1. Auditing and Audit Process in
Organization
by
Mohammed, Anas Taura (MBA)
Programme and Studies Department
Manpower Development Institute,
Dutse Jigawa State.
Thursday, June
23, 2016
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2. Outline of the Presentation
• Objective of the presentation
• An overview of audit, importance and its
function.
• Types of Audit
• Audit process
• Audit report and recommendation
• Summary and conclusion
Thursday, June
23, 2016
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3. Objective of the presentation
At the end of this presentation the participants
can be able to do the following:-
• Define the terms audit
• State clearly the importance of audit and the
function of auditors in organizations
• List various types of audit
• Identify and list audit processes
• Differentiate between internal and external audit
• Identify various type of audit report.
Thursday, June
23, 2016
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4. Definition of Auditing and Audit
Process:
• Audit is defined as systematic and independent
examination of data, statements, records,
operations and performances (financial or
otherwise) of an entity/organizations for stated
purpose.
• While audit process are tasks the auditor
undertake for collecting , analyzing, interpreting
and documenting information during an audit.
It involve planning, execution and reporting.
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23, 2016
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5. An overview, Importance and
Function of Audit.
• The concepts of Audit has undergone a set of
changes and its earlier objective of “Fault
findings” is no more relevant.
• Nowadays auditing can said to be a concept that
is aimed to achieved a combination of both
financial and operational efficiency. It is also
aimed at reviewing financial plans for future to
enhance organizational performance.
Thursday, June
23, 2016
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6. Importance of Audit
• Audit plays an important role in raising the level of
confidence of both public, management and staff as well
as the remaining stakeholders of an
entity/organizations. Depending on where you find your
self, below is what audit and audit report means to these
group of people and entity:
• Investors and shareholders (people): these are the
owners of organization be it public or private enterprises,
but in many cases are not involved closely in its day to
day running. Therefore an independent audit is
interesting to them, since it provide them with a trusted
second opinion on the organizations financial statement
and in turn, gives some, insight as to how well it is being
run.
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23, 2016
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7. • Company accountants/finance directors:
having an independent expert poring over your
figures might be a little bit uncomfortable at times,
but the reward is making sure that your numbers
are true and fair. What’s more, audits now a days
will look at ‘internal control systems’ as well as
finances. These systems usually established
through the specific design of computer systems
and, for instance, ensure that the authorization of
transaction is controlled according to clear rules
and policies. Knowing these are sufficiently strong
and are working properly is also very re-assuring.
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23, 2016
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Importance of Audit (cont’)
8. Importance of Audit (Cont’)
• Financial Analysts: for financial analysts audited
accounts are vital tool, since they provide unbiased and
independently checked information on which to base
their opinion on what future hold for particular firms or
businesses.
• Regulators: these are organizations that are tasked
with overseeing wide range of players in particular
industries to ensure firms are operating fairly and legally.
They make use of audited accounts as part of the ongoing
monitoring of each firm or to help with more specific
investigation.
• Other stakeholders: this are journalists, politicians
and general public who may be interested in the
information in one way or the other depending on the
nature of organization.
Thursday, June
23, 2016
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9. Functions of Audit.
• Study accounting system
• Analyses and test internal control system –
to determine its effectiveness or otherwise.
• Assets verification – to make sure the existence
of an assets in the business.
• Legal requirements – here audit must ensure
that all legal obligation are fully observed in all
organization/entity dealings e.g. company income
tax.
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23, 2016
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10. Functions of Audit (Cont’)
• Vouching - this is done to determine accuracy of
accounting record. it help, to prove the
business/government transactions since all entries in books
are made on the basis of relevant vouchers and receipts.
• Reporting – one of the primary function of auditor is
reporting. As an independent person auditor is expected to
submit his report in writing.
• Valuation of assets and liabilities – both the value of
assets and liabilities in the book of accounts, can be verified
by the auditor. In each case auditor can seek help of expert
if he so wishes. He can use the accounting principles to
ascertain the value of assets and writing to the creditor to
verified the liabilities of the organization, this of course
with consent of the auditee.
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23, 2016
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11. Types of Audit
Types of audit depend on the nature & purpose of the
audit:
A) Nature:
I) statutory – this is types of audit mandated by
law and it must follow all the prevailing accounting
standard. Company and Allied Matters Act 1990
provided that all public limited liabilities company
should publish audited financial statement at the
end of each financial year.
II) private audit – when audit is not statutory
but is conducted at the request of owners, that is
called a private or optional audit.
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23, 2016
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12. Types of Audit (Cont’)
III) Internal Audit – this is an independent appraisal
function established within an organization to examine
and evaluate its activities as a service to organization.
IV) External audit – this is audit process performed on
organization by independent outsider who is engaged by
the owners of the organization/entity.
B) Purpose Based Audit:
I) financial audit
II) control and compliance audit – e.g. internal
control system
III) performance/operational/management audit
– this include budget performance, testing of new
technologies e.g. new machine employed like finacle used
by banks or new internet service provider.
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23, 2016
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13. Difference between external and
internal Auditor
Area Internal External
Appointment By management By owners of
organization/NASS/Board
Reporting To management Owners/NASS/Board/partners
Responsibility (Focus) Quality assurance
(control & compliance
audit)
Expression of opinion
(financial Audit)
Status Employee of an
Organization
Not an employee of an
organization
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23, 2016
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14. Audit process
• Although every audit is unique, the audit process
is similar for most engagement and normally
consist of three (3) stages namely: planning,
executing and reporting processes.
• Planning process – involves activities like
engagement letter, preliminary survey, entrance
interview and audit plan/programmes.
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23, 2016
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15. Audit process (Cont’)
• Execution process – in this stage the auditing
process involves are: transaction testing, advice
& informal communication, audit summary and
working papers.
• Reporting process - this is the final product
activities of audit process and activities it also
involves the following aspects: exit conference,
draft report, issue a final report and audit
follow-up.
Thursday, June
23, 2016
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16. Audit report and Recommendations
• Audit report is a signed, written document which present
the purpose, scope and result of audit. In other words, it
is the finding or final outcome of the test evaluation and
the observation of the audit on the audited financial and
operational system. While audit recommendations are
actions the auditors believes necessary to correct existing
conditions to improve operations. All audit
recommendations must:
• Be doable by the auditee
• Be specific
• And has to solve the problem and address the cause of
the problem
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23, 2016
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18. Summary and conclusion
Both management and its staff of the auditee
should know that the auditor are not witch-
hunters, rather they are partners in good
governance. To achieve overall business
objective for providing public goods or efficient
customers service delivery as the case may be,
there is this need to co-operate with auditors to
achieve optimum result.
Thursday, June
23, 2016
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