Description
What's Auditing?
A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent in accordance with any applicable rules (including accepted accounting standards), regulations, and laws. The audit can be conducted internally by employees of the organization or externally by an outside Chartered Accountant firm.
Why Auditing?
An audit is important as it provides credibility to a set of financial statements and gives the shareholders confidence that the accounts are true and fair. It can also help to improve a company’s internal controls and systems.
Who's Auditor
Auditors can be an internal or an external hire.
Internal auditors
They work in the company as an employee, and as part of their role, they must audit certain procedures within the company to enhance internal control procedures and business operations.
External auditors
They are employed by an accounting firm, not by the organization. External auditors perform an audit from an independent point of view and to undertake an audit that is free of any bias.
Preparing an Audit Plan
The auditor will review prior audits in your area and professional literature and typically requests documents listed on an audit preliminary checklist. The auditor will also research applicable policies and looks over the information contained in the documents and plans out how the audit will be conducted.
Scheduling an Open Meeting
This meeting will include senior management and key administrative staff. Purpose and objective of auditing will be discussed as well as the audit program The auditee should provide an overview of major programs and operations and other relevant information that will assist us in the fieldwork.
Conducting Onsite Fieldwork
Auditor takes information gathered from the open meeting and uses it to finalise the audit plan. Auditor also tests for compliance with policies and procedures. The auditor may discuss problems with organization staff as they arise to give the organisation an opportunity to respond.
Drafting a Report
The auditor prepares a report detailing the findings of the audit after the fieldwork is completed. The report includes such areas as mathematical errors, posting problems, or other audit concerns. The auditor then writes up a commentary describing the findings of the audit and recommendations for correction or improvement.
Management Response
A draft audit report will be submitted to the management of the audited area for their review and responses to the recommendations. Management responses should include their action plan for correction.
Setting Up a Closing Meeting
The auditor solicits a response from management that indicates whether it agrees or disagrees with issues and problems in the report. If there are any remaining issues in the final report will be communicated and resolved in this meeting. This is the time for questions and clarifications.
Follow-up
If any significant audit findings were included in the final audit report, conducts a follow-up audit within six to twelve months after the original audit was completed. The purpose of this review is to ensure the corrective actions were implemented.
- Provide audit service to examine and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent in accordance with any applicable rules (including accepted accounting standards), regulations and laws.
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