A manufacturer is a company that produces consumer or business goods through a variety of processes. Business owners and managers use audits as a performance management tool to measure the effectiveness and efficiency of their operations. These audits can be financial or operational. While the financial audit will typically review how much money is spent on a process, the operational audit tests product quality and production standards. Auditors—usually from a public accounting firm—will develop a checklist to audit a manufacturer.
Companies that use public accounting firms for their manufacturing audits will typically have an initial meeting to discuss the audit specifics. Audit scope, length, number of auditors and cost are a few items to discuss in the meeting. Companies may have several meetings and take bids to achieve the lowest cost for the best possible audit team. Owners and managers will also use the meeting to determine the legitimacy of the public accounting firm and its auditors. This allows companies to review the firm’s track record and reputation in the business environment.
The planning stage is where auditors will review the manufacturer’s operating manuals, accounting policies or procedures and other pertinent documents. Auditors will also determine which processes to audit and what steps to follow when conducting fieldwork. Sampling is the specific step where auditors will request a certain amount of information from the company. This information represents documents and notes the company has put together during its normal operations. Auditors request this information to be on hand prior to their arrival, so less time is spent gathering information during the audit.
Fieldwork is the main testing stage of an audit. Auditors will observe the manufacturing process, interview employees and test the sample documents. Observing production processes allows auditors to see firsthand how the company operates and whether each employee follows the procedures. Interviewing employees is a critical step because it allows auditors to discover how well each individual understands her role in the manufacturing process. Auditors can also question why the employee completes functions a certain way. Testing the sample documents allows auditors to recalculate information to determine its accuracy and validity.
The final meeting is part of the wrap-up phase of the manufacturing audit. Auditors will bring their audit notes and information to discuss with company management. Auditors will discuss any variations or misstatements found in the audit. Official external audits will result in an audit opinion, which is released to outside business stakeholders. Internal audits may not include an official report; the final result might be a document that outlines their findings and recommendations for corrections.
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