How to start an Audit

How to start an Audit❓❓❓ 1️⃣ Understand the Company & Plan the Audit 📌Know the Business: Learn about the company, what it does, and its financial risks. 📌Engagement Letter: Get an official letter that explains what the audit will cover. 📌Find Important Areas: Focus on key things like revenue, expenses, and assets. 📌Set Materiality: Decide how big an error should be before it becomes a problem. 📌Make an Audit Plan: Plan how you will check each part of the financial records. 2️⃣ Check Risks & Internal Controls 📌Identify Risks: Find areas where mistakes or fraud could happen. Test Internal Controls: See if the company’s rules and systems prevent errors. 📌Do a Walkthrough: Follow a transaction from start to finish to understand the process. 3️⃣ Check the Financial Records 🟦 Balance Sheet Items 👉Cash & Bank: Check bank statements and confirm balances. 👉Receivables: Verify how much customers owe and if any amount is doubtful. 👉 Inventory: Count stock and check if the valuation is correct. 👉Fixed Assets: Confirm if the company owns its assets and if they are recorded properly. 👉Liabilities: Check what the company owes, like loans and expenses. 🟦 Profit & Loss Statement Items 👉Revenue: Check invoices and see if sales are recorded correctly. 👉Expenses: Verify payments and ensure they are for business purposes. 👉Salaries: Check employee payments and deductions like taxes and benefits. 4️⃣ Review & Analyze 📌Compare with Last Year: See if the numbers make sense compared to previous years. 📌Ratio Analysis: Use simple calculations to check if financial health looks right. 📌Recalculate Numbers: Double-check important figures for accuracy. 5️⃣ Keep Records & Working Papers 📌Save Audit Evidence: Keep copies of bank confirmations, invoices, and calculations. 📌List Open Issues: Write down any doubts or missing information and discuss with management. 6️⃣ Give the Final Report 📌Prepare Audit Report: Decide if the financials are correct or if there are mistakes. 📌Talk to Management: Share findings and suggest improvements. 📌Finalize the Report: Get approval and sign off the audit report. 7️⃣ After the Audit 📌Follow Up: Check if the company fixes the problems found during the audit. 📌Improve Next Time: Learn from the experience and make the next audit even better.