What is the procedure of an audit?
What is the Procedure of an Audit?
An audit aims to determine whether a company adheres to expected standards by objectively analyzing and examining its operations. Audits can have different purposes. Audits typically consist of several steps or phases to ensure the most accurate and reliable results. Audit processes vary depending on the type of audit and what standards govern the auditor’s work. This article will help you get the basic details of an audit procedure.
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Issue of Notification
Audits begin with issuing a notification to the Company or organization being audited. The notification letter generally will specify the following:
- The purpose of the audit
- Date and time of the audit
- Date and time of an initial meeting of the auditor and Company’s leaders
- Documents required for auditing – Articles of incorporation, the recorded minutes of the board meeting, an organizational chart, correspondence, sales records, and more.
Auditing Planning Process
The auditor will plan the audit once the notification is sent. Auditors must also identify the critical areas of inquiry and the specific information they wish to examine to analyze.
Initial meeting
As part of the planning stage, the auditors and senior management usually meet for the first time.
Fieldwork
Fieldwork is the first active auditing stage. To investigate business practices and procedures, key employees may be interviewed. Auditors will also perform sample document checks to ensure the firm’s’ document creation and retention practices are sound.
Draft Audit Report
The auditors prepare a draft audit report after the auditing team completes the document review and fieldwork. The team will circulate the draft report for review and suggested revisions.
Management response for Draft Audit Report
After the auditing team makes the final revisions to the audit report, the final document will be given to management for review and response. The audit document usually contains the following details:
- Ask the administration to respond to each audit’s findings and conclusions.
- Whether Company agrees or disagrees with the problems cited.
- The plan to correct any observed problems
- The expected date by which all issues will have been addressed.
Exit Meeting after Auditing
An exit meeting may be scheduled with the Company being audited after receiving the management response, which may be attached to the final audit report, to close loose ends, answer questions and clarify the audit scope.
Distribution of audit report
The finalized audit report will be distributed to all necessary stakeholders of the Company, including inside and outside the audited area, if applicable.
Feedback on the Audit Report
As a final step, the audited Company implements the recommended changes per the audit report. After that, the auditors review and test how well those changes resolve the identified issues or problems. Feedback between the auditors and the Company continues until all issues are resolved and the next audit cycle begins.
