How a Bookkeeping Firm Should Work with an Audit Firm to Assist Their Clients
In today’s highly regulated and compliance-driven business environment, companies in Singapore must maintain proper financial records and comply with statutory requirements. Two key service providers—bookkeeping firms and audit firms—play crucial roles in ensuring businesses stay financially healthy and compliant. While their functions are distinct, there is strong synergy between them when they work together to support their clients.
For business owners, especially small and medium-sized enterprises (SMEs), having a seamless relationship between their bookkeeper and auditor can lead to more efficient audits, better financial insights, and improved compliance. In this article, we explore how a bookkeeping firm should collaborate with an audit firm to best assist their clients.
1. Understanding the Roles: Bookkeeper vs. Auditor
Before diving into the collaboration process, it’s important to understand the core roles of each party:
- Bookkeeping Firm: Responsible for maintaining accurate and up-to-date financial records. This includes recording transactions, reconciling bank accounts, generating monthly reports, and preparing financial statements for internal use.
- Audit Firm: An independent entity that examines the financial statements prepared by the company (or their bookkeeper) to ensure they fairly present the company’s financial position and comply with accounting standards like the Singapore Financial Reporting Standards (SFRS).
While the bookkeeper is involved in day-to-day financial recording, the auditor reviews the accuracy and integrity of the financial reports. These roles are complementary and should align closely to avoid duplication of efforts or errors.
2. Why Collaboration Matters
When a bookkeeping firm and Singapore audit services firm work together effectively, the client benefits from:
- Faster and smoother audit processes
- Fewer errors and reclassifications
- Improved compliance with statutory deadlines
- Cost savings from fewer revisions or audit adjustments
- Better overall financial management
Ultimately, this collaboration helps to build trust with clients, reduce stress during audit season, and improve operational efficiency for all parties involved.
3. Setting the Foundation: Communication and Expectations
Open communication is the cornerstone of any successful working relationship. Here’s how a bookkeeping firm can take the lead in fostering collaboration:
a) Introduce the Auditor Early
If a client is being audited for the first time, the bookkeeper can introduce a trusted audit firm and facilitate the initial discussions. This early connection allows the auditor to set expectations regarding document requirements, deadlines, and audit scope.
b) Establish Communication Protocols
Bookkeepers and auditors should agree on how they will communicate throughout the engagement. This can include:
- A shared communication channel (email, WhatsApp group, or project management tool)
- A dedicated point of contact from each firm
- Agreed-upon timelines and checkpoints
4. Preparing for the Audit
One of the most valuable ways a bookkeeping firm can support the audit process is through meticulous preparation. This reduces the auditor’s need to request additional information or flag discrepancies.
a) Ensure Financial Records Are Up-to-Date
Timeliness is essential. The bookkeeping firm should ensure all journals, ledgers, reconciliations, and year-end adjustments are up-to-date before the audit commences. Delays in bookkeeping can significantly impact the audit timeline.
b) Reconcile All Key Accounts
Bank accounts, supplier and customer balances, loans, and inter-company accounts should be reconciled and supported by documentation. This gives auditors confidence in the accuracy of the financial statements.
c) Provide a Year-End Closing Pack
A well-organized audit pack should be prepared and include:
- Trial balance
- General ledger
- Fixed asset register
- Bank reconciliations
- Debtors and creditors aging reports
- Inventory listings
- Payroll summaries
- Relevant contracts or agreements
- Supporting documents for significant transactions
Auditors rely on this pack to perform their testing and verification.
5. Supporting the Audit Process
Even with solid preparation, the audit process may take several weeks depending on the size and complexity of the company. During this time, the bookkeeping firm should remain actively involved.
a) Respond Promptly to Audit Queries
Auditors may have follow-up questions or request additional supporting documents. Bookkeepers should respond quickly and accurately to keep the process moving.
b) Explain Complex Transactions
If the company had complex transactions (e.g., sale of assets, loan restructuring, inter-company dealings), the bookkeeper can provide explanations or background that help auditors assess the proper accounting treatment.
c) Work on Audit Adjustments
If the audit identifies any necessary adjustments, the bookkeeping firm should review and post them promptly in the accounting system, ensuring that final audited financial statements reconcile with the internal records.
6. Learning from the Audit
A good bookkeeping firm doesn’t just view the audit as a compliance exercise—they see it as a learning opportunity.
a) Review the Management Letter
Most auditors issue a management letter with recommendations on improving internal controls, processes, or financial reporting. The bookkeeping firm should review this letter, discuss it with the client, and implement changes where necessary.
b) Continuous Improvement
By incorporating audit feedback into their monthly bookkeeping practices, firms can improve the quality of their records and reduce friction in future audits.
7. Going Beyond Compliance: Adding Strategic Value
When the bookkeeping and audit services firms align their efforts, the business gains more than just compliance—it gains insight.
a) Identify Red Flags
Bookkeepers can spot early warning signs such as cash flow issues, overdue receivables, or inventory build-ups. Combined with audit insights, these signals can help clients make informed strategic decisions.
b) Budgeting and Forecasting
Bookkeepers who understand audit requirements can better structure financial data for forecasting and cash flow analysis, giving the client tools to plan ahead effectively.
8. Establishing Long-Term Partnerships
Building a strong, ongoing relationship between the bookkeeping firm and audit firm creates a support network for the client that evolves as the business grows. These partnerships:
- Streamline annual audit preparations
- Build mutual trust and efficiency
- Allow for proactive advisory services (e.g., tax planning, compliance updates)
- Present a united front to help clients navigate financial challenges
Conclusion
In the ever-evolving business landscape of Singapore, SMEs benefit greatly when their service providers work in unison. Bookkeeping firms and audit firms must see each other as partners in the financial ecosystem rather than separate entities. When these professionals work hand in hand, they create significant value for the client—offering not just compliance, but clarity, strategy, and peace of mind.
Bookkeepers who actively support and coordinate with audit firms help reduce the stress and uncertainty often associated with audits. In turn, auditors can complete their work more efficiently, with confidence in the underlying records. Together, this collaboration sets the foundation for long-term business success.