Audit Process
Audit Process
Typically an audit flows through a series of logical steps culminating in the ‘Audit Report’.
Background Research
Preparation of the Audit Plan
Accounting Systems review
Internal Control System review
Substantive Testing
Analytical review techniques
Analytical review of financial statements
Preparation and signing of the Audit Report
Background Research
1. Present condition and future prospects for the industry
2. History, present and future prospects of client
3. Key management and personnel, changes thereto
4. Products, services, processes of client
5. Location(s) of operations
6. Significant difficulties – manufacturing, sourcing, loss of customers, for-ex, oil prices etc
7. Problems in accounting and internal control systems
8. Specific accounting issues eg inventory valuation, intangibles, pensions, deferred tax, derivatives, securitisation
9. Problems likely to increase audit risk – LTCWIP, Sub-prime, Oil & Gas reserves
10. Logistical problems – multiple locations, language, time requirements, stocktaking attendance
11. Changes in legislation, regulatory regime etc
Bulk of the background research conducted by reading or interviewing;
Previous year’s files
Audit staff previously engaged in the audit
Published material
Trading statements, interim reports, annual reports, internal management reports
Management & Key personnel
The Audit Plan
Outline of the audit work to be done in each area
Staff and staffing
Location(s) of the audit
Timing of the work to be done
Budget of times and costs
Accounting Systems Review
Ascertain and record the system and corroborate the details.
Consider the adequacy of the system.
Test the system.
Evaluate and conclude on adequacy.
Internal Control System Review
Ascertain and record the system and corroborate the details.
Consider the adequacy of the system.
Test the system.
Evaluate and conclude on
Typically an audit flows through a series of logical steps culminating in the ‘Audit Report’.
Background Research
Preparation of the Audit Plan
Accounting Systems review
Internal Control System review
Substantive Testing
Analytical review techniques
Analytical review of financial statements
Preparation and signing of the Audit Report
Background Research
1. Present condition and future prospects for the industry
2. History, present and future prospects of client
3. Key management and personnel, changes thereto
4. Products, services, processes of client
5. Location(s) of operations
6. Significant difficulties – manufacturing, sourcing, loss of customers, for-ex, oil prices etc
7. Problems in accounting and internal control systems
8. Specific accounting issues eg inventory valuation, intangibles, pensions, deferred tax, derivatives, securitisation
9. Problems likely to increase audit risk – LTCWIP, Sub-prime, Oil & Gas reserves
10. Logistical problems – multiple locations, language, time requirements, stocktaking attendance
11. Changes in legislation, regulatory regime etc
Bulk of the background research conducted by reading or interviewing;
Previous year’s files
Audit staff previously engaged in the audit
Published material
Trading statements, interim reports, annual reports, internal management reports
Management & Key personnel
The Audit Plan
Outline of the audit work to be done in each area
Staff and staffing
Location(s) of the audit
Timing of the work to be done
Budget of times and costs
Accounting Systems Review
Ascertain and record the system and corroborate the details.
Consider the adequacy of the system.
Test the system.
Evaluate and conclude on adequacy.
Internal Control System Review
Ascertain and record the system and corroborate the details.
Consider the adequacy of the system.
Test the system.
Evaluate and conclude on