The audit process involves planning, fieldwork, reporting, and possibly follow-up, with steps varying based on the type of audit. Planning involves deciding on the type of audit and fees, while fieldwork involves reviewing financial and operating information. Reporting involves discussing findings with management and preparing a final report. Follow-up may be necessary for companies that fail the initial audit.
The audit process is the specific steps used in a financial, operational, or compliance audit. The steps may vary depending on the business and the type of auditing services that business owners request from an outside accounting firm. Most companies have financial audits once a year; Operational and compliance audits are typically performed on an as-needed basis. The audit process generally includes three basic steps: planning, fieldwork, and reporting. A fourth step, follow-up, may be necessary if the company fails the initial audit process.
Planning is usually the first stage of the audit process. It usually starts with company management working with auditors on the type of audit service needed for your company. Typical audits include banks, internal controls, fixed assets, or complete financial commitments. Audit fees are often discussed at this point as well because each audit may have different levels of involvement from the auditors. Higher levels of audit services generally require more time and effort on the part of auditors, resulting in higher fees. Once the audit engagement services are decided, the audit process generally moves into the fieldwork phase.
The fieldwork phase of the audit process is the hands-on review of financial and operating information by the auditors. The breadth and depth of the field depends on the type of audit and the number of errors found during the fieldwork phase. Auditors select a sample of the company’s financial or business information and compare it to the company’s accounting or business policies. Significant variances or flaws generally result in auditors selecting a second sample to determine if further errors exist. If there are more errors, auditors typically mark the entire business process related to the specific information as a failure. If the second samples are error-free, auditors often just note how many variations or flaws were found in the data. Once the fieldwork phase is complete, auditors typically begin the reporting section of the audit process.
The reporting phase of the audit process typically involves auditors discussing their findings with company management. This meeting provides management with the opportunity to dispute any findings and ask the auditors to reconsider items found during the fieldwork phase. Auditors may request additional information from management during this meeting to complete their documentation requirements. Once the company’s management and the auditors agree on the initial audit report, the auditors normally prepare the final audit report that can be issued to external interested parties.
The follow-up stage of the audit process is a corrective audit performed on companies that do not achieve a passing audit rating. Large or publicly owned companies have generally assigned acceptable audit scores to each department in their operations. Auditors may regularly require smaller companies to perform a corrective audit, which is not unusual; Corrective audits are simply an extension of the process.
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