How to prepare for an audit

By Admin | 14 Sep, 2020

How to prepare for an audit
Time to read this article: 2 minutes
Key points
• Industry to which client belongs
• Law and regulations applicable to that client
• Recent changes in related to industry and notifications
• Checking the Trial balance & Pointing out key accounts
• Making and filing the checklist
Starting a new audit can be quite challenging and overwhelming specially for a new CA in practice. I remember when I signed my first audit report.The CA in me today would not have signed it so easily says Noel (name changed). I was just so overwhelmed being a fresh CA in practice the idea of any first audit client that my working papers were in a mess. Over the years I have tried to follow few steps to get a better hang and preparing for an audit in advance:
1. Understand the client’s industry: Before you even get the assignment, read about the industry to which the client belongs. Read about the practice challenges it faces, talk to the client if they faced any issue during the audit period which needs attention.
2. Read about applicable laws and Regulations: Once you know the industry to which client belongs, read about the specific laws applicable to them. You can also list down the laws for which compliance needs to be checked and reporting will be done for non-compliance.
3. Recent changes & Notifications: Take out the list of notifications related to the applicable laws which will directly impact the client. Check the compliance and pay attention to the dates when there has been a change in the treatment of a transaction in mid year.
4. Check Trial balance and point out key accounts: Once you are aware about the nature of transactions undertaken by the client, it will be fairly easy to go through the Trial Balance and point out the ledgers which are not in line with the acceptable or normal treatment. For e.g When a debtor has a credit balance mark the ledger and find the reason.
5. Make a Checklist: When you have done the overview of Trial Balance, make a checklist of the tasks to be done, documents to be vouched and ledgers to be verified. Make sure that at the end of audit all these checkpoints are addressed.