Question

what is audit memorandum. state any four content of audit memorandum​

Answer 1

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The final step in the audit process is the

audit memorandum which summarizes each phase of the audit and gives your reader recommendations for changes that will improve the accuracy of the records and profitability of the company.

Answer 2

Answer:

What is an audit memorandum?

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In audit, an audit memorandum is referred to as an ‘audit planning memo’.

An audit planning memo, is a pre-audit memo outlining the following:

Who is the client

What sector are they in (manufacturing, real estate, mining, ect.)

Is the industry on an increasing or declining cycle currently

Relevant important facts about the inner working of the company (changes in management, was fraud discovered, are the owners considering a sale of the business, is there a lawsuit ongoing, ect).

Risks Assessment

This outlines what the risk level is to the audit firm and risk increases with:

Are there lots of users to the financial statements? Is the company privately held or is it publicly traded?

Are there any bank covenants that the company needs to meet (Revenue to debt ratio for example)

Are there any creditors? If so, how many?

Is the audit a first year audit? Is this a new client to the firm?

Is the company in a highly specialized sector or industry?

Is there new management? New CEO/CFO/CIO?

Materiality

Usually calculated by using one of the following:

5% of income from continuing operations (normalized income)

5% of net income (before bonus’)

0.5% - 2% of revenues or expenses

0.5% - 1% of net asset value

Performance Materiality

Take the number you get from your materiality calculation and re-calculate based on 50% - 75% from your materiality figure.

Procedures

What procedures will be taken to ensure adequate work and testing are done to reduce the chances of material misstatement on the audited financial statements.

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Conducting an in-house audit or an independent audit for another company requires you to delve into the finances and physical assets of the business to in order to balance the tangible with the existing records. The final step in the audit process is the audit memorandum which summarizes each phase of the audit and gives your reader recommendations for changes that will improve the accuracy of the records and profitability of the company. Writing an audit memorandum requires in-depth knowledge of the business and the attention to detail required to compare records with reality.

Outline the financial results of the audit in your introduction. Explain to the reader whether the audit showed a higher or lower financial standing than the existing records.

Write a summary of the physical audit of the inventory of the company. List the details of the inventory audit. Explain to the reader whether items were physically missing or whether there were more items than expected.

Draft an outline of the existing book inventory recorded by the company and how it compares to your physical count. Refer back to your comparison between the books and the physical count. Explain where the bookkeeping needs improvement.

Explanation:

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