Finance & Accounting

Accounting Firm Auditing Checklist

Accounting firm Auditing checklist refers to the various audit checklists that are to be conducted by the company through external audit experts or internal audit professionals. Although there are multiple types of audit processes. Private sector companies conduct their audit mostly through an accounting firm audit checklist professional to achieve an error-free audit report.

It helps the company stakeholders, investors, and board of directors to gain confidence in the company’s financial status and positions. For companies, the accounting firm auditing experts collect and evaluate various financial statements to check if they comply with the audit laws and regulations. Documents that are collected by the respective auditors are companies’ income statements, cash flow statements, and balance sheets.

However, accounting firm auditing helps the company’s board of directors, stakeholders, regulatory agencies, and upper management with an idea or knowledge of how the company’s money is earned and spent throughout the fiscal year. The auditing procedure is indeed very time-consuming. Depending on the size of the organisation, it can take a month to an entire year. It is the responsibility of the auditor to prepare the findings on a draft of the audit report along with their expert opinion on the accuracy and complete details of the financial transaction of the respective organisations.

What is an Audit?

An audit is a kind of financial investigation of the various financial transactions of the company. A company must maintain accuracy and clarity through an accounting firm auditing its financial report. Such reports of financial transactions are done through an examination or evaluation of the financial statements of the respective organisations. The company’s audit program is conducted by either external or internal company auditors. A complete, accurate, and error-free audit gives a company’s investors and stakeholders a boost of confidence that the company’s auditing reports are working accurately.

Accounting firm auditing experts help the company’s audit process to comply and align with the appropriate legal compliance and regulation standards. After the auditors complete the audit, an opinion will be drafted in the audit report if any improvements are to be made to align the financial statements of the organisation to prevent various penalties and legal liabilities.

What are the three types of Audits?

1. Compliance audit

Compliance audit refers to an audit that evaluates if the company is complying with the respective state laws and regulations. This compliance audit helps the company to prevent any legal liabilities and penalties for non-compliance.

2. Operational Audits

An operational audit, on the other hand, is an audit that examines the company’s business operations, like how the products come and go from one place to another. This is an examination of how organisations gain profit from their company’s business operations.

3. Financial Audits

Financial auditors are the ones who evaluate and examine the company’s financial transactions by collecting various data and documents from the respective company, aligning with the company’s terms and policies and its legal regulatory requirements. Financial auditing is conducted by professional auditors applying the statutory auditing standards and procedures. Auditors help the company to have an accurate financial structure supported by various audit evidence.

What are the Types of Financial Audits in a Company’s

 There are many types of financial audits, and depending on the company policies and framework, each type of financial audit serves a different purpose. The most common types of financial audits are given below.

1. Internal Financial Audit

When a company conducts its financial audit through its employees by appointing an external audit professional to check and evaluate the company’s effectiveness of its internal control, risk management, and various laws and regulations compliances.

The internal financial audit helps the organisation mitigate the risks involved with the company’s operations. It provides various advantages to the company by identifying various risks involved in the company’s operations, thus enhancing the effectiveness of the company and reducing the potential risks.

2. External Financial Audit

External financial audits are the kinds of audits that are generally conducted by publicly traded companies according to the requirements of laws and regulations. This is conducted by an independent, certified public account or a professional audit firm. The key objective of the external financial audit is to ensure the credibility and accuracy of the organisations’ financial statements, thus helping investors, shareholders, and the board of directors have confidence in the financial status of the respective companies.

3. Financial statements audit

Most of the company organise this financial audit to check the financial statements of the company; this is conducted based on the company’s size, either internally or externally by the respective companies. This helps the company to understand the accuracy of its financial status. During auditing, an auditor will collect several documents, like a balance sheet, invoices, accounting records, etc., to evaluate the company’s financial strength.

4. Non-profit Audit

A non-profit audit refers to the auditing procedure of Non-Profit organisations. Unlike any other company, the requirements of non-profit organisations are different. The objective of the non-profit audit is to review and examine if the organisation has complied with the respective laws and regulations. It has accounts on the funds where they have been utilised and accuracy in financial reporting.

What are the Phases of the Accounting Firm Auditing Process

It is indeed common among organisations to conduct a financial audit to avoid any discrepancies and risks in the company’s growth. Given below are some of the common phases of the auditing process that are adopted by accounting firm auditing.

1. Firstly, accounting firm auditing will start with planning how to conduct the company audit; for that, they start collecting various important documents from the companies, such as previous years’ audit reports and preliminary statements from the involved parties. During the phase of planning, the auditor identifies and analyses the scope and objectives of the company’s financial audit.
2. Second, a preliminary assessment has to be conducted by the accounting firm auditing before starting its audit plan. A company may have a different structure to conduct an auditing program. For that, a company needs to evaluate and communicate with its upper management team to align with its internal policies.
   Accounting firm auditing organizes a meeting or conference with the companies being audited and collects or incorporates suggestions and recommendations made by the company’s management if applicable.
3. Third, accounting firm auditing will conduct an assessment by interviewing and cross-questioning the employees of the organisation working in various departments. This will help the auditor to understand the company’s general practice, operations, and procedures of the company frameworks. After holding this assessment, accounting firm auditing experts will get an idea of whether the company is effectively following auditing compliances according to laws and regulations. Such non-compliance will be identified by the concerned auditor, and accordingly, recommendations and changes will be implemented wherever necessary to avoid any penalties and legal liabilities.
4. Lastly, after completing the above three important phases, an accounting firm auditing firm will draft an audit report on the company’s financial transactions, mentioning the areas where improvement is essential and various other recommendations that a company shall follow to improve their auditing procedures. An exit meeting or conference is conducted between the accounting firm auditing and the respective companies’ upper management to discuss the final audit report.

