Steps Before

Commencing an
Audit
Ensuring Preparation for a Successful Audit
Darshan jain
 INTRODUCTION

•Purpose of the Presentation

• The purpose of this presentation is to outline the critical

steps required before beginning an audit to ensure a
thorough and effective process.

•Importance of Preparation in Audit Process

• Preparation is essential for setting clear objectives,

identifying risks, and ensuring compliance, ultimately
leading to a more successful audit outcome .
• Define Audit Objectives
Clearly state the specific goals and objectives of the audit,
such as financial statement accuracy, compliance with
regulations, or operational efficiency.
Develop Audit Scope
Determine the boundaries and extent of the audit,
including the departments, processes, and time frame to be
covered.
Allocate Resources
Identify and allocate the necessary personnel, -budget,
Neil Armstrong
technology, and other resources required to conduct the
audit effectively.
 ASSESING RISKS
•Identify Potential Risks

• Conduct a comprehensive risk assessment to

identify potential areas of concern, such as
fraud, errors, compliance issues, or
operational inefficiencies.

•Prioritize Risks

• Evaluate and prioritize identified risks based

on their likelihood of occurrence and
potential impact on organizational objectives.

•Determine Risk Mitigation Strategies

• Develop strategies to mitigate identified risks,

including implementing controls, improving
processes, or transferring risks.
 Understanding Legal and Regulatory Requirements

•Review Relevant Laws and Regulations

• Identify and review applicable laws, regulations, industry standards,

and organizational policies relevant to the audit scope.

•Ensure Compliance
• Assess the organization's compliance with legal and regulatory
requirements, identifying any gaps or areas of non-compliance.

•Identify Potential Legal Risks

• Identify potential legal risks and implications for non-compliance,

such as fines, penalties, legal actions, or damage to reputation.
 Gathering Preliminary Information

•Collect Relevant Documents

• Gather and review relevant documents, including financial statements, policies, procedures,
contracts, and previous audit reports.

•Review Previous Audit Reports

• Analyze findings and recommendations from previous audits to identify recurring issues,
areas of improvement, and progress made since the last audit.

•Analyze Financial Statements

• Review financial statements, including balance sheets, income statements, and cash flow
statements, to assess the organization's financial health and performance.
 Assessing Internal Controls
•Evaluate Effectiveness of Internal Controls

• Assess the design and operating effectiveness of internal controls relevant to

the audit objectives, such as segregation of duties, authorization procedures,
and system access controls.

•Identify Weaknesses

• Identify weaknesses or deficiencies in internal controls that could lead to

errors, fraud, or non-compliance with regulations.
•Recommend Improvements

• Provide recommendations to strengthen internal controls and mitigate risks,

such as implementing additional controls, improving existing controls, or
enhancing monitoring activities.
 Communicating with Stakeholders

•Inform Management and Key Personnel

• Communicate audit objectives, scope, timing, and expectations to

management, key stakeholders, and relevant personnel.
•Discuss Audit Objectives and Scope

• Engage stakeholders in discussions about audit objectives, scope,

methodology, and potential areas of focus to ensure alignment and
address any concerns or expectations.
•Address Any Concerns or Questions

• Address any concerns or questions raised by stakeholders,

providing clarification and reassurance as needed to build trust and
cooperation.
 Finalizing Audit
Plan
•Incorporate Feedback from Stakeholders

• Solicit feedback from stakeholders on the draft audit plan, incorporating their
input, suggestions, and concerns to ensure alignment and address any overlooked
issues.

•Adjust Plan as Necessary

• Review and revise the audit plan as necessary based on changes in circumstances,
emerging risks, new information, or updated stakeholder requirements.

•Obtain Approval from Management

• Obtain formal approval from management or the audit committee for the final
audit plan before proceeding with fieldwork to ensure support, endorsement, and
authorization.
 Conclusion

• Highlight the critical importance of thorough preparation in

ensuring a successful audit process, including defining
objectives, assessing risks, understanding legal requirements,
gathering information, assessing controls, communicating with
stakeholders, and planning fieldwork.

•Emphasize the Importance of Preparation

• Reinforce the idea that proper preparation is essential for

mitigating risks, ensuring compliance, achieving audit
objectives, and delivering value-added recommendations that
drive organizational improvement.
THANK YOU