The planning phase of a financial statement audit is arguably the most important step. It is important for clients to understand the planning phase of an audit and why it is crucial for a successful and efficient audit.
Proper planning is critical to audit success. During this phase client opening meetings are conducted, audit objectives and scope are determined, Internal Audit staff gain an understanding of the unit's business and operations, and an audit program is prepared.
Internal control is the most important part of auditing and many organizations can find a significant amount of value from having an audit conducted.
Although every audit process is unique, the audit process is similar for most engagements and normally consists of four stages: Planning (sometimes called Survey or Preliminary Review), Fieldwork, Audit Report and Follow-up Review. Client involvement is critical at each stage of the audit process.
Audit Phases
Audit engagements are performed in three general phases: planning, fieldwork & review, and reporting.
Internal audit conducts assurance audits through a five-phase process which includes selection, planning, conducting fieldwork, reporting results, and following up on corrective action plans.
One of the most effective ways to establish the reliability of certain features of the accounts is to obtain confirmation that the client's accounts agree with related records kept by other parties. This technique has several common uses.
AUDITING STANDARDS provide minimum guidance for the auditor that helps determine the extent of audit steps and procedures that should be applied to fulfill the audit objective. They are the criteria or yardsticks against which the quality of the audit results are evaluated.
Why are Audit's important? 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.
Because it requires skepticism. Being an auditor is like being a judge, giving verdict if one's practice is in accordance with the standard.
OTHER COMMON AUDIT PROBLEMS INCLUDE FAILURE to exercise due professional care and the appropriate level of professional skepticism, overreliance on inquiry as a form of audit evidence, deficiency in confirming accounts receivable, failure to recognize related party transactions and assuming internal controls exist when ...
Fieldwork. The evaluation phase of the audit is referred to as fieldwork. This phase includes assessing the adequacy of internal controls and compliance, testing of transactions, records, and resources, and performing other procedures necessary to accomplish the objectives of the audit.
A project audit ascertains that the project management satisfies the standards by assessing whether it complies with the organisation's policies, processes and procedures. It evaluates the methodology used to help identify gaps in order to introduce the required improvements.
Audits help to identify the risk factors due to the company policy which may impact the quality, environment, time, and budget. The review further assesses the feasibility of the task of the terminology of performance and affordability by offering transparency as well as evaluating resources, time, and costs.
Analytical procedures are used for the following purposes: To assist the auditor in planning the nature, timing, and extent of other auditing procedures. As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions.
Auditing techniques are the methods adopted by the auditor in checking the accounts. Auditing technique is defined as “any technique used by auditors to determine deviations from actual accounting and controls established by a business or organization as well as uncovering problems in established process and controls”.
Definition: Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation.
An audit cycle is the accounting process an auditor uses to ensure a company's financial information is accurate. The audit cycle typically involves several distinct steps, such as the identification process, audit methodology stage, audit fieldwork stage, and management review meeting stages.
The diagram above shows the five stages as a cycle, and this represents the ongoing nature of audit and continual re-audit to assess that standards continue to be met.
The five step approach to clinical audit. Resources required to support clinical audit.
The completion stage of the audit is of crucial importance. It is during the completion stage that the auditor reviews the evidence obtained during the audit together with the final version of the financial statements with the objective of forming the auditor's opinion.
Pre-audit phase
Before starting the process, a general analysis is performed on the organization to be audited. This way, the audit team can have a better understanding of how processes work and what the entity's objectives are.