Market Volatility May Cause Change in Audit Procedures

By: Dennis Gardiner, Partner email

As we begin to prepare for the upcoming audits of our cooperative and agricultural clients this Spring, we are anticipating a wide range of audit issues. The volatility that the market is currently experiencing in regard to handled commodities, grain, fertilizer and fuels will cause us to adapt our audit procedures to match the risks it imposes.  As your audits approach, we will be defining how to respond to those risks.

Some obvious concerns we will be addressing are:

  • Signed producer contracts
  • Risk of non-performance on contracts
  • Accounts receivable aging and collectibility of accounts
  • Inventory valuations
On top of these concerns, audit standards now require us to perform more in-depth risk assessments of our clients. Because of this, you may find us asking more questions about your accounting system and flow of transactions than we have in the past, which also adds to our audit hours overall. Also, after visiting several clients recently to review their grain pricing and margins, we have concluded that the basis widening for both corn and beans has been a strain on margins. Many clients have had to increase their operating lines of credit this year, some more than once. There are plenty that are even bumping into those increased lines with the margin calls and the cost of the other inventories. The significant jump in the fertilizer prices have afforded some to pay for new (larger) facilities in one year, others have missed the opportunity. With a busy Spring season within reach, we wish you the best as your fiscal year’s come to a close.