Auditing is the process of examining an organization’s financial report as it occurs in the annual report. An audit is performed by an individual independent of the organization. It helps in the determination of whether the information in the financial report whole reflects the organization’s financial position at a given date. The financial report comprises of an income statement, a cash flow statement, a balance sheet, a statement of equity changes and summary notes on the major accounting policies. Whenever auditors come to an organization, there are a number of things that the employees should expect (Vanderbilt, 2018) .
The auditors should begin by communicating with the financial officer or department head to schedule an introductory planning meeting. In this meeting, the audit team members and departmental representatives discuss the main functions of the operating unit or department. Through this discussion, it will be possible for the audit team to come up with a clear audit approach plan.
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The audit team will then schedule a conference with the departmental representatives, where they will define the scope of the audit and discuss its objectives. This conference is followed by a control assessment of the internal operations. It is possible to revise the audit approach at this stage depending on the outcome. The team then conducts tests to assess the efficiency and effectiveness of key controls and processes, ensuring that they communicate their findings in all stages.
Upon the completion of the assessment test, the team should then develop a management action plan that incorporates the steps towards addressing the suggested recommendations. This action plan should be part of the final report issued to the vice chancellor. A final meeting is then held to discuss the audit findings and the team releases the final report. The team might also ask the staff to comment on their performance as a self-evaluation program.
The Sarbanes-Oxley Act (SOX) is very crucial in the auditing process as it protects organizations from fraud. SOX has an auditor watchdog, the Public Company Accounting Oversight Board (PCAOB), which investigates, inspects, and enforces the compliance of auditing firms. SOX requires all of these firms to be registered under PCAOB to ensure that no fraudulent activity occurs during the auditing processes. Firms are prohibited from being in a business relationship with the organizations they are auditing ("4 Ways the Sarbanes-Oxley Act of 2002 Stops Corporate Fraud", 2018)
The process of auditing is essential because it ensures that organization reports their financial stand correctly in the financial reports. It is important that employees know what to expect during an auditing process as a way of protecting themselves from fraud. In case of a fraudulent auditing activity, the firms are protected by SOX (Vanderbilt, 2018) .
References
4 Ways the Sarbanes-Oxley Act of 2002 Stops Corporate Fraud . (2018). The Balance . Retrieved 12 March 2018, from https://www.thebalance.com/sarbanes-oxley-act-of-2002-3306254
Vanderbilt. (2018). What to Expect During an Audit . The audit, Risk, and Advisory Services . Retrieved 12 March 2018, from https://www.vanderbilt.edu/internalaudit/audit-services/what-to-expect.php
