In attempting to reduce overhead expense, management often overlooks an area where there can be significant savings--the cost of the annual audit. They assume this expense is uncontrollable. Not true! You can control your audit fees substantially by following this simple, straightforward formula:

A prerequisite to a successful audit assumes you have taken the time and effort to select auditors that can not only meets your needs and expectations, but whom you respect, trust and enjoy working with. The end result will be a relationship that is effective, mutually beneficial and long-term.

Here are ten proven action steps companies have used to control their audit expense:

1. Recognize from the outset that managing the annual audit is your job, not the responsibility of the auditors.
2. Schedule a pre-audit planning session with your auditors three months prior to the start of the audit. Determine and formalize in writing the responsibilities of each at this session. Set an achievable time schedule for the completion of each task.
3. Require an engagement letter from your accounting firm confirming their understanding of their role. Tell them to provide you with an estimate of their fees (preferably a range) and an estimate of their expenses. If you are prepared for the audit, your fee should be at the lower end of the range. If you are not, the auditors will spend more time on the audit and have less time available to provide management comments or other business analyses that provide the audit's value.
4. Conduct a "mini-audit" internally before the auditors start. Using work papers from prior years, reconcile the various accounts and prepare the mandatory reports in the required formats.
5. Have your most senior accounting staff person draft the footnotes and other disclosure documents. If you don't have a qualified person on staff, hire a temporary contract accountant for this task and the mini-audit.
6. Get the auditors to provide you a list of the accounting records, work papers and documents they will need. Have them available when needed.
7. Use your staff for photocopying and filing chores, not the higher cost audit staff. Again, hire temporary help, if necessary.
8. Alert the auditors to operational changes that may affect their work. Periodic review meetings during the process are very productive. During the review meetings the auditors can give you continual estimates of the final fee.
9. Provide the auditors with a comfortable and efficient work area-preferably separate from your own staff work areas. An adequate size conference room usually works well.
10. Ask the auditors for their recommendations for installing or improving your accounting controls and procedures-often referred to as the management letter.

Planning is a critical a factor in this formula for a successful audit. A poorly planned audit will be an expensive audit because it will require additional staff and time to complete with costs out of your control.

Teamwork is also essential. Confrontation often replaces cooperation during the heat of the audit. Your staff has their regular jobs to perform, yet they still must find time to assist the audit team. The auditors want to do their job efficiently as well. Monitor the situation frequently. Tell the auditors your concerns when your plan isn't working; listen responsively to their issues.

Finally, hold your accounting firm to high standards. Insist that the staff assigned to your audit be experienced; assign your most qualified people to work with them. Demand prompt, efficient service from your auditors; reciprocate in kind. Pay for their services promptly. Accounting firms respond to requests for services in the same manner in which you respond to your customers' requests-those that pay promptly receive the best service.

Implementing these ideas into action steps will help you achieve your goal of completing your annual audit, successfully, with costs under your control.