Kind of questions for auditor the board should be asking

Thu, Apr 23, 2015

By LaDonna Sinning
Q: The board of directors that I serve on receives various communications from our external
auditors every year and meets with them annually. What should I be looking for in those
communications?
A: There are several things you should consider with regards to your interaction with the external
audit firm. The primary one is to make sure you have a firm understanding of what services,
exactly, they are providing. Ask about them about those services, their scope and anything
excluded from the audit.
Q: I believe I have a strong understanding of what they are doing for us, but Im not sure what I
should be asking them when we meet in person each year.
A: First of all, be sure to listen carefully to what they present to you. Their professional standards
require that they communicate to you any significant deficiencies or material weaknesses that they
identify as well as disagreements with management and any adjusting entries that were needed to
correct the financial records as a result of their audit. Be careful about discounting what they have
to say as, generally speaking, if the auditors present an issue to the board of directors it is only
because they believe you should know about it and take some action to address it.
Q: What are some questions that we board members should ask of them?
A: Here are a few key questions that will help you benefit from the audit and receive added value
from their work:
n. What do they think about the competency of the organizations accounting and finance
personnel? The external auditors work with a large number of organizations each year and have a
unique perspective on the strengths and weaknesses of your people.
n. Where do they see opportunities for improvement in your internal controls? Remember, they
only tell you about significant deficiencies. There may be other areas where controls could be
improved.
n. What do they believe is the highest financial risk to your organization? This question will help you
understand how well your auditor understands your industry and it gives you the opportunity to
gain additional insights from an outside professional.
n. What would they recommend you do to increase efficiencies in your organization? Again, your
external auditors work with a number of organizations each year and can share their insights with
you.
n. Do they see any way for you to reduce borrowing costs? The auditors spent significant time
reviewing your debt and should have some idea as to whether your lending costs are in line with
that of other similar organizations.
n. Finally, dont forget to ask them what amounts they believe are key numbers on your financial
statements, then follow through by asking them to explain those numbers and why they believe
they are important for managing your organization.
LaDonna Sinning is a Certified Public Accountant, Certified Fraud Examiner and partner at Arledge
and Associates, PC, an Edmond-based accounting firm. Arledge & Associates, PC is a recognized
leader in the accounting industry offering practical solutions in the areas of tax planning, auditing,
consulting, accounting advisory services and client accounting. -