Preparing For An Audit

KEY 5S AUDIT POINTS AND AUDIT SHEET 1. Sort (Seiri) Identify Unnecessary Items: Separate items that are not required for current tasks. Red-tagging: Use red tags to mark and remove unnecessary items. Free Up Space: Clear clutter and create a clean workspace. Minimize Waste: Reduce excess inventory and non-essential materials. Simplify Work Areas: Ensure only essential tools and equipment are present. 2. Set in Order (Seiton) Organize Tools and Materials: Arrange items in a logical order based on usage frequency. Label Items Clearly: Use labels or color codes to make identification easier. Create Storage Locations: Assign specific places for each item to reduce searching. Visual Controls: Implement visual cues like shadow boards to guide proper storage. Optimize Workflow: Design the workspace for maximum efficiency and minimal movement. 3. Shine (Seiso) Regular Cleaning: Perform daily cleaning of the work environment, machines, and equipment. Inspect Equipment: Look for signs of wear, damage, or malfunction during cleaning. Maintain Cleanliness: Keep floors, tools, and surfaces tidy to avoid contamination. Eliminate Dirt and Debris: Ensure all work areas are free from dust and waste materials. Preventive Maintenance: Develop a routine for maintaining and cleaning machinery to avoid breakdowns. 4. Standardize (Seiketsu) Create SOPs (Standard Operating Procedures): Develop written procedures to standardize tasks. Implement Visual Cues: Use color codes, labels, and signs for consistency. Ensure Consistency: Make sure practices are uniform across shifts and teams. Documentation: Keep records of standards to track adherence. Training and Awareness: Ensure all employees are trained on standardized procedures. 5. Sustain (Shitsuke) Develop Discipline: Foster a culture of self-discipline to maintain 5S practices. Regular Audits: Conduct routine audits to ensure 5S principles are followed. Continuous Improvement: Encourage feedback and constant updates to the 5S system. Management Commitment: Ensure leadership supports and promotes 5S initiatives. Employee Engagement: Involve employees in maintaining and improving 5S practices.

Imagine having an assistant who knows all 665 pages of PCAOB guidelines by heart. That's exactly what Josh Poresky has achieved with RAG (Retrieval Augmented Generation)—and it's set to transform how we approach SOX audits. 🤖 In this bonus episode of The Accounting Podcast, Josh explains how RAG allows an AI like ChatGPT to focus on a specific set of documents. By feeding the 665-page PCAOB audit guidelines into a RAG program, he's created a tool that can answer complex audit questions in seconds. Now, you can pose specific scenarios to the bot—like whether a certain password control is an issue—and receive clear, concise answers with explanations. No more sifting through hundreds of pages or waiting for a manager's input! Josh demoed the app he's built with RAG. We explored how it handles a case where management didn't sign off on a user access review. The bot flagged it as a PCAOB issue but also considered whether a compensating control could mitigate it. The best part? RAG prevents the bot from "hallucinating" information that isn't in the documents. When asked about Tom Brady, it simply stated that he wasn't mentioned in the provided context. I'm excited to see how RAG and similar AI techniques can streamline complex accounting processes. It's a great example of how AI will help auditors work smarter, not harder. What other applications do you see for this technology in accounting and finance? Let me know in the comments 👇 #AI #Accounting #SOX #Audit

I became an auditor to discover financial truth. An audit is a mirror to a company's reality. I learned this early in my career. Transactions are not just debits and credits. They are about people and their choices. Audits surface what culture tries to hide. Late reconciliations, rushed reviews, brittle controls. Behind each symptom is a habit. If we treat an audit like a fight, we lose the lesson. If we treat it like an opportunity, the company grows. Here are my 7 tips to help you prepare for an audit: 1. Close cadence: ➞ Every task has an owner, a deadline, and reviewer. ➞ Have a clear plan so the audit starts on time. 2. Reconciliations: ➞ Bank, ledgers, intercompany, inventory, payroll.  ➞ Verify, explain, clear or escalate. 3. Evidence on first click: ➞ Policies, contracts, approvals, and calculations. ➞ Saved with transactions for easy access. 4. Cutoff discipline: ➞ Shipments, revenue, accruals, and provisions ➞ Completed promptly with clear timestamps. 5. Segregation of duties: ➞ Nobody does everything. ➞ Share tasks to lower collusion or fraud risks. 6. Open door policy: ➞ Staff can flag pressure or errors without fear. ➞ Encourage proactive disclosure. 7. Review within 72 hours: ➞ After close, capture errors and fix root causes. ➞ Prompt improvements save you time. When leaders do this, their audit costs reduce and trust increases. Run this ritual for your next audit and let me know how it goes. How do you keep better financial records? ------- ➕ Follow Jonathan Maharaj FCPA for finance‑leadership clarity. 🔄 Share this insight with a decision‑maker. 📰 Get deeper breakdowns in Financial Freedom, my free newsletter: https://lnkd.in/gYHdNYzj 📆 Ready to work together? Book your Clarity Session: https://lnkd.in/gyiqCWV2

