Audit Planning for New Year

Do not make resolutions without an action plan. J. Allen Shaw

An excellent audit is of paramount importance to ensure that the purpose for which the audit has performed is achieved. A successful audit is an audit in which both the client and the auditors are satisfied with the audit results. Whenever a year ends and the time comes to say hello to New year, maybe it’s a good time to think ahead and make a resolution that your business will not follow the past missteps and will make efforts to take the business to the maximum heights.

Nothing is achieved without proper planning. A good audit needs perfect planning. As said by Benjamin Franklin “By failing to prepare, you are preparing to fail”. Many audits face failure because of inadequate planning. An audit can be an unpleasant surprise especially if done by ATO, or it can be a golden opportunity to identify the exploitation and fraud. To avoid any unpleasant surprise visit from ATO auditors, companies hire independent auditors to perform the audit in order to streamline the company’s affair. Audit help companies to expose any inconsistencies and inaccuracies within the report prepared by your organization. Auditors not only provide you with the solution to solve the issues but they also help companies to identify the areas which need attention and improvement. 

Audit Planning for New Year 1

Steps in Planning

Regardless of the company size, the auditors will use different audit strategies to conduct audit successfully. 

  • Audit planning 

The first step is to conduct meetings with the client to understand the structure and culture of the business. Audit planning is very important as the objective of auditors is to minimize the audit risk to a low level that is in accordance with the objective of the audit process. Auditors plan the direction and nature of the audit after having the complete knowledge of the client’s business. Auditors create their own auditing team which includes members from both parties i.e. auditors and staff of an organization. Auditor supervises their work and give them important guidelines. The objective of audit planning is to

  • Uncover the areas of risks
  • design strategies to address risks and to collect the logical proves or evidence
  • make audit economically reasonable 
  • avoid any disagreement between the client and auditors

 

  • Conduct a review or evaluate the strategies 

 

The auditors closely observe the strategies the company uses to operate effectively. The auditors will take also takes into consideration the company’s internal system and processes. If the auditor feels that the company’s internal processes and strategies are not allowing him to conduct the audit as planned, he may change his strategy and make alterations to accommodate both; his assumptions and company’s strategy to operate.

 

  • Conduct meetings to have a clear picture 

 

Many auditors think it is important to conduct a meeting with the company’s staff working in different areas to have a complete understanding of the different areas of an organization. This helps the auditors to identify areas of the organization that are not in compliance and are not working as effectively as they are supposed. 

 

  • Generate audit report

 

After conducting an audit, auditor generates a report which includes many suggestion and recommendations to improve the efficiency of the organization. 

  Challenge of Increased Risks- Things to consider for Audit committee

Due to the advancement of digital technology, the audit committee, and board members are experiencing great pressure. In the past, auditors only have to focus on two things; quality of audit and financial reporting. Today in this digital era, auditors and board members have to focus on many other things. They must have to work in accordance with the regulatory requirements and they also have to monitor the risks that are connected with the latest technology. Technology is playing a dual role, it is beneficial and also exposing businesses to new risks. Auditors should consider the risks that may arise due to the use of the latest technologies. To face this technological issue, auditors need to use the latest version of accounting software and techniques to make their audit successful and effective. The powerful new technology tools not only help auditors to conduct a perfect audit but it also gives assurance to companies and delivers them the true picture of the financial status of the company. This complete and valid information about the financials allows companies to take important steps for the benefit of the company. Data analytics is changing the direction of the work of auditors, auditors are forced to use to audit large data or datasets instead of small samples of data. With this latest technology company are enabled to get the little financial report reviewed. 

According to a survey, complications in businesses, digital and technology advancement are demanding to increase the focus of auditors on risk management area and internal control management. Board and audit committee should keep an eye on the change in the tax policies. 

Even though the latest technology has increased the risk factor still audit committee can enhance the effectiveness of audit by adopting the following ways

  • Audit reports must be based on facts, not on assumptions. It should be clear, transparent and meaningful. 
  • The importance of effective communication cannot be denied. Effective communication involves written, in-person, on-call, email, etc. This also helps business owners to have a complete insight into the company’s financial situation. 
  • Audit committee members must be well versed in all accounting and auditing areas. They must have knowledge of the latest accounting software. Auditors need to educate themselves so that they have complete knowledge about the latest development in regulatory and tax laws. They should attend different training programs to improve their accountancy skills. 

Audit planning includes many other things which are necessary for the successful growth of the organizations. It does not only help to understand the business and identify risks, but it also helps to identify the past missteps and give thoughtful suggestions to make the new year memorable.

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