In this podcast episode, our host, Joe Fitzgerald, describes what annual audit management letters are and provides four steps you should take to get ahead of a prominent, rising concern.
VLDI Podcast Episode 4 Transcript
Hi there, Joe Fitzgerald here, your host of The VLDI Podcast – welcome back!
Today, I wanted to discuss the management letter you receive as part of your annual audit.
For companies that report on a calendar year and have completed their 2021 audit, the CFO should have received a management letter from their auditors.
The management letter highlights key financial findings and provides recommendations for improvements to internal controls. It also raises awareness of new accounting pronouncements that the company will need to adopt.
One topic we have seen in annual management letters for a couple of years now is regarding the need to comply with the new lease accounting standards – ASC 842, GASB 87 and IRFS 16. With that in mind, it’s time to take action – if your company hasn’t already – to avoid being flagged for not meeting these standards in your next annual audit.
Here’s four steps you should take to successfully achieve and maintain lease accounting compliance, and reduce the risk to your business:
- Familiarize yourself with key deadlinesTypically, this is a heavier lift than many companies expect, so ensure you have enough time to gather all your lease documents, and develop and execute a strategy to extract, transform and load all the necessary data elements before getting started.
- Create a plan and identify the principal stakeholders who will be involved in the process
Once aware of major milestones, it’s important to map key players/teams to each initiative to get a handle on what resources will be needed.
This also creates an opportunity to generate awareness around the lease accounting deadlines so that all parties understand the importance and their role within the process.
- Gather all relevant documents in one centralized system This will ensure that you have all the information you need in one place and it can be easily accessed, analyzed and updated on an ongoing basis. This is also where investing in technology comes into play to ensure your process is efficient.
- Develop business requirementsIf you decide to move forward with investing in supporting technology or partners, consult with all internal stakeholders and factor their feedback in before selecting a provider. This pre-work will translate into easy adoption, which can greatly impact your ability to remain compliant.
I hope this information helps you in your lease accounting journey! See you next time.