A corporate audit can be a stressful event for any business owner or finance team, especially if it’s your first time undergoing one. However, with proper preparation, an audit doesn’t have to be intimidating. In fact, it can be an opportunity to improve your company’s financial practices, internal controls, and regulatory compliance.
In this guide, we’ll walk you through the essential steps to prepare for a corporate audit, from understanding the purpose of an audit to getting your documents and team ready. Whether you’re preparing for a statutory audit or an internal review, these steps will help you face the process with confidence.
1. Understand the Purpose of the Audit
The first step in preparing for a corporate audit is understanding why it is happening. In Singapore, audits are typically required under the Companies Act for companies with annual revenue above S$10 million, total assets above S$10 million, or more than 50 employees.
There are different types of audits:
- Statutory Audit: Required by law, focusing on compliance with accounting standards and financial reporting accuracy.
- Internal Audit: Typically voluntary, aiming to evaluate internal controls and operational efficiency.
- Special Purpose Audit: Requested by shareholders, investors, or regulators to review specific financial components.
Knowing the scope of the audit helps you focus your preparation efforts appropriately.
2. Appoint a Point of Contact
Assign a person or team to liaise with the auditor. This could be your Finance Manager, CFO, or a senior accountant. Having a designated point of contact ensures smooth communication and faster turnaround times when auditors request specific documents or clarifications.
3. Review Prior Audit Reports
If your business has been audited before, reviewing previous audit reports is a smart move. Look for:
- Prior year audit findings or recommendations
- Any unresolved issues
- Areas of concern that were highlighted
This information can guide your preparations and help you avoid repeating past mistakes.
4. Prepare Your Financial Statements
Your financial statements are the foundation of the audit. These include:
- Statement of Financial Position (Balance Sheet)
- Profit & Loss Statement
- Cash Flow Statement
- Statement of Changes in Equity
- Notes to the Financial Statements
Make sure these documents are prepared according to Singapore Financial Reporting Standards (SFRS). It is advisable to work with your external accountant or corporate service provider to ensure compliance.
5. Reconcile Your Accounts
Before the auditor steps in, it’s important to reconcile all accounts:
- Bank Reconciliation: Match your bank statements with your accounting records.
- Accounts Receivable & Payable: Confirm outstanding invoices and amounts due to suppliers.
- Inventory Records: Conduct physical stock counts and ensure they match book entries.
- Fixed Assets Register: Verify asset existence and depreciation calculations.
Reconciled accounts reduce discrepancies during the audit, making the process smoother and faster.
6. Organise Your Supporting Documents
Auditors will request documentation to verify transactions and balances. These include:
- Invoices and receipts
- Bank statements
- Tax filings (e.g. GST returns, Form C-S/C)
- Payroll records
- Contracts and agreements
- Loan documentation
- Board meeting minutes
Organise these documents by category and period. If you use cloud accounting software, ensure your system allows easy extraction of these reports.
7. Ensure Compliance with Tax and Regulatory Filings
Auditors may check for compliance with tax and regulatory obligations. Ensure:
- Corporate tax returns (Form C-S/C) have been filed
- GST returns are accurate and timely
- CPF contributions are paid correctly and on time
- Annual returns are filed with ACRA
Non-compliance can trigger audit qualifications or worse—penalties from regulatory bodies.
8. Evaluate Internal Controls
Strong internal controls protect your business from fraud and financial mismanagement. Review:
- Approval workflows for expenses and purchases
- Segregation of duties (e.g., different staff for payment approval and disbursement)
- Access controls for accounting software
- Proper documentation of financial procedures
If you detect weaknesses, fix them and document the improvements made. This demonstrates a proactive attitude toward corporate governance.
9. Communicate With Your Team
Inform relevant departments that an audit will be taking place. Department heads in HR, procurement, sales, and operations may need to provide information or documentation. Set expectations for timelines and cooperation.
Having your team aligned ensures you can respond to auditor queries promptly, reducing delays.
10. Conduct a Pre-Audit Review
Before the actual audit begins, conduct an internal review or mini-audit. You can:
- Check for inconsistencies or errors in financial reports
- Validate supporting documentation for major transactions
- Review general ledger entries
- Reassess year-end journal entries and accruals
Engaging an external accountant to do this pre-audit review can give you a neutral perspective and help you fix issues before the auditor finds them.
11. Set Up a Work Space for Auditors
Auditors often conduct fieldwork on-site. Provide them with a comfortable space with access to:
- Internet
- Power outlets
- Relevant documents or systems
- A designated staff member to assist them
Being hospitable and cooperative improves the working relationship and reflects positively on your organisation.
12. Address Auditor Queries Promptly
During the audit, auditors may have follow-up questions or request clarification on transactions. Respond promptly and honestly. If you’re unsure about something, it’s okay to say so—but take the initiative to find the answer.
Transparency builds trust and keeps the process moving.
13. Learn from the Audit Report
Once the audit is completed, you’ll receive an audit report. The report may be:
- Unqualified (Clean): Financial statements are fairly presented.
- Qualified: There are some reservations about parts of the financial statements.
- Adverse: Major misstatements exist.
- Disclaimer of Opinion: Auditor couldn’t obtain enough information to form an opinion.
Take time to review the findings and implement recommended improvements. A good audit should not just be a compliance checklist—it’s a chance to make your business more efficient, transparent, and resilient.
Final Thoughts
Preparation is the key to a successful corporate audit. When you view the audit process as a routine health check for your company rather than a threat, it becomes an opportunity to build credibility with stakeholders, strengthen internal processes, and ensure long-term success.
If you’re unsure how to get started, consider engaging a professional corporate services provider or audit-prep consultant to guide you. The time and effort you invest upfront will save you stress and surprises during the actual audit.