In intervening years, the risk assessment is updated through data analysis and interviews with senior executives across the university. If necessary, the audit plan is adjusted for any changes to the university's risk assessment.
We believe that the university is best served if the Audit Plan is a dynamic document that continually adjusts to changes in the environment.
Therefore, if your management center or department has a need for our services, please contact us. Depending on the relative risk associated to your need and the amount of time necessary to fulfill your request, the Office of Internal Audit Services will communicate what level of assistance we will be able to provide.
At a minimum, we will be available to offer guidance and advice throughout any project you perform on your own. The auditor will review prior audits in your area and professional literature. The auditor will also research applicable policies and statutes and prepare a basic audit program to follow. The Office of Internal Audit Services will notify the appropriate department or department personnel regarding the upcoming audit and its purpose, at which time an opening meeting will be scheduled.
This meeting will include management and any administrative personnel involved in the audit. The audit's purpose and objective will be discussed as well as the audit program. The audit program may be adjusted based on information obtained during this meeting. This same-as-last-year approach leads to incongruities in risks of material misstatement and the procedures performed. In effect, the prior year work papers become the current year audit program.
Another common audit planning mistake is the use of a balance sheet audit approach. Moreover, some auditors test balance sheet accounts and little else. But this approach can lead to problems. I have heard auditors say: If I audit all of the balance sheet accounts, then the only thing that can be wrong is the composition of revenues and expenses. But is this true?
If we disregard stock purchases and sales, equity is usually the accumulation of retained earnings. And retained earnings comes from the earnings or losses on the income statement. In other words, retained earnings comes from revenues and expenses. So the net income or loss revenues minus expenses has to fit into the accounting equation equity equals assets minus liabilities.
Mathematically I see why someone might say this, but a flaw lurks in the construct. I once saw an audit firm sued for several million dollars. The CPAs audited the company for several years, issuing an unqualified opinion each year, but a theft was occurring all along.
The balance sheet accounts reconciled to the general ledger, and no problems were noted in the audit of the balance sheet accounts. But millions were missing. So what flaw lies in a balance sheet audit approach? Millions can go missing while the balance sheet accounts reconcile to the general ledger. Consequently, auditing the balance sheet accounts alone may not detect theft. Therefore, gaining an understanding of the internal controls and developing appropriate responses is critical to identifying material misstatements, especially when fraud is possible.
So as we plan our substantive procedures, we need to avoid the flawed balance sheet approach. Yes, substantive procedures for the balance sheet accounts are important, but fraud detection procedures are necessary when control weaknesses are present. A test of details is necessary when a significant risk such as a fraud risk is present. Develop an audit strategy and plan once you complete your risk assessments procedures. Then link the risks of material misstatement to your further audit procedures.
Doing so will help ensure that your audit is successful. In other words, that no material misstatements are present when you issue an unmodified opinion. See my audit series The Why and How of Auditing to learn even more about the full audit process, including how to audit transaction cycles such as cash, receivables, payables, and debt. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He frequently speaks at continuing education events. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
Wesley, yes, for my subscribers. You should see a subscription box at the top or bottom of my posts. Or I can add you manually if you like. Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.
We are documenting: The scope the boundaries of the work The objectives what the deliverables are The significant factors e. The risk assessment what are the risk areas? The planned resources e. It could have read as follows: We will put a man on the moon. Here are the main areas we cover: Deliverables and deadlines A time budget The audit team Key client contacts New accounting standards affecting the audit Problems encountered in the prior year Anticipated challenges in the current year Partner directions regarding key risk areas References to work papers addressing risk Who Creates the Audit Strategy?
Audit Strategy as the Central Document If you want to see one document that summarizes the entire audit, this is it. Audit Plan or Audit Program Now we create the detailed planning steps—the audit program. Creating the Audit Program How—in a practical sense—do we create the audit programs? Sufficient Audit Steps How do we know if we have adequate audit program steps? These facts serve as the foundation for the opinion in the audit report. These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.
Audit techniques often employed by auditors include analytical procedures, investigation, examination of records and assets, observation, reconciliation Reconciliation Reconciliation is the process of comparing account balances to identify any financial inconsistencies, discrepancies, omissions, or even fraud.
At the end of any accounting period, reconciliation involves matching balances and ensuring that debits credits from one account for one transaction is same as the credit debits to another account for the same transaction.
Furthermore, the knowledge and experience of the auditors will undoubtedly reflect in the conversations throughout the work plan development. This knowledge transfer method guides audit engagement teams throughout different processes such as information evaluation and risk identification.
Having a punctiliously crafted audit design helps auditors achieve efficient engagement, risk mitigation, and compliance with standards set by authorized governing bodies. In addition, the company being audited should be ready and offer coordination to assist in the efficient completion of the audit.
Let us look into the significance of a well-informed design with the help of an audit plan example. The auditor painstakingly considers the issue in the current year by addressing it in the risk assessment or designed audit procedures Audit Procedures Audit Procedures are steps performed by auditors to get evidence regarding the quality of the financial information provided by the management of a company.
It enables them to form an opinion on financial statements and ensure whether they reflect the true and fair view or not. The auditor plans to assess the risk of inventory fraud with the help of observation of physical inventory and analytical procedures and describes its nature, time, and extent. Hence, what is more important is the treatment of planning as a continuous process commencing from the end of the previous year audit and comes to an end with current audit engagement completion.
The vital thing is to develop an overall audit strategy. The plan should be in line with the audit strategy so that the plan entails the successful completion of the audit objectives.
Generally, the audit design must encompass the nature, timing, and extent of risk assessment procedures, further audit procedures at the assertion level, and other planned audit procedures to complete the process while ensuring professional standards.
The two elements of planning are creating an overall audit strategy and the associated plan. Following different activities like collecting client requirements and information and verifying the applicable laws is vital in preparing an audit strategy. It should align with audit objectives and contribute to the act of curating an audit work plan.
0コメント