Audit pro 411

Information and Communication Technology (ICT) or Remote Auditing What is ICT or Remote Auditing ? In these turbulent and uncertain times brought about by COVID-19, many questions have arisen concerning the availability and viability of conducting remote audits, also known as “ICT”.­­­ To help separate the facts from the fiction, Smithers has developed an ICT information sheet to help you understand what it is, the basics around how it works, and the questions that interested parties must answer before moving forward with this option. What is ICT auditing, exactly? It is defined as: “The use of technology for gathering, storing, retrieving, processing, analyzing, and transmitting information to optimize an audit’s effectiveness and efficiency, and to support and maintain the integrity of the audit process.” Some acceptable technologies for conducting these remote audits are, but not limited to: Smartphones, Tablets, and other Handheld Devices  Laptop and Desktop Computers  Video Camera

What is audit quality? Audit quality refers to matters that contribute to the likelihood that the auditor will: achieve the fundamental objective of obtaining reasonable assurance that the financial report as a whole is free of material misstatement; and ensure material deficiencies detected are addressed or communicated through the audit report. This includes appropriately challenging key accounting estimates and treatments that can materially affect the reported financial position and results.

What is Accounting ? Accounting has been hailed by many as the “language of business”. There are many quotations like “A pen is mightier than the sword but no match for the accountant” by Jonathan Glancey which tell us about the power and importance of accounting. The text book definition of accounting states that it includes recording, summarizing, reporting and analyzing financial data . Let us try and understand the components of accounting to understand what it really means: Recording The primary function of accounting is to make records of all the transactions that the firm enters into. Recognizing what qualifies as a transaction and making a record of the same is called bookkeeping. Bookkeeping is narrower in scope than accounting and concerns only the recording part. For the purpose of recording, accountants maintain a set of books. Their procedures are very systematic. Nowadays, computers have been deployed to automatically account for transactions as they happen. Summarizing

4 key COVID-19 audit risks for 2020 year ends Many auditors have begun to turn their sights to their next group of audits: clients with 2020 fiscal year ends. The World Health Organization declared a public health emergency on Jan. 30, 2020, meaning many of these clients will have been affected by the COVID-19 pandemic during the period under audit. Auditing these clients will carry unique challenges, and certain areas may present heightened risks of material misstatement for the audit. Here are four such areas for auditors to consider as they prepare for their next audits of commercial entities. Internal control When states issued stay-at-home orders in March and April, many entities were presented with a new reality. As they shifted from the office environment to remote working, and as financial reporting processes moved from in-person to virtual, the risk of breakdowns in internal control was heightened. Auditors are required to evaluate the design and implementation of controls rel

Why am I being selected for an audit? Selection for an audit does not always suggest there’s a problem. The IRS uses several different methods: Random selection and computer screening  - sometimes returns are selected based solely on a statistical formula. We compare your tax return against “norms” for similar returns. We develop these “norms” from audits of a statistically valid random sample of returns, as part of the National Research Program the IRS conducts. The IRS uses this program to update return selection information. Related examinations  – we may select your returns when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit. Next, an experienced auditor reviews the return. They may accept it; or if the auditor notes something questionable, they will identify the items noted and forward the return for assignment to an examining group. Note: filing an amended return does not affect the selectio

How to Process Documents for an Audit An audit is a detailed scrutiny, analysis and verification of the accounting records, transactions and transaction documents of a business or an organization. The audit process involves the physical inspection of the documents and their comparison with book records and transactions to confirm the correctness of the recorded figures. When preparing for an audit, you need to counter-check and ensure that all the transaction documents, such as check books, purchases invoices, sales receipts, journal vouchers, bank statements, tax returns, petty cash records and inventory records are in order. 1 Gather and file all your business records -- you will need to confirm the correctness of your transaction entries in the general ledger. Label the files clearly and arrange them in alphabetical order, or according to dates, department or titles. Gather all your accounting books: sales books, purchases books and inventory books. 2 Proceed to verify that all the