In: Accounting
To establish and reinforce all parts of auditing, audit planning, process, descriptions, and reports parts.
In 700 to 1,050 words, demonstrate the planning process for a complete audit from the role of an auditor.
Include the following:
Financial iauditing iis ithe iprocess iof iexamining ian iorganizations i(or iindividual's) ifinancial irecords ito idetermine iif ithey iare iaccurate iand iin iaccordance iwith iany iapplicable irules i(including iaccepted iaccounting istandards), iregulations, iand ilaws.
External iauditors icome iin ifrom ioutside ithe iorganization ito iexamine iaccounting iand ifinancial irecords iand iprovide ian iindependent iopinion ion ithese irecords. iLaw irequires ithat iall ipublic icompanies ihave itheir ifinancial istatements iexternally iaudited.
Internal iauditors iwork ifor ithe iorganization ias iinternal iemployees ito iexamine irecords iand ihelp iimprove iinternal iprocesses isuch ias ioperations, iinternal icontrols, irisk imanagement, iand igovernance.
Auditing iStandards
The iPublic iCompany iAccounting iOversight iBoard i(PCAOB) imaintains iexternal iauditing istandards ifor ipublic icompanies i(issuers) iregistered iwith ithe iSecurities iand iExchange iCommission i(SEC).
As iof i2012, iPCAOB ihas i15 ipermanent istandards iapproved iby ithe iSEC iand ia inumber iof iinterim istandards ithat ireflect igenerally iaccepted iauditing istandards, ias idescribed iin istandards iissued iby ithe iAuditing iStandards iBoard i(ASB), iwhich iis ipart iof ithe iAmerican iInstitute iof iCPAs i(AICPA).
The iASB ialso iissues iStatements ion iAuditing iStandards i(SASs) ithat iapply ito ipreparing iand ireleasing iaudit ireports ifor inonissues i(companies inot irequired ito iregister iwith ithe iSEC). iAICPA imembers iwho iaudit ia inonissue iare irequired iby ithe iAICPA iCode iof iProfessional iConduct ito icomply iwith ithese istandards. iAs iof i2012, ithere iare imore ithan i60 iactive istandards.
For iinternal iauditing, ithe iInstitute iof iInternal iAuditors iprovides ia iconceptual iframework icalled ithe iInternational iProfessional iPractices iFramework i(IPPF) ithat iprovides iguidance ifor iinternal iaudits. iSome iof ithe iguidance iis imandatory, iwhile iothers iare iconsidered istrongly irecommended, ibut inot irequired iby ilaw.
Audit iPlanning
Audit iplanning iincludes ideciding ion ithe ioverall iaudit istrategy iand ideveloping ian iaudit iplan.
Auditing iStandard iNo. i9 ifrom ithe iPCAOB idescribes ian iexternal iauditor's iresponsibility iand ithe irequirements ifor iplanning ian iaudit. iAccording ito istandard iNo. i9, ian iaudit iplan iis iexpected ito idescribe ithe iplanned inature, iextent, iand itiming iof ithe iprocedures ifor irisk iassessment iand ithe itests ito ibe idone ion ithe icontrols iand isubstantive iprocedures, ialong iwith ia idescription iof iother iaudit iprocedures iplanned ito iensure ithe iaudit imeets iPCAOB istandards.
For iinternal iauditing, ithe iInstitute iof iInternal iAuditors iprovides iguidance ifor iaudit iplanning. iPlanning istarts iwith idetermining ithe iscope iand iobjectives iof ithe iaudit.
Internal iauditors ineed ito iunderstand ithe ibusiness, ioperations, iand iunique icharacteristics iof ithe idepartment/unit ibeing iaudited iand ito idevelop ian iaudit iplan ithat idefines ithe iprocedures ineeded ito ido ian iefficient iand ieffective iaudit.
THE iAUDIT iPROCESS
An iaudit iis ia iformal icheck iof ifinancial iaccounts iof ian iindividual, ibusiness ior iorganization. iAn iinternal iaudit iis iconducted iby imembers iof ithe isame iorganization ior ibusiness, iand ian iexternal iaudit imay ibe iconducted iby ia iregulatory iagency ior igovernmental iagency. iThere iare isix ispecific isteps iin ithe iaudit iprocess ithat ishould ibe ifollowed ito iensure ia isuccessful iaudit.
