Question

What are the preparatipn done before commencing of audit?

Answer 1

Before the commencement of a new audit the auditor should go through the minutes of the directors and note down the important decisions.The auditor should prepare himself before the commencement of a new audit; he should consider the following points:

1.Appointment

First of all auditor should confirm his appointment letter that it is in order from every respect and fulfilling all its legal requirements.

2.List of Books of Account

The auditor should obtain a list of all the books of account and should see that all books have been kept in accordance with company ordinance.

3.Legal Documents

The auditor should take the copy of the legal documents of the company and should study them carefully before the commencement of audit. Such documents may be memorandum and articles of association, prospectus and contract with vendors etc.

4.Nature of Audit

Auditor should know regarding the nature of audit so that he may prepare himself accordingly.

5.System of internal Audit

The auditor should also study the internal control system in the business concern. He should make detailed inquiries, inspect records and wherever possible, observe the actual procedure in operation.

6.Accounting System

Before the commencement of new audit the auditor must know the system of accounting adopted by the business concern. He should thoroughly investigate the whole system of book keeping and accounting.

7.Name of Principal Officers

The auditor should obtain the list of the principal officers with their financial and other powers.

Answer 2

The preparations before the start of an audit requires the auditor with a thorough understanding of the client and the business that is run by him.  He should be aware of the stakeholders, management and the number of people employed in the business unit. Thereafter he determines the methods and strategy of the audit.

Explanation:

• Auditing a company requires an effective audit plan and strategy by the auditors. Before starting on the audit the auditors should be aware of the kind of business and the accounting process that are   adopted by the business enterprise.
• The auditors should have a proper understanding of the client and the business process. he should be aware of the people working in the company and their responsibilities with the organization. He will make a thorough study of the book of accounts and then make a strategy plan for his audit.
• The procedure of audit requires for collecting the all the information and processes adopted for the working of the system. The auditor would  check on the accuracy of the accounting system and verify the procedures and systems before making his final assessment.

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