An audit is a formal check of financial accounts of an individual, business or organization. An internal audit is conducted by members of the same organization or business, and an external audit may be conducted by a regulatory agency or governmental agency. There are six specific steps in the audit process that should be followed to ensure a successful audit.
Requesting Financial Documents
After notifying the organization of the upcoming audit, the auditor typically requests documents listed on an audit preliminary checklist. These documents may include a copy of the previous audit report, original bank statements, receipts and ledgers. In addition, the auditor may request organizational charts, along with copies of board and committee minutes and copies of bylaws and standing rules.
Preparing an Audit Plan
The auditor looks over the information contained in the documents and plans out how the audit will be conducted. A risk workshop may be conducted to identify possible problems. An audit plan is then drafted.
Scheduling an Open Meeting
Senior management and key administrative staff are then invited to an open meeting during which the scope of the audit is presented by the auditor. A time frame for the audit is determined, and any timing issues such as scheduled vacations are discussed and handled. Department heads may be asked to inform staff of possible interviews with the auditor.
Conducting Onsite Fieldwork
The auditor takes information gathered from the open meeting and uses it to finalize the audit plan. Fieldwork is then conducted by speaking to staff members and reviewing procedures and processes. The auditor tests for compliance with policies and procedures. Internal controls are evaluated to make sure they’re adequate. The auditor may discuss problems as they arise to give the organization an opportunity to respond.
Drafting a Report
The auditor prepares a report detailing the findings of the audit. Included in the report are mathematical errors, posting problems, payments authorized but not paid and other discrepancies; other audit concerns are also listed. The auditor then writes up a commentary describing the findings of the audit and recommended solutions to any problems.
Setting Up a Closing Meeting
The auditor solicits a response from management that indicates whether it agrees or disagrees with problems in the report, a description of management’s action plan to address the problem and a projected completion date. At the closing meeting, all parties involved discuss the report and management responses. If there are any remaining issues, they’re resolved at this point.
– Sharon Penn