 Different kinds of Accounting Firm Auditing Checklists

1. Create a structure on the Audit Checklist.

This task is about determining the organisation’s size, framework, complexity, etc. Accounting firm auditing assists companies in defining the boundaries and objectives of the financial audit of the respective organisations. However, accounting firm auditing evaluates the company regulations and areas where the auditing is necessary, covering all the potential risks. This is the first step where the company’s auditing goal is created and hence aims to achieve it.

2. Appoint a key audit personnel.

Before conducting the financial audit for their company, the company shall appoint and determine a professional audit personnel, such as an accounting firm auditing service provider, who shall execute the organisation’s financial audit very efficiently by collecting data and analysing the same. Company communication and accountability have to be very clear between the auditor and the employees of the organisation.

3. Evaluation of past financial audits

It is very important to learn from the previous mistake to bring improvement in the present; accounting firm auditing shall examine the previous auditing reports of the organisations to understand the repeated mistakes or issues, deficiencies, and areas where improvements are necessary for the company to look for. Accounting firm auditing will analyse if any issues in past auditing are unresolved, patterns or trends that could indicate a potential risk, and systematic weaknesses of the organisations.

4. Learning Companies Business Structure or Models

Before conducting an audit of the financial transactions of the company, it is indeed important for the accounting firm auditing professionals to look into the company’s models, structure, operations, and business strategies. Evaluate the organisation’s industry trends, complex landscape, compliance and regulatory environment, etc. Accounting firm auditing shall seek a piece of knowledge and understanding of the organisation’s target audience and competitive advantages for bringing better results for the company’s overall growth. 

5. Assessment of the Organization’s Accounts receivable

Accounting firm auditing shall evaluate if the company has a bad debt or invalid accounts. For this accounting firm, the auditing professional shall have access to the organisation’s accounts receivable to confirm that the company maintains accuracy, completeness, and recoverability.

6. Inspection of Inventory Counts

The company needs to maintain the accuracy of inventory counts between the physical counts and recorded inventory counts with the help of accounting firm auditing and report the same if any discrepancies and inconsistencies are detected.

7. Examine for Non-Compliance

It is, indeed, important for organisations to comply with various laws and regulations to maintain relevancy in the market. It is the responsibility of the accounting firm auditing experts to examine if the respective organisations are complying with accounting standards compliance and regulations, thus preventing the companies from legal liabilities and fines.

8. Inspection of the company’s capital Assets

Accounting firm auditing shall review and identify the capital assets of the company, like property, plant, equipment, etc. Examine the accuracy of the asset records and calculate the asset depreciations.

9. Test Internal Controls Efficiency

For the upliftment of the company’s growth, a company’s internal policies have to be very efficient to prevent and mitigate various risks involved in the company’s financial transactions.

10. Verify the company’s liabilities and Equity.

Accounting firm auditing has to examine the various companies’ contracts and agreements to determine if there are any debt covenants or shareholder equity transactions to achieve complete accuracy and completeness in the organisation’s auditing program.

11. Review the company’s income and expenses.

Accounting firm auditing needs to review the company’s income and expenses of the organisations to examine the reliability and accuracy of the company’s transactions.

12. Preparation of the Audit Report draft

After various evaluations and examinations of the company’s policies and operations, accounting firm auditing experts shall prepare a draft of an audit report on various findings and make a recommendation on the same if any changes or improvements are required. This draft of the audit report shall be accompanied by sufficient evidence to support every conclusion.

What are the outcomes of Accounting Firm Audit Checklists?

1. The accounting firm audit checklist helps the company meet the accounting standards according to state laws and regulations. A company, to stay relevant and maintain its credibility, has to fulfil the compliance requirements.
2. Another significant outcome of an accounting firm audit checklist is that a company can mitigate the potential risk involved in its internal controls, policies, and procedures. Thus, the company’s vulnerabilities and weaknesses are detected and identified through an auditing program. It also helps the company to maintain its reputation among its peers in the market.
3. This examination helps the company have a transparent idea about its financial performance. Companies can also improve their financial status once they detect where it is lacking.
4. An accurate audit report through an accounting firm auditing attracts more investors as they look for a company with a strong financial structure so that they can have confidence investing in such firms with a peaceful mind.

Conclusion

The Accounting Firm Auditing checklist is an important framework for companies and business owners. Companies can streamline their objectives in auditing their financial transactions. It helps the company comply with the laws and regulations of audits in respective jurisdictions. However, companies, with the assistance of an accounting firm auditing checklist, can detect and identify potential risks, thus safeguarding the reputation of the respective company or organisation. It also helps the company increase the efficiency of its operations.

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