External audit plays an important role in maintaining and promoting confidence and integrity in Australia’s business entities.
Boards oversee audit readiness by ensuring management maintains effective financial reporting processes, internal controls, supporting documentation and clear accountability for audit deliverables.
External audits are most efficient when preparation is embedded throughout the year. Although many medium-to-large Australian businesses have been audited before, each cycle can introduce new accounting requirements, different audit teams and previously unidentified documentation gaps. Businesses that maintain audit-ready records, responsibilities and supporting analysis are better placed to meet their reporting obligations and complete the audit with fewer delays.
The following considerations address the areas that most often affect audit efficiency and the quality of information provided to the external auditor.
- Create audit documentation as part of the month end and year end close process. Use a secure shared platform to identify each item, its location, its owner and its status so information can be provided consistently to the audit team and relevant internal stakeholders.
- An audit touches more than finance: HR, IT and procurement records all get pulled in.
- Maintain a current register of prior-year audit adjustments, management letter findings, agreed actions, responsible owners, due dates and remediation status. Significant or overdue matters should be reported through the appropriate governance process, including to the directors or those charged with governance where relevant.
- Judgement calls (provisions, valuations, revenue recognition) need documented reasoning under AASB standards.
- Tax positions, including ATO correspondence, get tested alongside the financial statements.
Centralise audit documentation and clarify ownership
As a business grows, its records often become dispersed across the accounting platform, project management tools, shared drives, email threads and departmental spreadsheets. Before the audit begins, prepare a central audit request register that identifies each required document, where it is stored, who owns it and when it will be available. This reduces time spent locating evidence and clarifying responsibilities once audit requests are issued.
Engage relevant teams across the business
Auditors ask questions that reach well outside the finance function: procurement approvals, HR records for payroll testing, IT access logs for systems controls, and operational data for revenue recognition. Businesses that treat an audit as a finance-only exercise often find themselves chasing other departments for information at short notice, which slows everything down and puts pressure on relationships that didn’t need to be strained.
Address prior-year adjustments and audit findings
If last year’s audit resulted in adjusting entries, management letter points, or agreed follow-up actions, auditors will expect to see what’s changed. It’s common for these items to sit in an email inbox rather than a tracked list, which means they resurface as a surprise rather than a closed loop. A running log of prior findings, updated as they’re actioned, turns this into a five-minute conversation instead of a rediscovery exercise.
Estimates and judgement decisions need formal documentation
Provisions, asset valuations, revenue recognition on complex contracts and impairment assessments involve significant judgement. Auditors need evidence supporting both the amount recognised and the methodology applied, including relevant assumptions, source data, sensitivity analysis and management approvals where applicable. Recording that reasoning when decisions are made produces a more reliable audit trail than attempting to reconstruct it during fieldwork.
System changes increase audit scrutiny
A new accounting system, payroll provider or ERP migration during the year can increase audit scrutiny over the completeness and accuracy of transferred data. Auditors will need to understand what was migrated, how opening and closing balances were reconciled, which exceptions were identified and what controls operated before, during and after the transition. These records should be retained as part of the implementation process rather than reconstructed months later for the audit.
Align tax positions with the financial statements
An external audit doesn’t sit in isolation from a business’s tax position. Auditors will look at how deferred tax, provisions for tax disputes, and any recent ATO correspondence are reflected in the accounts. Businesses that have kept their tax file up to date year-round, rather than reconciling it against the accounts only at audit time, avoid a category of question that otherwise takes real effort to answer well under time pressure.
Engage key stakeholders from the outset
Audit requests often land with whoever is available, rather than whoever actually processed the transaction or made the judgement call. Nominating a coordinator who knows who owns what, and can route questions to the right person quickly, keeps the process moving and avoids answers that are technically correct but missing the context the auditor actually needs.
Pre-audit checklist
- Confirm where all supporting documentation is stored and who can access it
- Circulate the audit timeline to every department likely to be asked for information, not just finance
- Review prior-year management letter points and note what’s been actioned
- Document the reasoning behind key estimates and judgement calls as they’re made
- Prepare a summary of any system or process changes made during the year
- Reconcile the tax position against the accounts ahead of time, not during the audit
- Appoint a single point of contact to coordinate requests internally
For each item, assign an owner, due date and review status so that outstanding matters can be identified and escalated before fieldwork begins.
These steps do not determine the audit outcome, but they materially affect the efficiency of the process. Businesses that maintain audit-ready records and resolve issues throughout the year generally face fewer last-minute requests, avoid unnecessary delays and give management more time to address significant audit matters.
Frequently asked questions
What triggers a mandatory audit for a business in Australia?
Under the Corporations Act 2001, a proprietary company classified as large is generally required to prepare and lodge audited financial statements unless a specific exemption or relief applies. A proprietary company is generally classified as large when it meets at least two of the three applicable thresholds relating to consolidated revenue, consolidated gross assets and employees. Public companies and some regulated entities, including certain Australian financial services licensees, may have separate financial reporting and audit obligations.
How far in advance should a medium-large business start preparing?
Embed audit preparation throughout the year by documenting significant judgements, monitoring prior findings and addressing information gaps as they arise. Four to six weeks before fieldwork, confirm that documentation is complete, responsibilities are assigned and outstanding matters are escalated. Use the audit planning meeting to agree the timetable, deliverables, key risks and communication protocols.
What’s the difference between an external audit and an ATO review?
An external audit tests whether the financial statements comply with AASB standards and give a true and fair view and is generally required under the Corporations Act or a company’s constitution. An ATO review or audit tests compliance with tax law specifically. The two are separate processes, but they overlap in practice: an auditor will look at how tax positions and ATO correspondence are reflected in the accounts.
Who coordinates an external audit inside a medium-large business?
The finance function will usually lead the external audit, supported by a nominated coordinator who maintains the request list, monitors deadlines, follows up outstanding items and directs technical questions to the appropriate people across HR, IT, procurement and operations. A single coordination point improves consistency without preventing auditors from speaking directly with the relevant process owners when necessary.
Major business decisions depend on reliable financial information. We deliver an audit experience tailored to your industry and led by auditors who combine strong technical accounting expertise with technology-enabled processes. Our objective perspective provides comprehensive and efficient audit outcomes—regardless of your organisation’s size, operations or location—while highlighting potential risks and offering insights into performance relative to industry peers.
Audit readiness does not have to rest entirely with your internal team. Economos works with medium-to-large businesses throughout the year to strengthen supporting documentation, record significant judgements and reconcile tax positions before audit fieldwork begins. See how we help here, or contact our team to discuss your organisation’s readiness for its next external audit.