What Are the Ingredients of a Successful Accounting Audit?
One of the most essential skills an accountant needs to possess is how to conduct a successful audit. Regardless of whether the audit is ordered by the IRS or by a company CEO for business purposes, there are specific tasks and routines that any and every auditor must adhere to. These common ingredients are part of every audit, though certain elements will vary depending on the size and type of the business. Both seasoned and first year accountants can benefit from taking a closer look at what these ingredients are and why they are important.
Most business owners look for the following in a successful audit: thorough preparation, effective communication and a detailed and complete review. These three key components can clearly make or break a successful audit experience.
Below are a few other points to consider before heading into your next audit.
1) The importance of complete and accurate detail should never be underestimated. A successful audit depends on error-free specifics, meaning absolutely nothing can be overlooked. An auditor serves as a data gatherer, consultant, judge and salesperson, and each of these roles demands inordinate attention to detail. This is not just about detail in numbers, but includes grammar, mechanics, punctuation and other basics of formal written language as well.
2) When conducting your audit, make sure you are knowledgeable in the basic auditing methods and know which are best used in certain situations. These methods are: interviews, inspections, record reviews, observations, vertical tracking (sometimes known as vertical auditing) and exercises. As you begin to formulate your conclusions, make sure they are fully supported with information you have gathered by several if not all of these methods.
3) If the purpose of your audit is to identify areas that are problematic, make sure to focus on the following hot spots that are more subject to trouble than other areas: older procedures, inter-departmental interfaces and communication barriers, unusually complex programs, short-term or temporary “fixes,” outdated facilities and equipment and any policies or procedures that appear to be either too laidback or too strict.
4) Make sure that you are aware of any specific requirements of the business. In your planning process, this issue can be addressed along with other topics such as: which subjects will be audited in the given department, when exactly each department will be audited, the dates and times of the opening and closing meetings and of course, the point of performing the audit as well as what the official audit boundaries are going to be.
The goal of auditors and agencies is essentially the same: to make sure that all laws and rules are being followed. An audit is the tool to help the audited reach this goal. Clearly, there are no excuses for an accountant not knowing how to conduct an audit; those charged with this important responsibility must know without question exactly what they are doing every step of the way. With thorough planning and a smoothly executed auditing process, you can expect your next audit to contain all the right ingredients for success. For accountants wanting to gain a better understanding of performing audits, becoming a CPA provides the knowledge necessary to help you succeed.