Working With Auditors

By assisting your auditors in completing their jobs, your firm benefits as well. 1. Examine your own perceptions. "Managers tend to dismiss auditors as bean counters," says Paul Danos, dean of Amos Tuck School of Business Administration at Dartmouth College in Hanover, N.H. "However, auditors have seen many businesses and know how they survive, grow, and prosper." In addition, many accounting firms have organized their audit staffs along industry lines in order to provide a higher level of expertise, says Gary H. Stein, business assurance partner with accounting firm Coopers & Lybrand. 2. Review the make-up of the audit committee. The most effective ones are composed of outside, independent directors who can freely question management, says K. Raghunandan, associate professor of accounting at the University of Massachusetts at North Dartmouth. Members also should understand financial-statement analysis and preparation. 3. Keep some contact year-round. This allows the auditors to remain current with changes in your corporate structure that will impact the audit. "This is different from the old model, where we run the numbers, and you check em over," says Phillip Billiam, director of corporate reporting with Minneapolis-based Honeywell Inc. 4. Allow unmonitored communication between the internal audit department and the external auditors. Like the external auditors, internal auditors need a degree of independence, says Dorothy McMullen, associate professor of accounting at Rider University in Lawrenceville, N.J. Allowing the two to communicate freely can help catch inefficient behavior.