1. Requesting iFinancial iDocuments
After inotifying ithe iorganization iof ithe iupcoming iaudit, ithe iauditor itypically irequests idocuments ilisted ion ian iaudit ipreliminary ichecklist. iThese idocuments imay iinclude ia icopy iof ithe iprevious iaudit ireport, ioriginal ibank istatements, ireceipts iand iledgers. iIn iaddition, ithe iauditor imay irequest iorganizational icharts, ialong iwith icopies iof iboard iand icommittee iminutes iand icopies iof ibylaws iand istanding irules.
2. Preparing ian iAudit iPlan
The iauditor ilooks iover ithe iinformation icontained iin ithe idocuments iand iplans iout ihow ithe iaudit iwill ibe iconducted. iA irisk iworkshop imay ibe iconducted ito iidentify ipossible iproblems. iAn iaudit iplan iis ithen idrafted.
3. Scheduling ian iOpen iMeeting
Senior imanagement iand ikey iadministrative istaff iare ithen iinvited ito ian iopen imeeting iduring iwhich ithe iscope iof ithe iaudit iis ipresented iby ithe iauditor. iA itime iframe ifor ithe iaudit iis idetermined, iand iany itiming iissues isuch ias ischeduled ivacations iare idiscussed iand ihandled. iDepartment iheads imay ibe iasked ito iinform istaff iof ipossible iinterviews iwith ithe iauditor.
4. Conducting iOnsite iFieldwork
The iauditor itakes iinformation igathered ifrom ithe iopen imeeting iand iuses iit ito ifinalize ithe iaudit iplan. iFieldwork iis ithen iconducted iby ispeaking ito istaff imembers iand ireviewing iprocedures iand iprocesses. iThe iauditor itests ifor icompliance iwith ipolicies iand iprocedures. iInternal icontrols iare ievaluated ito imake isure ithey're iadequate. iThe iauditor imay idiscuss iproblems ias ithey iarise ito igive ithe iorganization ian iopportunity ito irespond.
5. Drafting ia iReport
The iauditor iprepares ia ireport idetailing ithe ifindings iof ithe iaudit. iIncluded iin ithe ireport iare imathematical ierrors, iposting iproblems, ipayments iauthorized ibut inot ipaid iand iother idiscrepancies; iother iaudit iconcerns iare ialso ilisted. iThe iauditor ithen iwrites iup ia icommentary idescribing ithe ifindings iof ithe iaudit iand irecommended isolutions ito iany iproblems.
6. Setting iUp ia iClosing iMeeting
The iauditor isolicits ia iresponse ifrom imanagement ithat iindicates iwhether iit iagrees ior idisagrees iwith iproblems iin ithe ireport, ia idescription iof imanagement's iaction iplan ito iaddress ithe iproblem iand ia iprojected icompletion idate. iAt ithe iclosing imeeting, iall iparties iinvolved idiscuss ithe ireport iand imanagement iresponses. iIf ithere iare iany iremaining iissues, ithey're iresolved iat ithis ipoint.
Elements iof ian iEffective iAudit iPlanning iProcess
1. Research ithe iAudit iArea
It iis iessential ito iunderstand ithe ibusiness iprocess ior ifunction ito ibe iaudited. iIf inot ifamiliar iwith iit, ithoroughly iresearch ithe iprocess ior ifunction ito ifully iunderstand ithe isubject imatter. iReview iinternal iprocedures, isearch ithe iinternet ifor iresources, iand iseek ihelp ifrom isubject imatter iexperts.
2. iMaintain iOpen iCommunications iThroughout ithe iPlanning iProcess
The isooner ithe iaudit iteam ireaches iout ito ithe iauditee, ithe ibetter. iThere iis ia icertain iamount iof itrepidation iinvolved iin iany iaudit. iWorking iwith ian iauditee iprior ito ithe iaudit ihelps iease iconcerns ithe iauditee imay ihave. iCommunicating iin iperson iis ialways ipreferable. iIf ithis iis inot ipossible, itelephone icalls iare ithe inext ibest ithing. iAvoid icommunicating iby iemail iif ipossible.
3. iConduct iProcess iWalk-Throughs
Armed iwith ia iworking iunderstanding iof ithe iprocess ior ifunction, iconduct ia iface-to-face iwalk ithrough iwith ithe iauditee. iIdentify ikey ibusiness iobjectives, imethods iemployed ito imeet iobjectives, iand iapplicable irules ior iregulations. iA iwalkthrough imay iinclude ia itour iof ifacilities. iYou imay igather ibackground iinformation irelative ito ithe inature, ipurpose, ivolume, isize, ior icomplexity iof iautomated isystems, iprocesses, ior iorganizational istructure. iYou imight iscan idocuments ior irecords ifor igeneral icondition. iAll ithese iactivities iprovide iopportunities ito iinterface iwith ithe iauditee iand ibuild irapport ibefore ithe iformal ientrance iconference.
