My company is being audited for the first time — how do I prepare?
This is the first time my company is going through an external audit — where do I even start?
A company's first external audit is fundamentally different from every annual audit that follows it, for one simple reason: there's no prior audit file for the auditor to build on. Opening balances have to be verified from scratch — even if the business has been running for years — which requires additional procedures that don't apply to repeat engagements. The international auditing standard for initial engagements, ISA 510, sets out exactly how auditors are expected to handle this.
What to prepare before the audit starts: a complete trial balance and general ledger for the full fiscal year, bank statements and their reconciliations, the fixed asset register with purchase documentation, active lease and financing contracts, the company's legal documents (trade license, memorandum of association), and any related-party transaction disclosures. If the company prepared unaudited internal financial statements in prior years, have those ready too — they help the auditor understand the accounting policies already in use.
One point that surprises most first-time companies: verifying opening balances isn't a formality. Without a prior audit to rely on, the auditor is required to verify opening figures through alternative procedures — reviewing supporting documents or recalculating certain balances manually — which can extend the audit timeline and require documents from years you assumed were no longer relevant.
Other common surprises for first-timers: the volume of questions and documents requested tends to be larger than expected, and the timeline usually runs into weeks rather than days. You'll also need to sign a management representation letter confirming the completeness and accuracy of the information provided, and the audit sometimes surfaces small classification errors that accumulated over several years and now need correcting in the current financial statements.
The process typically unfolds in stages: a planning and initial risk-assessment phase, an interim fieldwork visit for larger companies, a final fieldwork visit for detailed testing, a review of the draft report with management, and finally the signed report — accompanied by a management letter noting any internal control observations, if applicable.
At RASEEKH, we help companies facing their first audit get their file organized from the outset, and run a pre-audit review before the external auditor's work begins, so the process goes through with as few surprises as possible.