Audit Procedures for Small Businesses
Audit procedures (Also see Audit Procedures – Its Methods, Benefits and Restrictions) are the steps that the auditors from audit firms in Johor Bahru would use to attain the particular audit objectives when they conduct the fieldwork stage of the audit. The goals include making sure that the company has determined and handled the risks efficiently, its employees follow its policies and regulations, and it has acquired the assets it needs and has been using them effectively. It is the responsibility of the auditor to determine the suitable audit approaches that they will use. Nonetheless, they need to get approval from the management of the company, which is being audited before they can start performing their job.
Verifying Records and Documents
When the auditors perform this procedure, they need to examine deeply the electronic and physical records of the company they audit. The records and documents include invoices, receipts and financial statements, and the auditors will assess the accuracy of these documents. In a small company, the documents are not too much so that the auditors can check all the records. If it is a sizable firm, the auditors will select some of the documents by random sampling for them to audit (Also see What are the Interim Audit and Final Audit?).
Assessing Tangible Assets
In this procedure, the auditors need to conduct a physical inspection on all tangible assets a company owns. They will compare the physical assets and the records on the asset inventory register of the company to make sure the existence of the assets.
This audit procedure is highly reliable as the auditors may involve themselves in the process of producing the company’s audit evidence. The auditors need to recalculate the values in the financial statements of the company so that they can ensure the correctness and accuracy of the figures.
The auditors will observe the staff of the company when they are performing their daily tasks. By doing so, the auditors will have a better understanding of the operation of the company they audit. However, this procedure is not very dependable as the staff may perform better than usual if they know the auditors are observing them.
The auditors will talk to the key staff so that they may acquire an in-depth understanding of specific departments and operations in a company. They can use the information they obtained to support other audit procedures.
Reviewing Management Meetings
Apart from that, the auditors will review the meeting minutes of the management meetings. This is for them to determine whether they have discussed any relevant issues which may impact the company’s financial performance and the frequency of having management meetings. Also, the auditors will know whether the management has applied the resolutions they decided in the meetings.
In the scanning process, the auditors need to review the company’s accounting records to detect unusual double entries (Also see Advantages of double entry accounting), omissions or errors. To guarantee the accuracy and authenticity of the entries in accounting documents, the auditors need to inspect them carefully. In this procedure, the auditors need to pay particular attention to unusual items, for example, fraudulent credits on the expense accounts or unauthorised debit on the revenue accounts.