Business entities must evaluate their operations and performances to see whether they are doing good. Conducting an audit is an efficient technique to analyze operations and assess several business fronts. However, an effective audit is incomplete without a comprehensive plan as it includes the road map and entails what to do after the results. Companies should focus on this plan and assess its viability before executing it. Professional auditors never work without these plans. This post will uncover how to develop a perfect audit plan for your business. Keep walking with us to learn more!
Effective ways to develop an audit plan:
An audit is a comprehensive road map that explains the audit process to take place for an organization. It also explains the standards auditors will uphold while performing the audit. Focusing on this document will help you ensure a streamlined auditing process to meet desired results. The information about the company in question is often disclosed in this document, helping you to touch on different aspects. However, developing a viable audit plan takes a few strategies enlisted in the given paragraphs.
1. Assess business risks:
Almost every business is exposed to a certain degree of risk, adversely affecting its health and standing. Being a smart business manager or owner, you should assess the associated risks in your business and develop an audit plan afterward. How ready is your company to handle these risks? It should probably be the first step in developing an audit plan that meets your expectations.
You should be quick enough to identify any risk(s) that may impact your company’s ability to reach its goals. Documenting this risk will help you put your company’s operating environment in question and work for it.
2. Analyze accounting policies:
Significant accounting policies exercised in your organization must be analyzed before preparing an audit plan. A professional auditor will spend sufficient time assessing whether the accounting policies and practices are appropriate. Why would you need this assessment? It is because most of the accounting policies and procedures can be helpful in auditing – especially the following:
- Revenue recognition
- Capitalization
- Consolidation impairment
- Accounting for inventory
- Valuation
A few documents and flowcharts in your company can help external auditors quickly understand accounting procedures. Do you find it hard to prepare for an external audit? It would be best to hire audit firms in UAE and let them help you with documentation and internal audit procedures.
Read also: Reduce fleet downtime with Fleet Management Software
3. Determine materiality threshold:
Have you ever thought of the effect caused by a misstatement on the decision-making capabilities of an individual or company? It is referred to as the materiality threshold in auditing terms, and you should determine it before preparing an audit plan. Why is it necessary to determine this point while auditing your company? It is a crucial size to gauge when creating an audit plan to determine the material threshold.
The materiality is usually relative to the size of the company in question. Auditors often use a percentage of the company’s total assets or a percentage of its revenue to reflect the materiality threshold number.
4. Create audit expectations:
Outlining your audit plan expectations is necessary before designing the audit plan. It should be an integral part of the plan as you develop expectations for analytical procedures that you must follow. Auditors primarily focus on ratio and trend analyses during the audit, as they comprise a major part of analytical procedures.
Ratio analysis aims to compare a company’s standings against the industry averages. At the same time, trend analysis will identify anomalies in the company’s accounting procedures and practices. A wise auditor will consider these options before preparing an audit plan to see how it will go with the current conditions and accounting policies.
Read also: Impact of Logistics Costs on the Economic Development
5. Design audit procedures:
Another integral part of creating an audit plan is to design procedures for a successful audit. Audit procedures normally exist under two categories – substantive testing and tests of internal control. Direct testing of transactions falls under substantive testing and is recorded on financial reports. The auditor will conduct numerous substantive testing, depending on what he wants to determine.
Reviewing a company’s abilities to prevent material misstatements falls under internal controls testing. These procedures are hard to implement unless you hire professional audit firms in UAE and seek their help. Having them on your side will streamline the internal auditing procedures, leading to a perfect audit plan.
Read also: Why Is It Best to Hire Experts to Optimise your Amazon listing?
Bring transparency into your company with internal auditing!
Auditing procedures help assess your company’s abilities and operations. You can design aggressive strategies to keep your firm compliant with the standards. However, many organizations don’t know where to start and how to keep track of transactions to avoid audit flaws. The best you can do is to hire an internal auditing company and allow these experts to bring transparency to your organization. The more your organization is compliant, the better!