Just wrapped a call with a fashion brand struggling to scale past 20L monthly revenue. Their agency kept pushing for higher budgets, but ROAS tanked every time. Sound familiar? Here's the exact audit process I used to fix this: 1. Creative Analysis Map every ad by: ↳ Theme (offer/UGC/lifestyle) ↳ Spend levels ↳ Purchase data ↳ AOV impact ↳ Revenue Per Click ↳ Product < > Content creation mapping 2. Product Performance Check which SKUs are: ↳ Eating budget with no returns ↳ Converting but underutilized ↳ Driving repeat purchases 3. Landing Page Experience Review ↳ Navigation clarity ↳ Product visibility ↳ Price transparency ↳ Mobile experience ↳ Checkout blockers 4. Campaign Structure Look for: ↳ Traffic campaigns (Not entirely red flag) ↳ Broad vs. Targeted performance ↳ Creative consolidation ↳ Creative testing velocity (High Velocity ≠ Good performance always) 5. Catalog Management Analyze: ↳ Low-spend SKUs (<2% of budget) ↳ High-CAC products ↳ Return rates by product ↳ Revenue contribution 6. Price Point Testing Track: ↳ Conversion rates by price tier ↳ Bundle performance ↳ Collection page results ↳ AOV impact Key insight: Most brands find 70% of their problems in steps 1 & 5. What's killing your ROAS right now?

SOPs Alone Do Not Create Compliance. Execution Does. One of the biggest misconceptions is: 👉 “We have SOPs, so we are compliant.” But auditors do not only check whether SOPs exist. They evaluate whether the system is actually working. They ask: ✔ Is the SOP being followed? ✔ Is the activity documented in real time? ✔ Is the record complete and traceable? ✔ Can batch, equipment, analyst, method, raw data, and result be connected? ✔ Is implementation consistent across people, shifts, batches, and sites? ✔ Is the process scientifically justified? ✔ Is the review system strong enough to detect gaps before an auditor does? In most organizations, SOPs, formats, checklists, and procedures are already available. Yet audit observations still occur because of gaps in: ❌ Implementation ❌ Documentation practices ❌ Traceability ❌ Review systems ❌ Training effectiveness ❌ Compliance discipline ❌ Data integrity culture Very often, the issue is not a missing SOP. It is because: • SOP says one thing, but actual practice follows another • Activity is performed, but not documented contemporaneously • Employees are trained, but execution varies person-to-person • Controlled documents exist, but are not reviewed properly • SOPs are not updated after process or system changes • Traceability between batch, equipment, analyst, and raw data is weak • GDP practices are ignored, overwriting, blank spaces, improper corrections, missing dates/signatures How to avoid such audit observations? ✅ Follow SOPs as written. If practice has changed, revise the SOP. ✅ Document activities in real time, accurately and completely. ✅ Strengthen traceability from sample to final decision. ✅ Verify training effectiveness, not only training completion. ✅ Review records with intent, not as a formality. ✅ Keep SOPs current after method, process, equipment, or system changes. ✅ Reinforce GDP discipline: no overwriting, no unexplained blanks, no backdating, no unsigned corrections. ✅ Monitor repeated issues as trends before they become deviations, OOT, OOS, or audit findings. ✅ Embed ALCOA+ in daily work, not only in training slides. Key Insight An SOP alone does not ensure compliance. Compliance comes from: Consistent Execution + Strong Documentation + Review Culture A strong quality system is not built only by writing procedures. It is built by proving that procedures are followed, records are reliable, and decisions are scientifically justified. The real audit question is not: “Do we have an SOP?” The real question is: “Can we prove that the SOP is followed correctly, consistently, and completely?” Document it right. Follow it right. Prove it right. #PharmaQuality #GMP #GDP #DataIntegrity #AuditReadiness #QualitySystems #Compliance #ALCOA #QA #QC #RegulatoryCompliance #SOP #CAPA

