The mistakes we see year after year at new clients

At a first engagement with a new company we almost always find the same things. We write them down here because none of them is hard to fix if you know in advance that they are looked for.

The stock count held without the auditor

The company counts properly, on signed sheets, but without telling the auditor. Where inventory is material, the auditor has to attend the count. Not attending cannot be made good with documents afterwards, and the consequence shows in the report.

Slow-moving stock carried at cost

Goods sitting in the warehouse for three years, still carried at their original value. Slow-moving stock requires an impairment allowance, and the allowance reduces profit. That is why it is postponed, and why it builds up.

Old receivables with no allowance

Invoices uncollected for more than a year, still carried in full, on the basis that there is still hope. Hope is not an accounting criterion.

Fixed assets that no longer exist

Machinery physically scrapped and removed from the hall, but still on the register, still being depreciated. It comes to light at the first count we attend.

Prepayments used as a holding account

The prepayments account becomes the place for amounts nobody has decided about. It almost always contains costs of the current year that should have been expensed.

Undocumented related-party transactions

Services invoiced between companies owned by the same people, with no contract, no description of what was provided and no justification of the price. This is the most frequent reason a transfer pricing file ends up being prepared in a hurry, against a deadline from the tax authority.

Why we say this in advance

Because all six are cheaper to resolve before the audit than during it. An adjustment you make yourself, with the explanation at hand, is a line in the statements. The same adjustment found by the auditor at the end is a conversation about the opinion.