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Developing a successful audit plan requires planning, establishing priorities, some fieldwork and one or more follow-up meetings. Before initiating any audit plan, determine the audit universe, which is the type, areas and number of entities to be audited as well as the specific processes to be used in the audit. In developing an audit plan, priorities must be established, the scope and extent of the audit determined, cooperation must be established within the company or organization and standards for evidence should be instituted.
The first step in any audit plan is establishing priorities and focusing on mandatory audits. Audits should first be identified as discretionary or mandatory. A bit of research will reveal whether specific organization or company audits might be required by certain regulatory requirements. For example, the New York Stock Exchange requires an internal audit for all publicly traded companies. Some privately held firms also establish rules for mandatory internal and external audits.
After the scope of the audit has been established, create a detailed estimate of the time necessary to complete the entire audit process. If you are working with a team or staff of people, this would be the time to review the strengths and weaknesses of each individual team member and determine how much time each person can contribute to the audit plan. Figure the time estimate based on the total number of available staff members and how much time each person can devote to the audit and any necessary follow-up meetings. With holidays, sick days, training days and vacation time subtracted, full-time employees working a 40 hour work week have about 1,800 available hours in the span of one year.
The success of any true audit plan will depend largely upon collaboration with and cooperation from key managers, directors, executives and board members. Audits typically are seen as invasive and intrusive, and they might be looked upon in a generally negative light by some employees. A successful audit plan must be conducted independent of any interference from employees or company personnel in order to produce an objective view of specific areas or entities within an organization. To ensure an accurate, objective and successful audit, establish ground rules of independent operation from the outset.
Productive audit fieldwork requires establishing procedures for gathering, analyzing and evaluating evidence. Determine the type of evidence to be collected, how much to collect and whether that evidence is actually relevant and useful. An auditor must understand the particular company or organization and its environment in order to discern what types of evidence need to be collected. Procedures for audit fieldwork should include gathering only evidence that is factual, assists in reaching a specific conclusion and supports the final audit recommendations.
Audit working papers belong to the auditor, but the information inside belongs to the client. Explain the statement.
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