Audit and assurance are procedures used for the assessment of a company's financial records. It is a method of verifying and validating accounting records of a company and match them to Indian accounting standards and principles. Audit and assurance functions also verify whether the company's accounting records are accurate or not.
What are Audit and Assurance?
Audit is the method of assessing accounting entries that appear in the company's financial statement. In contrast, assurance is the method of evaluation that is used for analyzing accounting entries and financial records of the company. Typically, both audit and assurance go hand in hand. An audit generally pursues assurance.
In this article, we will discuss five simple steps that can be used during an audit and assurance process.
The Five Simple Steps for Audit and Assurance
Most auditors use these five essential steps to verify and validate facts and solutions that a company wants to achieve during an audit and assurance. The essence of these steps is to focus on everything from asking investigative questions to examining documents and re-performing estimations.
Each of these audit and assurance steps support auditors to form an informed judgment, based on documented evidence. Additionally, it also offers auditors the right information that is considered necessary to deliver suitable conclusions, such as if the business is functioning optimally and controlling risks appropriately.
The five methods used for audit and assurance are as following:
Inquiry is the first fundamental step in which the auditors ask questions to the managers, accountants, and any other essential staff of the company to help establish relevant information and facts. Auditors can ask about business processes and reporting of financial transactions to ensure that the company does what it can to avoid risks.
A widely used example of inquiry is to ask the company owner how the financial records of the corporation are collected and maintained. Auditors then consider the responses—but do not accept the answers alone as validation—to determine additional test parameters, as this approach is also used in combination with other, more accurate methods.
The second necessary step is the observation or inspection of activities, procedures, and conditions by an auditor(s). Management must proclaim that all noted records and documents have been properly stored and kept protected in a locked cabinet.
Then, to authenticate that the stated documents and records have been stored securely, the auditors watch an employee or staff member unlock the specified cabinet and disclose the specified records. When there is no documentation or citation of the operation of a control, this step is used at large.
The third step, examination, facilitates auditors to determine whether manual controls are being regularly operated and accurately recorded. For instance, an auditor may verify that backups are planned and scheduled to operate consistently.
Audit and assurance experts also check whether necessary forms and files are being filled out precisely. Examination of evidence also incorporates the assessment of manual documentation and records that might contain visitor registers, employee handbooks and system archives.
The next step of audit and assurance is re-performance, which can only happen when inquiry, inspection, and examination have been unsuccessful in delivering the necessary assurance that a specific control is functioning efficiently. This step is also helpful in verifying if the automated controls are functioning successfully or not.
When it comes to audit and assurance, re-performance is one of the most critical steps to highlight the operational efficiency of a specified control. Using this step, auditor(s) should manually implement the control in question, like re-performing a calculation that is otherwise done using automated means.
After the completion of the re-performance, the correct adjustments and modifications must be made, wherever possible. Regardless of whether it is a routine employee practice or a complete process that needs change, it must be discussed and tackled to ensure compliance sustainability for any regulatory reviews or audits in the future.
The activities related to audit and assurance that guide to achieve a positive audit outcome involve complete knowledge and awareness of the regulatory legislations or standards for auditing. Convert the regulatory information into policy, procedures, or other documentation on quality assurance that offers directives and guidelines for workers to comply with the intended regulations.
Why Consider Outsourcing For Your Upcoming Audit?
Organizations that do not want to invest internally for obtaining audit expertise may opt to access substantially higher skills externally. All the while, having the flexibility to decrease or increase their internal audit activities to meet all ongoing and future demands of the business.
Through outsourcing, critical elements of an internal audit and assurance functions, your organization will not only minimize costs but also free up resources and key staff. Thus, allowing improved focus on core competencies while tapping into relevant skill sets, best practices, knowledge of the industry and corporate auditing.
Why Hire TRC For Audit and Assurance Function?
Audit and assurance functions are more than just numbers and figures. It is about attesting to successes and obstacles. Audit and assurance will help your business build solid foundations for all future objectives and aspirations. TRC Corporate Consulting illuminates the when, how, and why of the transitions so that you stay ready to take a step forward. These are some key benefits of outsourcing your organization's audit and assurance function to us:
Do you need additional information about any of the audit and assurance services? Contact our team at TRC Corporate Consulting, and we will help clarify the essential aspects of your organization's upcoming audit.
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