How to Perform a Basic Accounting Audit

by MUSASAVU; Updated September 26, 2017

Auditing is an interesting engagement that requires alertness of mind and concise application of Generally Accepted Accounting Standard using standard auditing producers.

Identify the organization or client that is to be audited. Follow the standard company procedures of commencing an audit, such as engagement letter to establish the terms of operation and establish the terms of operations. Identify the various selected business departments to be audited. Select the audit team and resources required for the audit taking into account the required skills and performance levels.

Study the client's business organization and identify the accounting standards, any policies, legislature and that pertain to the department to be audited and previous accounting audit reports and observations. During this preliminary analysis identify possible audit risks and inherent risks in the audit process. Gather up resources to be used whist in the field, including stationary, laptops, etc. so that you won't have to rely on the client being audited for supplies.

Introduce the audit team to the client being audited; follow the standard protocol and professional dress attire. Analyzed the existing accounting systems and then draw flow charts to reflect the system infrastructure. Examine the flow charts and identify any weaknesses in the system. After carrying out a system analysis and, examine the established sample of transactions and records to check for compliancy, accuracy, proficiency according to standard requirements. This process facilitates the checking of materiality and helps establish in planning the scope, the type of records and evidence evaluation and the audit report thereof.

Examine the selected volume and types of transactions audit in order to carry out an efficient audit according to the sampling frequency and percentages established. During the audit process maintain effective and standard observations, and recommendations for the respective accounting systems and accounting records examined.

Gather evidence by recording observations and make recommendations to improve the accounting systems and statements. Compile standard audit data files using information gathered during the audit which include working and permanent file papers, audit administration and evidence papers and synthesize the data collected by all the members of the audit team.

Produce an audit report document which will be presented to seniors in the audit department for further examination and analysis.

Hold end of audit meeting with an audit supervisor present to officially communicate the audit findings to the make the necessary recommendation. Make final adjustment in the report drawn from audit observations to include the client's comments and recommendations.

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