Audit Checklist Pre-Audit Preparation * Engagement letter signed * Understand client's business & industry * Review prior year's audit files & notes * Check legal & regulatory requirements (Companies Act, Income Tax, GST ,etc.) * Risk assessment plan Financial Records & Books * Trial balance reconciliation * Ledger scrutiny (sales, purchases, expenses, assets, liabilities) * Journal entries review (check unusual entries at year-end) * Cash book &. bank book verification * Compliance with accounting standards (ind AS/AS), Bank & Cash * Bank reconciliations for all accounts * Verify bank statements with books * Cash balance verfication (cash count, petty cash) * Review high -value/unusual cash transactions Fixed Assets * Verify Fixed asset register with books * Check additions/deletions during the year * Physical verification of assets * Depreciation calculation (Companies Act & Income Tax Act) * Review capital work-in-progress Inventory * Physical stock verification / reliance on stock reports * Reconcilation of stock records with financials * Valuation as per AS-2 (cost or NRV) * ldentify obsolete/slow-moving stock Debtors & Creditors * Debtors aging analysis * Balance confirmation from major debtors/creditors * Check doubtful debts & provisions * Review related party transactions *Creditors reconciliation &. overdue payments Revenue & Expenses * Cross-check sales invoices with GST returns * vouching of expenses (rent. salary, utilities, etc. * Verify TDS compliance on expenses * Cut-off testing (recorded in correct period) Statutory Compliance * GST returns vs. books reconcililation * TDS deducted & deposited timely * PF & ESI compliance * Income Tax advance tax/provisions * MCA flings (if applicable) Payroll & HR * Salary sheets & registers verification * Bonus, gratuity, leave encashment provisions * PF, ESI, Professional Tax compliance * Verify appointment letters & contracts Final Reporting * Draft audit report preparation * Notes to accounts & MRL (Management Representation Letter) * Report internal control weaknesses * Final sign-off

When's the last time you audited your clients? Most MSPs mistake paid invoices for healthy accounts. But some clients fuel growth while others quietly drain it. You should be grading your clients on: • Cultural fit • Strategic alignment • Communication quality • Revenue contribution • Profitability per account Then look deeper. → Do they see you as a partner or just a vendor → Do they take your recommendations seriously → Do they respect your process or fight every step If you're not sure, ask your team. They know which clients collaborate well and which ones drain time and morale. When you map it out, the patterns are obvious: • A clients are aligned, profitable, and grow with you • B clients are solid but need upgrades • C clients are high-effort but aren’t a lost cause yet • D clients resist change, erode margins, and don’t fit From there, decisions get simple. A clients define your ideal client profile. B and C clients need alignment conversations. D clients should be offboarded to protect your team That’s how you create room for clients who actually fit. Do this well and you unlock two things: 1. More income by upgrading and realigning accounts. 2. More time and capacity by removing bad-fit clients. Auditing your client base is one of the fastest ways to strengthen margin, reduce stress, and free up time. I built a full grading framework, scorecard, and profitability tracker to help MSPs do this properly. DM me the word ‘GRADING’ and I’ll send it over!

Most internal audit reports are thorough, detailed… and underutilized. Why? Because decision-makers don’t need more pages. They need clarity. This is where a high-level audit dashboard changes the game. A powerful one-page dashboard can: ✔ Highlight critical risks instantly ✔ Show what truly matters to the business ✔ Drive faster, better decisions ✔ Strengthen Audit Committee engagement ✔ Create accountability for action Frameworks like the Institute of Internal Auditors emphasize effective communication as a core pillar of Internal Audit. And in today’s fast-moving business environment, visual storytelling is no longer optional. From my experience, the real value of Internal Audit is not in identifying issues, it’s in ensuring they are understood, prioritized, and acted upon. A well-designed dashboard typically answers: 🔹 Where are the biggest risks? 🔹 What needs immediate attention? 🔹 Are issues recurring? 🔹 Who is accountable? 🔹 What is the business impact? When done right, it transforms Internal Audit from "a reporting function" to "a strategic decision enabler". One page. Clear insights. Real impact. #InternalAudit #RiskManagement #CorporateGovernance #AuditCommittee #DataVisualization #Leadership

