June 11, 2025

Maximizing Audits: Key Elements for Efficient and Successful Financial Assessments

By Parisa Mansoori

Audits are essential for businesses. Audited financial statements provide stakeholders with an impartial and objective evaluation of a company’s financial position, performance, and internal controls. This assessment reassures shareholders, investors, creditors and other interested parties relying on it for informed decision making. But for as much utility and usefulness as an audit provides to stakeholders, the process of undergoing an audit can be intimidating, particularly for first-time auditees.

Preparing to be audited requires resources, both human and capital. And it is hard to know exactly where to focus those resources, since auditors cannot give their clients the answer key regarding which accounts or transactions will be included in the audit scope. Nor can they assist them in cleaning up or validating their accounts before the audit.

To maximize its efforts in preparing for an audit, a company should focus on a few key elements:

  • Developing an internal controls framework, including sound accounting procedures;
  • Periodically reviewing transaction details and validating account balances;
  • Ensuring financial statements are consistent with industry and regulatory standards for presentation and disclosures.

The cornerstone of every financial audit is an Internal Controls Review. Internal controls are the policies and procedures put in place to safeguard a company’s assets from fraud or misappropriation, and to ensure reliable financial reporting, operational effectiveness and compliance with applicable laws and regulations. Some examples of internal controls include periodic account reconciliations, authorization/approval limits, reviewing supporting documentation, and segregation of duties.

The Committee of Sponsoring Organizations (COSO) Cube illustrates the key components and elements of an Internal Controls Framework, which starts with the tone at the top, evaluates risks relative to the business and industry, and develops controls and monitoring activities to mitigate the key risks impacting the financial statements.

Auditors assess the design and effectiveness of internal controls to identify weaknesses or deficiencies in the control structure that might expose the company’s assets to undue risk and evaluate whether existing controls are functioning as intended.

In preparing for the Internal Controls Review portion of the audit, a company should consider the risk of misstatement or misappropriation related to its key processes and functions, and design and document policies and procedures to mitigate such risks. Then, once processes and procedures are in place, a company should periodically assess whether such controls are functioning and remain relevant, considering any recent changes in the company’s operating environment.

While a seemingly perpetual process, creating a well-designed internal control structure will not only give auditors confidence that financial balances are accurate and reliable, but it can also elevate a company’s risk oversight abilities and overall corporate governance.

The keystone of every audit is the review of financial transactions, account balances, and supporting documentation. Behind every financial statement line item, there are hundreds, maybe thousands, of individual transactions. The transactions can be simple, complex, correcting, reversing, or adjusting. And they may be related to anything from a regular sales transaction, a prepaid expense transaction, depreciation expense, or anything in between.

Auditors perform detailed examinations of significant account balances, reviewing the underlying transactions and supporting documentation, such as invoices, contracts and schedules to verify the account’s accuracy and validity.

Maintaining well-organized and easily accessible supporting documentation will allow the auditors to review and validate information more efficiently, potentially reducing the need for extensive document retrieval and follow-up queries to company personnel.

Leveraging the features of an Enterprise Resource Planning (ERP) system can be a great resource for maintaining easily traceable and verifiable accounting records. Many ERP systems feature access controls, audit trails and workflow management tools that allow companies to not only record the transaction line items, but to also record memos about the transaction, attach copies of supporting documentation and have structured workflows.

If maintaining documentation outside of your ERP system is necessary, consider naming conventions and filing systems that make retrieving and accessing files simple.

The capstone of every audit is a review of financial statement presentation and disclosures. Because stakeholders utilize financial statements to make informed decisions, it is critical that financial statements, and their accompanying disclosures, accurately and clearly present a company’s financial position. This includes disclosure of accounting principles, relevant regulatory standards, and significant potential risks and liabilities that might impact the future viability or earnings of the company.

Auditors review the presentation of the financial statements as well as accompanying footnotes and disclosures to ensure that they are presented clearly, consistently and per relevant accounting standards and disclosure requirements.

Understanding the accounting standards and disclosures relevant to the industry in which it operates is critical in preparing for a financial statement presentation and disclosures review. Companies should ensure that their financial statements are presented clearly and transparently and include essential information required by regulatory and accounting oversight entities and other information pertinent to their stakeholders.

While developing a solid internal reporting structure, keeping detailed transaction records, and developing comprehensive financial statements require additional effort and resources upfront, the payback over the long term is worth the effort! The time and effort invested toward these tasks will not only directly contribute to a more successful and efficient audit process, but more importantly, it will enhance the company’s overall financial management and credibility, ultimately benefiting all stakeholders involved.

About the Author: Parisa Mansoori is a Senior Manager at Arcus Advisors. Contact her at parisa.mansoori@arcusadvisors.com.

Related CPE Webcasts:

  • Was It Fraud or Just Poor Audit Quality?
  • Performance Auditing Made Easy
  • Measuring Audit Risks
  • The Single Audit from Beginning to End Update

Go to the Education area of TXCPA's website to learn more and register.

