Audits are external reviews of financial information conducted by public accounting firms. Prior to engaging in the audit process, accounting firms create an audit plan for each client.
Audits plans consist of the accounting functions that will be reviewed by auditors during the audit. Auditors may request a “prepared by client" list from their clients; this limits the time spent gathering information for the audit process.
Audit plans indicate which transactions and accounting functions will be tested during the audit. Auditors and clients will decide how intense the audit plan will be based on the fees paid by the client.
Companies may request auditors to test the internal controls related to their accounting processes; this helps accounting management understand the weaknesses in their internal audit process.
Audits provide companies with more opportunities for external financing and investment options. External stakeholders and banks rely on these audits as an approval of the company’s accounting processes.
Audit standards and guidance are provided by the American Institute of Certified Public Accountants, which helps audit planning to go quickly and smoothly.