What are the steps involved in planning an audit of financial statements?

The Case Western Reserve’s Board of Trustees and management place assets at risk to achieve established priorities and goals. A key function of the Office of Internal Audit Services is to understand, audit, and report to management and the Board of Trustees how that risk is being managed. Knowing what areas to audit and where to commit resources is an integral part of managing the internal audit function.

To identify areas of potential risk, each year the Office of Internal Audit Services performs a thorough risk assessment of all university management centers, operating units, and significant departments. From this assessment, an Audit Plan is developed and presented to the Audit Committee for approval.

The plan addresses high-risk areas as well as allocates time for special ad-hoc projects. 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.

In most cases, expect to receive notification when you or your department is to be audited.

• Expect to understand the audit's purpose and objective
• Expect to provide your ideas or concerns regarding the audit
• Expect to be treated with respect and courtesy
• Expect to be asked for various financial and department documentation; some may be confidential
• Expect confidential information to remain confidential
• Expect to answer all questions honestly
• Expect to receive a draft copy of the Final Audit Report prior to its release

Preparing for an Audit

• Have all requested materials/records ready when requested
• Organize files so we minimize disruption of your day
• Provide complete files
• Please make yourself available during the time of the audit and communicate any planned absences
• Provide work space for auditors if requested

Audit Process

Step 1: Planning

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.

Step 2: Notification

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.

Step 3: Opening Meeting

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.

Step 4: Fieldwork

This step includes the testing to be performed as well as interviews with appropriate department personnel.

Step 5: Report Drafting

After the fieldwork is completed, a report is drafted. The report includes such areas as the objective and scope of the audit, relevant background, and the findings and recommendations for correction or improvement.

Step 6: Management Response

A draft audit report will be submitted to the management of the audited area for their review and responses to the recommendations. Management responses should include their action plan for correction.

Step 7: Closing Meeting

This meeting is held with department management. The audit report and management responses will be reviewed and discussed. This is the time for questions and clarifications. Results of other audit procedures not discussed in the final report will be communicated at this meeting.

Step 8: Final Audit Report Distribution

After the closing meeting, the final audit report with management responses is distributed to department personnel involved in the audit, the President, Provost, and Chief Financial Officer, and CWRU’s external accounting firm.

Step 9: Follow-up

Approximately six months after the audit report is issued, the Office of Internal Audit Services will perform a follow-up review. The purpose of this review is to conclude whether or not the corrective actions were implemented.

Are your financial records on par with the standards required of modern businesses? Ensuring your financial statements are free from errors and discrepancies is indispensable in presenting critical business numbers to banks, shareholders, and even potential investors. Not sure what goes into a financial audit or how to get started? Read on to get a breakdown on the different phases of a financial audit and how you can automate this process.

What Is a Financial Audit?

A financial accounting audit is a process that helps you maintain the accuracy of your company’s financial transactions. Audits ensure that stakeholders are provided with accurate and credible information so they can make more informed decisions about your company. 

The Financial Auditing Process

The financial audit process involves having auditors evaluate the financial transactions and statements of your business. A typical business financial audit has four main phases: planning, setting internal controls, testing, and reporting.

The Planning Phase

To set off your business financial audit, you need to come up with a plan for data collection. This first step is essential in gathering accurate information about your business transactions to better understand your company’s current financial position. By identifying the best data collection method, you can quickly collect error-free quantitative data which is vital in maintaining the integrity of your financial statements and helping you make informed business decisions. 

It’s also worth mentioning that the plan you need to put in place to collate business data should adhere to the regulations set by the GAAP.

The Internal Controls Phase

The auditors who will check the integrity of your critical business numbers will not just look at the data you have collected. They will also scrutinize the financial procedures you have put in place. To that end, establishing internal controls and adhering closely to them closely is as important as collecting historical information about your business transactions. Otherwise, it will be difficult for the auditor to come up with an accurate report of your organization’s financial status.

The Testing Phase

With the necessary business data on record and internal controls in place, the next item to tick off your list is the internal controls – to check if they are working.

To check how well the internal controls are working for your company, the auditor might request more information about your company’s business transactions, continue with the inspection, and see firsthand how the internal controls are being performed. 

The Reporting Phase

How did your company fare in the course of the financial business audit? You’ll find out for sure in the Reporting Phase. An unqualified approval is the highest rating you can get. Next is a qualified approval, followed by a disclaimer, and finally, an adverse finding. 

The audit report outlines an unbiased assessment of your financial statements and internal accounting processes. Use these findings to make necessary adjustments in your internal processes so your accounting team can avoid data entry errors and produce more accurate and insightful data in the future. 

Automating your financial audit

A quick look at the financial audit process should tell you that it is a tedious task, more so if done manually. The good news is that cloud-based accounting software offers automated audit trail features. This feature is a convenient way to record your business’s financial transactions over time and help keep your business records organized. Aside from documenting invoices and payment records, your chosen software should also help you identify errors and correct them to make financial audits easier for your accounting staff.

A comprehensive financial audit is extremely useful in determining where your company is currently at and what you need to do to gear your business in the right direction. Automating some parts of the financial audit process is a crucial step in gaining better control of your business finances. Deskera encourages SMEs to use modern technology to streamline their business processes. with our experts to schedule a free demo.

#support #Accounting #accounting software #Digital Accounting #Digital Transformation #Finance #Financial auditing #Financial Software #SME Productivity

What are the steps involved in audit planning?

What is the financial audit process step by step?

What are the 5 steps of an audit?

What is the 10 Step audit process?