Early preparation critical for financial reporting season this year
Finance team members should start preparing early for audit season, with many audit teams facing resourcing challenges and scope creep, says HLB Mann Judd.
With the end of the financial year fast approaching, finance teams should start preparing for the most challenging aspects of their financial reporting to prevent delays from unexpected issues, says HLB Mann Judd partner Norman Neill.
Neill said many accountants can underestimate the time taken to prepare financial statements and supporting documents for an audit or resolve accounting issues.
“The key may be to start earlier and set realistic timetables to better grasp any accounting challenges that may affect an audit,” Neill said.
“Accountants should identify early any challenges or problems that need to be discussed specifically with the auditors or require external assistance early on.”
Neill warned that many auditors continue to experience resourcing challenges as well as elevated levels of ‘scope creep’ where they are asked to help with the application of accounting standards.
“This potentially increases the risk of an auditor’s independence, which can impact on the quality of an audit and therefore lead to significant time and cost impacts,” Neill said.
Certain challenges should be resolved well before a final audit visit, such as determining share-based payments, R&D claims and acquisitions.
"This alleviates pressure from the busier months of August and September. The management of the board’s expectations may also be necessary,” he said.
“Whilst acknowledging things do not always go to plan, the impact of missing timetables does have a flow on effect to audit resourcing, flexibility and costs.”
The firm said it is critical that management teams drive the financial reporting process, allowing sufficient time for the identification of issues, preparation of reports, review by the board and the overall audit process.
“It’s clear that all businesses are facing challenges on a number of fronts. However, to ensure that the upcoming financial reporting season is as smooth and efficient as possible, additional early preparation will go a long way to ensure that you come out of the end of season on top of the ladder,” Neill said.
Neill said the fact there have been no significant changes to accounting standards for the 2023–24 year would ease pressure slightly for finance teams.
“It is expected that ASIC will continue its focus on corporate disclosures regarding a company’s operations, asset values and impairment, provisions and events occurring after the balance sheet date but before the completion of the audit report,” he said.
In its recent update on financial reporting and audit focus areas, ASIC also stressed that directors are primarily responsible for the quality of the financial report.
“This includes ensuring that management produces quality and timely financial information for audit, supported by robust position papers with appropriate analysis and conclusions referencing relevant accounting standards,” the corporate regulator said.
“Companies must have appropriate processes, records and analysis to support information in the financial report.”
ASIC has flagged large proprietary companies that were previously grandfathered from lodging financial reports as a particular focus area for the 30 June 2024 period.
“This is the second year that large proprietary companies, which were previously exempt, are required to lodge audited financial reports with ASIC. Financial reports from these entities are now included in ASIC’s financial reporting and audit surveillance program,” ASIC said.
