prepare for your company’s audit is to get started early. Throughout the year, collect the relevant documentation you will need for your audit. Designate who on your team will be responsible for gathering the information for the audit and communicating with your auditor. Provide timelines to all team members to ensure everyone stays on schedule.

 

Be Ready For Your Auditor’s Arrival

Before your auditor arrives, they will send you a Prepared by Client (PBC) list. If you’ve had an audit before, you can access and review your past PBC list. This will be a list of items that your auditor will need from you before beginning the audit process. PBC lists can be lengthy and contain 40-120 items (or more), depending on the size of your organization. 

 

Prepare Your Financials

Your auditor will need to review your organization’s financial statements and footnotes, which are required to be prepared in accordance with public company filing rules. The auditors cannot prepare your financial statements as that would impair their independence. Information in these financial statements includes items such as:

  • Sales
  • Cash receipts
  • Inventory levels and valuation
  • Outstanding bills
  • Liabilities
  • Payroll and operation expenses
  • Memo/policy documents

Your auditor may also tour your facilities and assess physical assets to verify their existence in the financial documents. They will also compare your company’s experience with industry trends to ensure the data makes sense. This includes margins, inventory levels, and uncollected revenue.

 

Get Control of Your Internal Controls

Your auditor will not only be reviewing financial documents for your organization, but they are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. This review of internal controls ensures that your company has established effective procedures to reduce the chances of errors or fraud. 

 

Communicate With Your Auditor

Before your auditor arrives, prepare a pre-audit conversation to discuss any concerns about your audit and establish consistent expectations between you and your auditor. This will help minimize the impact surprises have on your audit. Topics that are important to discuss: 

  • Due dates for all PBC list items before the engagement begins.
  • Business changes that may affect your audit. For example, a new business venture or staff changes.
  • Any issues with your accounting policies.
  • New SEC audit requirements and regulations which may affect your organization. 
  • Recent accounting pronouncements which may affect your accounting/ financial reporting.
  • Timing of fieldwork and deliverables.
  • Performing interim testing where possible, especially as it relates to revenue.
  • Presentation preference of deliverables to those charged with governance.

 

Learn From Past SEC Audits

To avoid making the same mistakes, review the previous years’ audit notes and recommendations. If you have any concerns, discuss them with your auditor before your next audit.

 

Conclusion

The key takeaway is that you can never be too prepared for SEC audit requirements. With inherently higher standards, a public company audit is more stringent, meticulous, and demanding, with an accelerated deadline. You have the best chance for a successful and timely audit by making a plan before the engagement begins. 

As a PCAOB registered firm, Assurance Dimensions is comprised of professionals with over 50 years of combined accounting experience. We serve dozens of publicly traded companies and know how to plan and execute PCAOB audits to meet each client’s needs efficiently and timely. 

Contact us today to learn how we can help with your next SEC audit.