If you’re on the path to obtaining your master’s in accounting, you have likely learned the theories, steps and facts associated with performing audits. However, you may be feeling anxious when it comes time to venture into your first real audit. Read on to learn more about making your first solo audit as productive and stress-free as possible:
Step #1: Identify the scope and purpose
In many cases, you will be provided with the reason behind an audit, whether to ensure compliance with new IRS regulations or to prepare a business for sale. However, part of being a valuable asset in accounting is the ability to pinpoint and hone in on problems business owners may not even know they have. It can often be worthwhile to schedule an in-person meeting early in the process so that you will be able to ask some detailed questions to help drive your investigative process.
Step #2: Determine the documentation you need — and how to get it
The next step to a successful audit involves drafting an outline and then gathering the tax returns, receipts, and record-keeping policies that you will need to create a thorough reconciliation of your client’s financial affairs. The most efficient method is generally to first identify what you need in order to create a solid financial picture, then list a few different ways you may be able to find each necessary piece of information. Having not only a plan A, but plans B and C can usually help you avoid delays or any other snags in the process.
Step #3: Learn your client’s financial workflow to create an audit trail
The “audit trail” is the backbone of the audit process. This trail shows the specific history for each transaction, making it simpler to spot any discrepancies. However, to have a comprehensive audit trail, you will first need a working knowledge of how your client handles money. This is where in-person interviews and review of any written policies governing financial transactions can come in handy. Once you’ve done this, you’re ready to get into the dirty business of cataloging transactions to see what steps (or funds) may be missing from the process.
Step #4: Clearly communicate your results
Even if you’re able to provide a brilliant analysis of your client’s financial issues, this skill will do little good if your method of presentation doesn’t capture your client’s attention. If your peers have worked with this client before, you may want to ask for tips on the best communication tactics. On the other hand, if you don’t have any inside information, some standards will always hold true: avoid jargon, use an outline to organize your thoughts before getting too deep into the writing process, and try to anticipate and answer questions the reader may have.
If you want to learn more about the audit process or want to pursue an advanced degree in accounting, visit Maryville University online to get started.