 

Thanks to the Sponsors of Today's CPA Magazine

This content was made possible by the sponsors of this issue of Today's CPA Magazine:

Accounting Biz Brokers

Accounting Practice Sales

CPA Charge

Goodman Financial

Poe Group Advisors

SafeSend

 

 

 

  • Meet TXCPA’s 2025-2026 Chair Billy Kelley

    Billy Kelley, CPA and managing partner at Dutton, Harris & Co, is the 2025-2026 Chair of TXCPA. With a background in public accounting, industry and entrepreneurship, he is passionate about leadership, mentorship and strengthening the CPA pipeline.
    View Article
  • CPE: What to Know About Profits Interest

    Profits interest is a form of partnership ownership that offers recipients a share of future profits without a capital contribution. While offering strategic advantages, profits-interest contracts involve complex tax and accounting considerations and remain subject to potential regulatory changes.
    View Article
    CPE Creditable
  • What’s Happening Around Texas - July-August 2025

    Members in Austin held a happy hour to wrap up tax season and Houston members volunteered at the Botanic Gardens. Permian Basin members teamed up with UTPB students for a city cleanup. Southeast Texas gathered for a Spring Meeting and Victoria enjoyed a festive Member Appreciation Event.
    View Article
  • 2025-2026 TXCPA Chapter Officers

    Introducing TXCPA’s 2025-2026 chapter leaders – a dynamic group of professionals ready to elevate the accounting profession. With passion, purpose and a bold vision, they’ll guide our chapters forward and help shape the future of TXCPA across the state.
    View Article
  • Optimizing Auditor Precision: Addressing Biases in Large Language Model Technologies

    Large Language Models (LLMs) are transforming accounting and auditing by improving efficiency, uncovering financial trends and analyzing unstructured data, but using them also introduces risks, especially biases from training data and algorithms. Professionals are encouraged to stay educated on AI trends to use LLMs effectively.
    View Article
  • Meet the Chair

    In his first message as TXCPA Chair, Billy Kelley discusses his passion for TXCPA and goals for the year. He also reflects on the recent Annual Meeting in Galveston and encourages member engagement.
    View Article
  • TXCPA’s Successes and Key Issues from the 89th Texas Legislative Session

    TXCPA had a highly successful 89th Legislative Session, securing two major wins. Senate Bill 262 creates an additional pathway to CPA licensure and Senate Bill 522 modernizes CPA practice mobility. These achievements strengthen the CPA pipeline and protect the public.
    View Article
  • How ESG Can Create Value for Your Business

    The SEC has introduced climate-related disclosure rules to improve transparency for investors, sparking both support and criticism. This article highlights how businesses can view Environmental, Social and Governance (ESG) not just as a compliance issue but as a value-creating strategy.
    View Article
  • Increasing Your Marketing Prowess: How CPAs Can Market with Confidence

    This article discusses common misconceptions that CPAs have about marketing and how even the most successful innovators have marketed their ideas effectively. It offers practical tips for CPAs to market themselves authentically by focusing on excellent client service, continuously improving their skills and committing to execution.
    View Article
  • Take Note

    In this edition of Take Note: Accounting Opportunities Month; TXCPA Leadership Nominations; Accountants Confidential Assistance Network (ACAN); CGMA® Designation for Management Accountants; TXCPA’s 2025 CPE Programs; Accounting Excellence Awards Presented
    View Article
  • Classifieds

    The classified ad section features listings for practice sales, firm buyers and specialized services. Whether you're expanding, selling or exploring niche opportunities, these ads connect you to valuable prospects and resources.
    View Article

CHAIR
Mohan Kuruvilla, Ph.D., CPA

PRESIDENT/CEO
Jodi Ann Ray, CAE, CCE, IOM

CHIEF OPERATING OFFICER
Melinda Bentley, CAE

EDITORIAL BOARD CHAIR
Jennifer Johnson, CPA

MANAGER, MARKETING AND COMMUNICATIONS
Peggy Foley
pfoley@tx.cpa

MANAGING EDITOR
DeLynn Deakins
ddeakins@tx.cpa

COLUMN EDITOR
Don Carpenter, MSAcc/CPA

DIGITAL MARKETING SPECIALIST
Wayne Hardin, CDMP, PCM®

CLASSIFIEDS
DeLynn Deakins

Texas Society of CPAs
14131 Midway Rd., Suite 850
Addison, TX 75001
972-687-8550
ddeakins@tx.cpa

 

Editorial Board
Derrick Bonyuet-Lee, CPA-Austin;
Aaron Borden, CPA-Dallas;
Don Carpenter, CPA-Central Texas;
Rhonda Fronk, CPA-Houston;
Aaron Harris, CPA-Dallas;
Baria Jaroudi, CPA-Houston;
Elle Kathryn Johnson, CPA-Houston;
Jennifer Johnson, CPA-Dallas;
Lucas LaChance, CPA-Dallas, CIA;
Nicholas Larson, CPA-Fort Worth;
Anne-Marie Lelkes, CPA-Corpus Christi;
Bryan Morgan, Jr, CPA-Austin;
Stephanie Morgan, CPA-East Texas;
Kamala Raghavan, CPA-Houston;
Amber Louise Rourke, CPA-Brazos Valley;
Shilpa Boggram Sathyamurthy, CPA-Houston, CA
Nikki Lee Shoemaker, CPA-East Texas, CGMA;
Natasha Winn, CPA-Houston.

CONTRIBUTORS
Melinda Bentley; Kenneth Besserman; Kristie Estrada; Holly McCauley; Craig Nauta; Kari Owen; John Ross; Lani Shepherd; April Twaddle; Patty Wyatt