Audit And Assurance Company On A Budget: 8 Tips From The Great Depression

Audit And Assurance Company On A Budget: 8 Tips From The Great Depression

Audits are divided into three stages: preparation, fieldwork, and reporting. Each phase can also be subdivided further. There are eight major steps in the preparation phase:

 

  • Receipt of Assignment: This phase informs your auditor if they must do a financial statement audit or a more comprehensive performance or compliance audit. They may be given a vague assignment, to begin with, but as auditing experts, they will be able to swiftly identify the job’s relevant objectives.

  • Research the Audit Subject: The AICPA issues Auditing Standards Statements (SAS). These publications provide external auditors with guidance. The US GAO also publishes the Yellow Book, which contains auditing requirements for federal entities. Both sorts of publications specify the questions auditors should ask their respondents before conducting risk assessments. Understanding the industry, the legislation, the nature of the company, the entity’s objectives and plans, the technique the entity uses to assess and review financial performance, and the entity’s internal controls are among these. To save time during this phase, many auditors adhere to the same last year’s (SALY) philosophy. This indicates that they do the audit in the same method as the prior year. Many auditors, however, disagree with this technique because they believe it is lazy.

  • Determine Audit Criteria: This is the auditor’s standard. Auditors conduct financial audits and compare them to the Financial Accounting Standards Board’s Generally Accepted Auditing Standards (GAAS) (FASB). Before the audit, the client and auditor must agree on the benchmark for audits that go beyond finances.

  • Perform the Risk Assessment: A risk assessment consists of two parts: segmenting the audit and measuring the risk of each segment. Financial statement audits are already segmented by SASs. When it comes to other sorts of audits, auditors may have to get creative to separate the risk groups. The auditor then applies an audit risk calculation to each piece: (Detection Risk) x (Inherent Risk) x (Audit Risk) (Control Risk). This formula calculates the probability of incorrect findings as well as undetected major misstatements. The auditor has complete control over the detection risk in this calculation.

  • Confirm Audit Objectives: The auditor has already analyzed the risks and can confirm what the audit objective(s) are at this point. In the case of a financial audit, for example, the auditor can include specific objectives (sub-objectives) such as a review of cash receipts.

  • Choose Audit Method: The techniques for making decisive findings should come naturally from the audit goals. The auditor will link each aim to a methodology such that their results are supported by good evidence. Methodologies include sampling, observations, interviews, and fluctuation analysis, to name a few.

  • Link the Method to Cost: Once the auditor has determined the methodologies, the auditor will budget the cost so that the firm may estimate the total cost of the audit.

  • Confirm the Audit Plan: Your auditor’s final step before going on the field is to finalize their plan with your company. The on-site process can begin once your company has confirmed the plan and is satisfied with the number of hours that correspond to the methodology and expenses.

 

The firm, S I G M A C & Co, Chartered Accountants, was founded in 1997. Qualified Auditors, Accountants, and Business and Tax Consultants make up the firm. We are headquartered in Mumbai, India’s financial center, and have operations in Delhi NCR, and Aurangabad. Years of expertise have led to significant expansion and dramatic advancement with one focus: qualitative customer service with an ongoing commitment to give best-in-class service to our clients.