5 Ways to Perform Basic Accounts Auditing

Account auditing is the process of checking the financial accounts of a business organization or an individual to ensure its accuracy and compliance with accounting and taxing rules. Auditing has become a mandatory requirement today as it helps to get an accurate insight into an organization’s business transactions and its financial condition. It also ensures that the company’s financial information is not exploited for personal gains by the people in power. The auditing results provide valuable information to the people connected with the company, like shareholders or banks.

Types of Auditing

Auditing can be of two types:-

• Internal auditing is one that is performed by people who are members of the same company.
• External auditing is handed over to outside agencies like a government or other regulatory agency. An external audit usually is undertaken once a year, and the accounting records are inspected. This process ensures that the records are accurate and free from errors.

Steps to provide Basic Account Auditing

The following five steps will serve as a guide to the accounts auditing process:

1. Checking all previous documents
   
   The auditor has first to inform the company in advance about the auditing date so that they can get ready all documents that will be needed. This is required for initial checking such as the previous year’s audit report, bank statements, bank account reconciliation statements, and receipts and ledgers for all financial transactions. He can also request a copy of the company’s rules and regulations, organization charts and minutes of meeting previously conducted by the board and members.
   
   
2. Preparing an audit plan and meeting the senior staff
   
   After inspecting the requested documents, the auditor drafts a detailed audit plan considering all the information received. He then identifies the problem areas in the organization. A meeting is conducted with the company’s senior staff and discusses matters like the main objectives of the audit and the period in which the audit will be conducted. The auditor can also get the senior staff to prepare all its employees for the audit.
   
   
3. The actual auditing process
   
   The next step is conducting the practical auditing, and this involves meeting with the staff members and studying the various financial documents required and reviewing them. This will include income statements and balance sheets, and the auditor has to see whether the transactions are correctly recorded. He also ensures that all the procedures are compliant with the organization’s regulations and policies. He has to see whether internal controls are in place and if the financial transactions comply with the accepted accounting standards. He is also responsible for checking all taxation and legal rules are followed and if there are adequate records and receipts for all the financial transactions. He can discuss any issues that may be discovered with the staff members so that they can prepare themselves for timely action.
   
   
4. Preparing an audit report
   
   The auditor analyzes all the information collected by him and based on his findings prepares a detailed audit report. The report includes all things like posting errors or calculation mistakes made and any other issues related to financial transactions. He also adds his insights and opinions and offers possible solutions to the problems found. He will state whether the financial transactions are accurately recorded and free of error and if they follow the rules and regulations.
   
   
5. Final meeting and follow up
   
   The auditor discusses the issues that have come up in the report and gets the opinion of the management regarding the problems. He gives them his view on the matters, discusses with them the possible solutions that can be undertaken to rectify the issues.
   

Performing an efficient accounts audit in this manner helps to not only rectify errors in the financial records of an organization but also prevent possible financial frauds like misappropriations of funds by wrongly using the recorded financial information.