What Is an Audit Checklist? 5 Facts You Need To Know

An audit checklist is a list of items to review during your business process or procedure. It’s like a list of questions that are asked before a sale is made, a product is released or a service is rendered.
When you do it right, the checklist can actually save you time and money in the long run. But the question is, are you doing it right? and importance of audit checklists. Read more at article below:
What Is an Audit Checklist?
In the sphere of inspections and audits, quality assurance specialists use checklists as auditing tools. Compliance with numerous accounting standards and adherence to auditing standards are responsibilities of the audit experts.
What Is an Audit Checklist?However, the extensive use of checklists might call into question the auditor’s judgement in several auditing tasks. In addition to using audit checklists, the alternative processes must be implemented.

Using audit checklists to certify compliance with a certain standard in a systematic manner. In addition, the manner in which it operates may occasionally result in overlooked inspections and audits. The fact that it facilitates the preparation of audit reports in a methodical manner provides further benefits.

Types of audit checklists

Depending on their aims, auditors must create a method for creating a list of checklists that meets their needs. Listed below are few examples of audit checklists:

These optional checklists must be checked and come with three options: positive, negative, and not applicable.

Alternative checklist: This checklist has two responses that are opposing or complimentary.

In this form of checklist, the score is assessed in a methodical manner. To grade the checklist, a comprehensive evaluation must be performed.

Multiple-choice checklist: alternatives are presented in the order of the most frequent response. The alternative choice is also accessible for inclusion in the comments if required.

What Is an Audit Checklist?

Depth and scope of audit checklists

The audit’s depth and breadth would vary depending on the audit’s objectives. The auditor must commence inspection and auditing by initiating a complete set of audit checklists containing every minor and crucial audit detail.

However, audit checklists must be succinct and should be utilized at the auditor’s discretion. The checklist will be utilized in the system and in an electronic format.

This would expedite the data entry process for auditors. The additional benefit is that checklists may be readily added into the audit report as necessary.

Importance of audit checklists:

The audit team is responsible for reviewing material pertinent to the audit assignment, preparing work papers for reference, and documenting audit procedures. Included in this are audit checklists and audit sampling strategies. Audit checklists are basic audit tools.

Numerous firms will utilize audit checklists to handle the audit’s scope. The value of audit checklists is outlined below:

Checklist for specialized audit industry: The chief auditor must evaluate material pertinent to the audit assignment and create reference papers as needed. These documents must contain checklists and audit samples. This also applies to types of information recording, such as audit results and meeting minutes.

In addition, the use of checklists and forms shall not limit the scope of auditing operations. Audit checklists must encourage audit planning and provide uniformity across all auditing levels. It should also serve as a method for determining the audit’s duration.

The audit process is comprised of numerous duties that must be accomplished in a timely and methodical manner. Audit checklists include the actions that must be performed in a system, as well as the time allotted to execute the work within that time frame.

Various audit training checklist components necessitate the utmost level of care. These may involve plant verification and receivables vouching. The checklists ensure that these duties are carried out by auditors with the requisite knowledge and skills.

What Is an Audit Checklist?

To give audit with structure and consistency, audit checklists provide a list of objects to be inspected throughout the audit. The list may not be exhaustive, and audit discretion may be allowed. However, these checklists give structure and let the audit to continue based on a set of strict lists that can be subject to discretion as needed.

Assume that the auditing company has lately been tasked with conducting a statutory bank audit despite having limited experience in this area. Despite the audit team’s capability and professional expertise, the company lacks a legacy of extensive experience.

The company must meticulously list the goods to be reviewed, taking into consideration crucial financial items such as loans and advances. Consequently, audit checklists also serve as a resource for preparing future audits.

It serves as proof that the audit was conducted. Comprehensive audit checklists include the list of audit items examined, the date of the examination, the person charged with the task, and the method by which he carried out the necessary procedure.

Audit checklists are a component of audit working papers and can be used as evidence in the event of post-audit disagreements.

Internal Audit Planning Checklist

1. Initial Audit Planning

Every internal audit project must begin with the team knowing why the project was included on the audit schedule. Before fieldwork begins, the following questions should be answered and approved:

Why did the audit project receive approval for inclusion on the internal audit plan?

How does the procedure facilitate the achievement of the organization’s goals and objectives?

Which enterprise risks does the audit examine?

If this procedure has been audited in the past, what were the findings?

Have there been substantial modifications to the procedure recently or since the last audit?

2. Risk and Process Subject Matter Expertise

To analyze the operational efficacy of a process’s controls, it is beneficial to conduct an audit based on internal corporate data. For internal audit to stay up with the changing business environment and to guarantee that essential procedures and controls are also structured effectively, it is becoming increasingly common practice to seek out external expertise.

At least one of the following criteria should be used to assess the design of the audited process:

Subject Matter Expert (SME) from one of the Big Four or from another consulting company.

