Usually referred to as a financial statement audit, an audit is an unbiased examination and evaluation of the financial records of an organization. This process ensures that all records, statements, and transactions are fair and accurate to what the organization reports. Audits can be conducted internally by the organization’s employees or conducted externally by an outside CPA firm. In this month’s blog, we examine the four main phases of the audit process and how it is conducted.
Planning and Preparation
During the planning phase, the auditor will notify the client and discuss the scope and objectives of the evaluation in a formal meeting with the organization’s management. The auditor will also request a copy of the previous audit report, original bank statements, receipts, ledgers, and other necessary files. After gathering background information and meeting with key personnel, the auditor will begin preparing a draft of the audit plan and how it will be executed.
The fieldwork phase, also known as the execution phase, involves the auditor speaking with staff members and reviewing procedures and processes. There will be tests conducted for compliance with policies and procedures as well as evaluating internal controls. The auditor will also identify and discuss any problems that arise.
After conducting all of the necessary interviews and tests, the auditor will then finalize their audit report draft for review. This report outlines the objective and scope of the audit, relevant background information, the findings, any errors, and recommendations for improvement or correction. During this time, the draft will also be sent to management for their review and will give them a chance to respond to the report. Their responses should include their plans for improvement or correction and what steps they plan to take.
Closing Meeting and Follow-up
Finally, a closing meeting is scheduled with management and the entire report, responses, and any revisions will be reviewed and discussed. If there any issues, they will be resolved in this meeting and once all parties have come to an agreement, the audit report will be finalized. The final audit report including the management responses will then be distributed to all department personnel involved in the audit as well as to the CPA firm if an external auditor was enlisted.
After approximately six months to a year, a follow-up review will be performed to ensure the corrective measures were implemented. The effectiveness and timeliness of actions taken by management since the start of the audit will be evaluated.
When you need an audit conducted, call on the reputable services of MARIELA RUIZ, CPA, PLLC. We have many years of experience executing audits and strive to help companies improve their operations and internal workings. We are here to help you accomplish your objectives and improve the effectiveness of management and other procedures. Learn more by visiting our website or by calling (956) 997-0067 for any questions.