Audit Process Of Company
It may be difficult to deal with an auditor because doing so requires tedious work on the part of the auditors. It sounds unfair, but in reality, the listener has as much work to do. The difference is simply that the auditor does a lot of background research and the auditors have a lot of work to do over the period of the audit. Audit process of company includes audit planning, timing and communications, as well as auditor professionalism and performance.
Being a listener is a very rewarding career. However, if the process is immutable, the work itself changes and there are always new things to learn each time. Of course, you should know how to conduct an audit if you want to be excellent in the field. However, once you have learned the basics, it will be easier for you to really make it a fascinating and rewarding job.
Steps to do an Audit Process of a Company
Following are the steps that indicate how to do an audit process of a company. I’m sure after reading these step by step towards audit, you will be able to answer all of your questions relevant to the audit conducting process.
Schedule an Audit
You should be Clear about Your Mission
This requires ensuring the total objectivity of the listener in his assertions. For this, it is recommended that the professional be totally independent of the company. In other words, he can have no other relationship with the company that will be controlled. So here are some conditions that the auditor must adhere to.
- It must not hold any interest in the audited company (whether in shares or bonds).
- He must not serve society for any purpose.
- He must be relayed regularly during the process to have sufficiently recent opinions on the documents
Evaluate Your Mission
Before entering the different phases of the audit process. The auditor should analyze the company and assess the extent of the work to be done. This includes an estimate of the number of people involved in the assignment and its duration. As well as an estimate of all the specific work or investigations that will be required during the course of the audit. Getting this done can help the auditor to build a team. Hence if necessary, and allow the company to be audited according to a well-defined schedule for each phase of the process.
Identify Potential Errors
Before starting the assignment, the auditor should use his or her previous experience. So the industry knowledge to try to predict which positions the company may have misreported. This may require a thorough knowledge of the company in question and its current operating environment. It is obvious that this is only a very subjective affirmation; the listener will then have to rely on his own judgment.
Develop a Strategy
After completing the preliminary assessments, you will need to develop a plan. Outline all actions that should be carried out including the positions you think are most important. Assign a task to each team if possible. Then develop a schedule for the completion of each activity. Keep in mind that this schedule could change significantly. While the check with the appearance of new information.
More From Business Study Notes:- Authority In Management
Conduct the Audit Mission
Inform the Organization
You must give the organization that you plan to have enough time to prepare their accounts. Tell them the period to be audited (the fiscal year for example). Then the list of documents required for the examination. These are the following:
- The bank statement of the year to be audited
- The bank reconciliation report that compares bank statements with cash inflows and outflows
- Also the audit log of the period to be audited
- Canceled checks
- The list of transactions recorded in the General Ledger (manual or electronic system that can track the transactions made by the company, whether revenue or expenses).
- The verification request and reimbursement forms, including receipts and invoices for all expenses
- Certificates of deposit
- The annual budget as well as the monthly treasurer’s report
Check All the Outgoing Payment Validity
It is even better if they can be accompanied by supporting documents. However, as an external auditor, this is not your area of expertise. You just have to make sure all the transactions have been sent to the correct accounts.
- For example, there could be two different accounts payable, one for raw materials and another for office supplies.
Keep a Check on All the Company Deposits
This means that you must check if they have been registered in the correct accounts and in the general ledger. Very simply, these deposits should be recorded in the accounts receivable. However, they can be allocated to a specific account to record the debts, depending on the complexity of the organization.
- For example, revenues from the sale of products would be recorded in accounts receivable. While rebates paid would be recorded in retained earnings.
Audit Financial Statements and Reports
Review all Financial Statements
This can be the balance sheet, the profit and loss accounts of the period to be audited. Make sure all transactions have been properly recorded and reflected in the general ledger. Any unusual payments or withdrawals must be noted. Although you will need to make sure they have been properly accounted for and legitimate. Check that all these accounts are reconciled monthly.
- An unusual deposit could be a very large amount or a business located outside the country. This would be an unusual withdrawal when a substantial amount of money is sent to a person or firm. In fact over a relatively long period of time.
- Reconciliation is comparing two different reports or documents. For example, cash receipts and investments are compared with the statements of the brokerage firms and the bank. In addition, accounts receivable and accounts payable must be compared to customer orders and invoices, respectively. A physical count and valuation can be done each year for an inventory to ensure the fidelity of information included in the general ledger.
- To ensure reconciliation, the auditor does not need to check all transactions. Sampling (analyzing some of the operations and applying the error percentage obtained to all the operations performed) can give the same result in a much shorter time.
Administrative and tax Requirements
If you are auditing a particular organization, check to see if it meets certain tax principles. Also if the forms have been properly completed. You should check the tax returns and other tax documents. Such as declarations of business tax, tax audit reports. As well as applications and various administrative correspondences
Review all treasurer reports
Make sure everything that has been reported has been recorded. That the report totals exactly match the General Ledger reports. Check if the annual treasurer’s report was written and tabled.
Finalize the Audit and Make Recommendations
Fill All the Financial Review forms
This is a summary of all the activities of the period (it is often annual, but could also be quarterly). These include
- The available cash balance at the beginning of the period,
- Of all the receipts of the period,
- Of all the payments of the period,
- The available cash balance at the end of the period.
Your Suggestions as an Auditor
Be sure to specifically note any irregularities. If you do, evaluate the company’s performance against its budget or other performance criteria.
For example, you might suggest that all checks be signed by two people and not one. You may notice that some documents disappear at the end of the year. When they should be kept for a longer period for tax reasons. Note that only original documents must be saved. Set the length of time for which emails must be saved. All knowing that the duration is often 7 years.
Your opinion as an Auditor
At the end of the audit, the auditor must issue an opinion. This document indicates whether or not the financial information provided by the company is free from material misstatement. Also properly reported under accounting principles. Only the auditor can say whether the reports meet these criteria or not. If they are well postponed and free from any error. Then he gives an unqualified opinion. Otherwise, it issues an amended notice. The auditor may also have a modified opinion. Actually if he feels unable to perform a full audit (for one reason or another).
This is a statement that states that you have performed the audit. Although noticed that the account books contain errors or not. If you notice any problem, such as the loss of a check or receipt (without valid explanation). Also a discrepancy in the numbers, you must highlight it in your report. It is also useful to include all the information you estimated, Hence, appropriate to allow correct these problems or to prevent their recurrence in the next audit.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.