4. iMap iRisks ito ithe iOrganization, iProcess, ior iFunction
Ask ithe iauditee iwhat ihis iconcerns iare, iwhat i"keeps ihim iup iat inight." iThrough iresearch iand iinterviews, iidentify irisks ito imeeting ibusiness iobjectives iand icontrols iemployed ito imitigate ithose irisks. iRate irisks iwith ithe iauditee ibased ion iprobability iof ioccurrence iand ipotential iimpact. iConsider icontrol idesign, igaps, ior imitigating ifactors ito idetermine iif ithe icontrol isystem ieffectively imitigates irisks.
5. iObtain iData iPrior ito iFieldwork
This ihas ibecome ia iprincipal ifocus ifor ius irecently. iWe iemphasize idata iin iour iinitial irequests ifor iinformation. iWe iperform idata ianalytics ibefore iwe ibegin ifield iwork. iIdentifying ianomalies ito iconfirm ia icondition ior iweakness iearly ihelps ius itarget itesting iand ioptimize isample iselections.
Parts iof ian iAudit iReport
Accountants iuse iaudit ireports ito ipublish ithe idata ithey icollect iduring itheir ifieldwork iof ia icompany ior iorganization. iA iwidely iused ireport itemplate iis ithe istandard iaudit ireport, iwhich imust iinclude iseven ielements ito ibe icomplete. iThese ibasic ielements iare ireport ititle, iintroductory iparagraph, iscope iparagraph, iexecutive isummary, iopinion iparagraph, iauditor's iname iand iauditor's isignature.
1. Report iTitle
The ireport ititle imust iinclude idate iof ithe iaudit iand ithe iaddressee iof ithe ireport. iThe idate iof ithe ireport iis iusually ithe iaccountant's ilast iday iof ifieldwork, iand ithe iaddressee iis iusually ithe iboard iof idirectors ior istockholders iof ithe iorganization. iIt iis ialso iimportant ito iinclude ithe iwork iindependent iin ithe ititle ito iset iit iapart ifrom iinternal iaudits iwithin ian iorganization.
2. Introductory iParagraph
This iis iusually ia iboilerplate itext ithat istates ian iaudit ihas ibeen icarried iout, iidentifies ithe ifinancial idocuments iused ito iperform ithe iaudit iand iplaces ithe iimportant icaveat ithat ithe icompany's imanagement iteam iis iresponsible ifor ithe iaccuracy iof ithe ifinancial istatements. iIt ialso idetermines iwhat itime iframe iis icovered iby ithe iaudit.
3. Scope iParagraph
This iparagraph isays ithe iaudit ifollowed ithe irules iand imethods iset iby ithe iGenerally iAccepted iAudit iStandards iand iwas idesigned ito iprovide ireasonable iassurances ithat ithe iclaims imade iby ithe ifinancial istatements iare iaccurate. iIt ialso iindicated ithe itest imethods iused iby ithe iauditors ito itest ithe iaccounting imethods iused iby ithe icompany.
4. Executive iSummary
This isection iincludes ia isummary iof ithe iaudit's ifindings. iThe icontent iof ithis isummary iis idetermined iby iwhat ithe iauditor iconsiders ito ibe iimportant ifor ithe iexecutive iechelons iof ithe icompany. iUnlike ithe inext isection, ithe iexecutive isummary idoes inot iprovide imuch iopinion ibut ifocuses iinstead ion iexpressing iclearly ithe ifindings iof ithe iaudit.
5. Opinion iParagraph
The iopinion iparagraph iis iused ito ireport ion ithe ifinancial isituation iof ithe icompany ior iindividual iaudited iand ithe imethods iand iprocedures iused ito ireach ia iconclusion. iIt ithen ioffers ithe iauditor's iopinion ion ithe ifinancial ihealth iof ithe iorganization iand iits iconformity ior inonconformity iwith ithe iGenerally iAccepted iAccounting iPrinciples.
6. Auditor's iName
The iauditor imust iidentify ihimself ias ithe iauthor iof ithe iaudit i