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Audit Made Easy – DDS International;
What’s IS Audit? … an official inspection of an organization’s accounts, typically by an independent body.
Overview – Audit Made Easy
Auditing has been since history the best way to ascertain the beginning from the end.it helps you to secure your business lapses, gains, purchases etc.that is why every sector of the economy adopts a quite check of its financial books.being an auditor is rewarding, highly technical not-withstanding its set down rules the job itself is always changing, and there is always something new and different every day.
THE AUDIT STEPS:
Here are the steps you Need to get all you Want on Audit
- A.ARE YOU SUITABLE TO CONDUCT AN AUDIT
- B.AUDIT SIZE
- C.POTENTIAL MISTAKES
- D.AUDIT STRATEGY
2.CONDUCTING THE AUDIT
- A.AUDITING SIGNAL
- B.CHECKS ON THE ADHERENCE TO ACCOUNTING PRINCIPLES
- C.CHECK POSTINGS
3.THE FINANCIAL STATEMENT AND REPORT
- A.FINANCIAL STATEMENT REVIEW
- B.PROPAL COMPLIANCE WITH GOVERNMENT REGULATIONS
- C.TREASURE REPORT REVIEW
- A.FINANCIAL WORKSHEET
- B.RECOMMENDATION ON INTERNAL CONTROLS
- C.AUDIT OPINION
- D.SIGN AUDIT REPORTs
1 AUDIT PLAN:
ARE YOU SUITABLE TO CONDUCT AN AUDIT:
Any auditor is required to be independent of the company they intend to audit in other to give a sound judgment. that means an auditor should not:
1.be a share holder of the said company to be audited
2.work for the company in any capacity.
3.regular rotation during audit to get fresh opinions on materials
The auditors should assess the scope of the work.this will enable you to know how many auditors that will handle the work.
The experience they say is the best teacher, that is to say, that an auditor should be able to make use their past experiences to attempt to predict areas where the company may have misstated financial information. this requires an in-depth knowledge of both the company and its current operating environment.
The auditor should outline a defined strategy that will enable a smooth audit. then create a timeline for when each action needs to be completed. know that this timeline may be changed significantly throughout the auditing process in response to new information
2 CONDUCTING THE AUDIT
The auditors should send a signal to the organization they are to audit at least 1-4 weeks interval.and also tell them the time period to be audited and a list of documents to be reviewed. this include:
1.bank statement for the year being audited
2.bank account reconciliation.
3 A list of transactions that were posted to the general ledger (a manual or online system that tracks a company’s transactions, including income and expenditures).
4 Check request and reimbursement forms, including receipts and invoices for all expenditures
5 Deposit receipts
6 The annual budget and monthly treasurer reports
CHECK ADHERENCE TO ACCOUNTING PRINCIPLES
If they can be substantiated, all the better. However, as an external auditor, that’s not in your scope of influence. You just need to make sure everything was posted to the proper account.
For example, there may be two different Accounts Payable, one for raw materials and one for office supplies
This means they were entered into the correct accounts and ledger line in the general ledger. Very basically, these would account receivables, but they should be further broken down (or could be) into specific receivables, depending upon the complexity of the organization.
For example, revenue from the sale of a product would be entered into accounts receivable, while dividends issued might be entered into Retained Earnings
3 THE FINANCIAL STATEMENTS AND REPORTS
FINANCIAL STATEMENT REVIEW
These include balance sheets and income statements for the time period being audited. Ensure that all transactions are properly recorded and accounted for in the general ledger. Any unusual deposits or withdrawals must be noted and ensured that they were properly accounted for and legitimate. Check that all these accounts were reconciled monthly.
An unusual deposit might be a very large amount or one from a business located outside the country. Unusual withdrawals would be if substantial amounts of money are going to one person or business over a long period of time.
Reconciling means comparing two different reports or documentation. For example, cash and investments are compared to bank and brokerage firms’ statements. Additionally, receivable and payable accounts should be compared to customer orders and bills, respectively. For inventory, a physical count and valuation can be done at least once a year to make sure the information in the general ledger is accurate.
For reconciliation, the auditor doesn’t need to look at every single transaction. Taking a statistical sample of the total number of transactions (analyzing a small number and applying the percentage error to the whole set) can provide similar results in a shorter time.
PROPAL COMPLIANCE WITH GOVERNMENT
If you are auditing a non-profit organization, verify their 501 tax-exempt status and that the proper forms have been filed. Ensure federal and state taxes returns, incorporation renewal and state sales tax forms, example, have been filed as necessary.
TREASURERS REPORT REVIEW
Make sure that what was reported was recorded and the totals from report to ledger books match accurately. Check to see that an annual treasurer’s report was prepared and filed.
FINANCIAL REVIEW WORKSHEET
e financial review worksheet. This is a summary of all the activity for the period (usually annually, but could be quarterly as well). This includes:
A.The cash balance at the beginning of the period
B.All of the receipts during that time
C.Any and all of the payouts during that time
D.The cash at the end of the period
RECOMMENDATION ON INTERNAL CONTROL
Make sure to especially note when improprieties exist. If you are asked to do so, assess the organization’s performance against their budget or other metrics.
For example, you may want to suggest that two people sign every check, not just one. There may be documents that are disposed of at the end of the year when they should be saved for a longer time period for tax purposes. Point out that originals need to be saved, not copies. Define the time period that all emails should be saved, usually for 7 years.
Determine your audit opinion. At the conclusion of the audit, the auditor must draft an audit opinion. This document states whether or not the financial information provided by the company is free of error and report(ed) correctly under generally accepted accounting principle (GAAP) standards.
Whether or not the reports meet these criteria is up to the judgment of the auditor. If they are reported correctly and free of error, the auditor issues a clean opinion. If not, the auditor issues a modified opinion. Modified opinions are also used if the auditor feels as though they were unable to issue a complete audit (for any reason).
SIGN AUDIT REPORT
This is a statement that you have completed the audit and you have found that either the ledgers are accurate or that there are issues. If you found any issues, such as missing checks or receipts (without explanation) or otherwise a math discrepancy, you should point those out in the report.
It is also helpful to include any information you deem appropriate to assist in fixing those issues or preventing their recurrence for the next audit period. Download PDF!
Disclaimer. We can not guarantee that the information on this page is 100% correct. Read more