Recent articles from WSJ.com, HBR.org, and other top business publications

After utilizing internal and external resources to identify pertinent hazards, you will need to develop an audit program to test for these risks.

3. COSO’S 2013 Internal Control – Integrated Framework

Internal auditors can utilize COSO’s 2013 Internal Control – Integrated Framework to develop a more complete audit program, in addition to its significant use for Sarbanes-Oxley (SOX) compliance objectives. Internal audit should also aim to identify and test the other components of a well-controlled process, in addition to identifying and testing control actions.

Examine COSO’s 2013 Internal Control Elements, Principles, and Focus Areas.

4. Initial Document Request List

The next stage in preparation for an audit is obviously requesting and receiving documentation on how the process works. In order to get a knowledge of the process, important applications, and critical reports, the following requests should be made prior to beginning audit planning:

All policy, procedure, and organization chart papers

Principal reports used to manage the efficacy, efficiency, and success of a process

Access to process-essential apps

A description and listing of the master data for the processes being audited, including all data fields and properties.

After acquiring a knowledge of the audited process through the initial document request, you should seek access to master data for the audited processes to examine for trends and help in creating comprehensive sampling selections.

5. Preparing for a Planning Meeting with Business Stakeholders

Before meeting with business stakeholders, internal audit should have an internal meeting to validate a high-level grasp of the process or department’s objectives and key process phases. To prepare for a planning meeting with business stakeholders, it is necessary to conduct the following actions:

Outline important process phases using a narrative, a flowchart, or both, emphasizing information inflows, outflows, and internal control components.

Validate narrative drafts and flowcharts with domain experts (if any)

Create a preliminary pre-planning questionnaire in order to support a pre-planning meeting with important audit customers.

Preparing the questionnaire after conducting preliminary research sets a favorable tone for the audit and demonstrates that internal audit is well-informed and well-prepared. After completing this study, internal audit should meet with their company stakeholders to validate that they comprehend the process.

What Is an Audit Checklist?

6. Preparing the Audit Program

After internal audit has proven their comprehension of the process and hazards inside the process, they will be able to develop an audit program. A program for auditing should include the following information:

Method Objectives

Process Threats

Process Risk Mitigating Controls

Manage Attributes, such as:

Does the control prevent or identify a risk occurrence?

Control frequency (e.g. daily, weekly, monthly, quarterly, etc.)

Does the control decrease the danger of fraud?

Is the control performed manually, via an application, or by both?

A preliminary evaluation of the risk event (e.g. high, medium, or low)

Does the control prevent or identify a risk occurrence?

Control frequency (e.g. daily, weekly, monthly, quarterly, etc.)

Does the control decrease the danger of fraud?

Is the control performed manually, via an application, or by both?

A preliminary evaluation of the risk event (e.g. high, medium, or low)

Control Testing Procedures, Including the Following:

Inquiry, or the questioning of how the control is executed

Observation, or directly witnessing the control being carried out

Inspection or review of the paperwork proving the control was implemented.

Re-performance, or redoing the control independently to validate outcomes

Inquiry, or the questioning of how the control is executed

Observation, or directly witnessing the control being carried out

Inspection or review of the paperwork proving the control was implemented.

Re-performance, or redoing the control independently to validate outcomes

7. Audit Program and Planning Review

Prior to being finalized and for fieldwork to commence, audit programs, especially those for systems that have never been audited before, should undergo numerous layers of review and buy-in. Before beginning fieldwork, the following personnel should examine and approve the initial audit program and internal audit planning procedures:

What Is an Audit Checklist?

Internal Audit Director or Senior Executive

Chief Auditing Officer

Subject Matter Specialist

Audit’s Principal Point of Contact for Management (i.e. Audit Customer)

Internal auditors who can construct and record audit programs from start, rather than relying on audit program templates, will be more skilled and equipped to conduct audits in areas that are not usually examined.

When internal audit can spend more time and resources aligned with their organization’s primary objectives, the work satisfaction of internal auditors will rise since they will be assigned more engaging assignments.

The Audit Committee and the executive suite may get increasingly involved with the work of internal audit in important areas. Perhaps most crucially, the suggestions given by internal audit will have a greater influence to facilitate good change within their respective businesses.

Conclusion

Quality assurance specialists in the field of inspections and audits utilize audit checklists. The audit experts are responsible for verifying and confirming compliance with diverse accounting standards and adherence to their auditing standards.

Nevertheless, the widespread use of checklists calls into doubt the auditor’s discretion in many auditing tasks. To supplement the usage of audit checklists, the alternative processes must be executed.

Utilizing audit checklists to validate compliance with a given standard in an orderly manner. Moreover, the manner in which it operates may occasionally result in the omission of certain inspection and auditing facets. It aids in preparing audit reports in a methodical manner, which has additional benefits.

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