Most businesses are subject to an annual audit. It is carried out in a specific order and includes several stages. Before starting the audit, it is necessary to select an audit company.
Instructions
Step 1
There is a limitation when conducting a check. The auditor must confirm the independence of the audit firm. He cannot carry out verification if he is on the board of directors or is a shareholder of the enterprise.
Step 2
The initiation of an audit is a very important point. The management of the company must issue an order to conduct an audit. A contract with an auditor company is mandatory. Only then does the work begin.
Step 3
The verification process can be divided into four stages. The first step is planning. At the second stage, the internal control system and the materiality of the operations are assessed. The third stage is to conduct analytical and substantive procedures.
Step 4
The process is completed by the formation of the final review, carrying out analytical procedures. After that, an audit report is issued.
Step 5
Planning consists of two stages: strategic overall planning and planning of audit procedures. In the course of audit procedures, the specialist must find confirmation of the existing figures, prove that no material misstatements exist.
Step 6
When preparing strategic planning, the auditor analyzes the performance of the client company and compares them with those existing on the market in the industry. For example, if the industry average profit is 10% and the company is reporting 70% profit, the auditor should carefully consider this point.
Step 7
The complexity of audit procedures and their list depends on the client's business and on whether the auditor checks this company for the first or second time. Only after the overall strategic planning has been completed does the auditor begin planning in essence.
Step 8
Much attention is paid to the second stage, during which the company's internal control system is assessed. A system assessment is performed to prepare correct audit procedures.
Step 9
If the company has a strong control system, management responds in a timely manner to changes in legislation, carries out strict financial control and control of the production process - in this case, audit procedures may be less voluminous.
Step 10
Sometimes the system of internal control at the enterprise is absent or it is very weak. Then the audit procedures essentially have to be made more voluminous.
Step 11
The third stage of an audit is to carry out analytical procedures as well as substantive procedures.
Step 12
The final step is to review all audit documents and evidence for the project and issue an audit report. It can be of two types - unconditional positive and modified. The first is issued when there are no substantive comments.
Step 13
Modified can be issued with a reservation, be negative. Refusal of opinion is also possible. It all depends on the results obtained during the audit.