Dear Accountants, External Audits Don’t Have to Be Stressful Let’s be honest, when the message goes out that external auditors are coming, tension rises across the organization. Finance teams get anxious. Management starts to worry. Everyone feels the pressure. But here’s the truth: Auditors aren’t just there to “find faults.” Their mission is to: ✅ Verify that your financial statements present a true and fair view ✅ Ensure compliance with accounting standards (IAS/IFRS) ✅ Assess the strength of internal controls and financial processes With the right mindset and preparation, audits can be smooth, insightful, and even a chance to grow. Here are some practical Tips to Prepare for External Audits (Especially for NGOs) 1.     Start Preparation Early. Don’t wait for the audit notice. Keep documentation and reconciliations up to date year-round. 2.    Ensure Financial Records Are Complete. Record all transactions, update bank reconciliations, and file every receipt and invoice properly. 3.    Review Grant Agreements and Donor Requirements.Understand each donor’s reporting rules and confirm that funds were used as agreed. 4.    Prepare Audit Schedules in Advance. Have schedules for assets, liabilities, income, and expenses ready and ensure they reconcile with your general ledger. 5.    Label and Organize Files Clearly. Whether digital or physical, clear labelling saves time and shows professionalism. 6.    Reconcile Inter-Project and Inter-Fund Balances.For multi-project NGOs, ensure all inter-project transactions are reconciled and supported. 7.    Review Internal Controls. Check that policies like approvals and segregation of duties are being followed and strengthen weak spots early. 8.   Work with Program Teams. Financial accountability isn’t just for finance. Align program reports with financial reports, especially for donor-funded activities. 9.    Hold a Pre-Audit Meeting. Review key audit areas, past findings, and unresolved issues. Preparation builds confidence. 10. Be Transparent and Cooperative. Provide information promptly, answer questions honestly, and avoid being defensive. 11.  Document Learnings and Follow Up. Review findings together, agree on corrective actions, and follow through. 12. Maintain Continuous Communication. Keep lines open between finance, management, and auditors before, during, and after the audit. External audits should not be feared, they are a chance to demonstrate accountability, improve systems, and build donor confidence. With good preparation and teamwork, the process can run smoothly and become a valuable learning experience for everyone involved. How does your organization prepare for external audits? Let’s share best practices and grow together.

Controlled Chaos: The Art and Discipline of Modern IAM Roadmaps If you have ever led an IAM team in any capacity, you would have been asked to create a clean roadmap. Yet after years of reviewing these maps, what’s promised and what’s get done are very different. Folks in IAM know that IAM is structurally chaotic. It’s downstream of every bold strategy slide, every new regulation, and every fresh threat actor earning street creds. My advise is to not pretend that the chaos will go away, rather embrace it and master the art of controlled chaos. For me, that means few foundational moves: Name the flood Put the noise on the table: digital initiatives, audit findings, SaaS sprawl, AI agents, legacy directories, and privilege debt. Chaos feels less political when everyone can see its sources. Design a control system, not a project list. Group work into a few stable streams: • Foundational plumbing • Risk & compliance • Business enablement • Strategic bets Give each stream 2–3 outcomes and KPIs, then plan in horizons (0–6, 6–18, 18–36 months) instead of pretending every dependency will behave. Wire in feedback loops by design Threat retros, audit cycles, and strategy shifts should move the roadmap, not derail it. If identity really is the control plane, it must be allowed to respond at the same speed as the environment it protects. IAM will never be neat. Don’t try to domesticate it into a static plan. Use it as an instrument of continuous change. We’re not shepherds out in a quiet pasture; we’re bull riders hanging on for 8 seconds at a time and still expected to smile for the team photo. One common anti‑pattern is using “chaos” as an excuse to duck accountability, instead of doing the hard work of bringing just enough order to it. #TheIdentityNavigator