Before an audit is assigned to staff, there are few matters that should be considered such as:
- The size of the company to be audited. (If it is a private limited co .i.e. Sdn.Bhd. 2 or 3 staff will be required. If it is a Public Listed Company 3 or 4 staff and if it's a Group audit 6 or 7 staff depending on the number of subsidiaries.)
- The budget is very important as we are always advised to stay within the budget so that the audit fees is sufficient to cover all the cost incurred especially the disbursements.
- The deadline. An audit assignment usually has very tight deadlines and therefore staff must ensure that the Audit Report is submitted to the Partner for Review on time so that the signing of accounts is not delayed.
When the audit manager assigns a job to the senior, the first thing the senior does is to meet with all his team members to discuss about the job and to delegate duties to the respective members.
The audit assistant will normally be asked to retrieve the previous year's file of the company from the filing room.
The previous year file is always used as a guide only. Staff must not copy blindly as the manager and partner will be annoyed. Staff must always tailor-make the audit for the year according to the events that occurred during the year.
Once the last year's file is retrieved, a new file will be opened for the current year's audit.
The next thing the audit senior is supposed to do is to contact the client to make arrangements as to when the audit can commence.
An audit should always be done at the clients place. This is required in order to obtain all the information necessary for the audit. The client should also be available and free during the period in order to give the auditors all the required information.
An audit is divided into 3 stages - Planning Stage, Field Work Stage and Review Stage. The first time we visit the client is at the Planning stage. Planning is essential as this is the time we understand the client's business and their controls in the company.
At this stage the audit senior normally discusses with the client about the performance of the client for the year such as increase or decrease in profitability and reasons for it, any new products launched during the year, any important staff that left the company and etc. This is all documented in the Business Understanding Document.
The audit assistants will normally be asked to carry out the test of controls in the company so as to ensure that the Payment Vouchers, Purchase Orders documents, Goods received notes and Delivery Orders are filed in sequential order and are properly authorized.
This is normally done on a sample basis and will be documented in the Process Analysis Document.
Once the planning is completed, the file will be submitted to the audit manager for review. The audit manager will review the file and raise any queries.
The audit senior will then obtain the answers to the queries by contacting the client and updating the information which was left out.
Once the planning is approved by the manager, then the audit team will get prepared to go in for the field audit.
Field audit is normally the longest period in an audit as this is the time we perform many testing of controls and substantive procedures. It is also very crucial as after the audit is completed it will normally be reviewed by the partner.
During the field audit, work will be delegated to staff appropriately - in order to complete the work within the timeframe.
The type of work normally given to audit assistants will be the checking the cash and banks reconciliation (sending bank confirmation), audit the property, plant and equipment (to sight the fixed assets) other payables (search for unrecorded liabilities), other receivables (to vouch material invoices for deposits and prepayment).
The audit senior normally takes charge of the more important...