There is a moment in an audit of the financial statements that is unlike any other. The moment in which the auditor asks a simple question and no one in the room can answer it. Not because the information does not exist somewhere. But because the person who knows it is no longer there.
I am writing this article out of a situation I am living through right now. An audit spanning three years has to be carried out without the people who made the material postings during that period.
Why auditors ask questions that no one can answer
Auditors are expert third parties who are legally obliged to confirm the accuracy of financial statements. A posting of 2.3 million euros in a provision is a figure. Whether that figure is correct depends on whether the valuation assumptions behind it are correct. All of these are questions that cannot be answered from the figure itself. They require context. And context is tied to people.
What happens when auditors receive no answers
The first reaction is a follow-up enquiry. The second reaction is increased audit depth in the affected area. The third reaction, if even the increased audit depth yields no satisfactory results, is a formal objection. Each of these escalation stages costs time and money.
How to communicate with auditors about reconstructions
The wrong strategy is to feign certainty where none exists. An auditor who senses that an explanation is based not on direct knowledge but on speculation loses confidence in all further explanations.
The right strategy is structured transparency: I can tell you what this posting is and which accounts it touches. I derived the specific valuation assumption behind it from the contract dated the twelfth of March 2023, which I am attaching. I cannot directly evidence the approval of this valuation, but the email record makes clear that the CFO at the time was aware of the valuation logic and had no objections.
Which tools are available in SAP for the reconstruction
Transaction code FB03 for accounting documents. FAGLL03 for G/L account line items. FBL1N and FBL5N for vendor and customer line items. FAGLB03 for G/L account balances across several periods. The SAP user log for user activities.
What structured documentation prevents in practice
A structured closing documentation for every monthly and annual closing, produced in real time during the closing process, not afterwards. A knowledge-transfer obligation for all finance functions. A structured handover process when a person leaves the finance organisation. Not a briefing of the successor in the final week. At least four weeks of structured handover.
What I bring to the table
I am Nicole Vekonj, Interim Manager Finance & Controlling. I support complex audit situations operationally, with deep SAP expertise and with the experience of what works in audit situations.
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