questions to ask during an audit walkthrough

TIS Section 8200.12, as issued by the AICPA, states the following: Inquiry—AU section 314 (now AU-C 315) requires the auditor to obtain an understanding of internal control. In addition to writing notes in my Livescribe notebook, I take pictures with my iPhone. Accordingly, auditors might perform a walkthrough of significant accounting cycles every year [emphasis added]. Upon completion of the walkthrough, I summarize all control deficiencies so I can track the disposition of each one. The questions related to project funding should (in theory) have already been sorted out … Has management been responsive to your and the external auditors’ previous findings and recommendations? Internal auditors need to ask difficult questions, and when the answer to a question is likely to be adversarial (when a deadline is going to be missed or a production estimate is overly optimistic, for example), some experts suggest framing the question pessimistically. What were the causes of the changes? Did management pressure you on contentious issues by threatening to “shop” for other auditors? Does management give appropriate consideration to your views? How? Answer : Use audits as opportunities to train others. Accountants are often more comfortable with numbers than processes. We’re gaining an understanding of risks and responding to them. Once we know the risks, we know where to audit. 8. I interview personnel. While performing the walkthrough, we ask probing questions about the client's processes and procedures and related controls to gain a sufficient understanding to be able to identify important points at which a necessary control is missing or not designed effectively. Invite all the auditees to the closing meeting. Prepare More, Ask More There was an error submitting your subscription. Will your risk assessment of the internal control policies and procedures enable you to reduce audit testing performed in conjunction with the integrated audit? Will your report make reference to the other external auditors? Are there policies and procedures in place for disclosing internal accounting control deficiencies and frauds or illegal acts identified to the auditors and the audit committee? Can I have a copy of your organizational chart? During the walk-through, the auditor will want to ask all personnel interviewed about any instances where normal procedures were not followed, including management override and unusual related-party transactions, as well as any known instances of fraud. If yes, what changes were made and what are the financial statement effects? Audit interviews are one of four ways to gather information during an audit, the others being to review documents, observe operations, and examine records. By asking the open question, How To Involve People In Audit? What was the substance of significant issues raised by either internal corporate or outside counsel, and how are these matters reflected in the financial statements? It’s too complicated–and too important. Were any integrity or honesty concerns noted? Charles Hall is a practicing CPA and Certified Fraud Examiner. Were any significant deficiencies or material weaknesses identified and communicated to us pervasive across the organization or were they limited to a specific location or account? I am having trouble coming up with Internal Audit questions for ISO 9001 in regards to the purchasing process? An auditor can determine whether a control has been implemented with a test of one transaction. Also tell the client about your status on the audit. The insights and advice you need, everywhere you do business. These sequences happen most of the audit that I encountered and it is a very helpful guide to trace down the things that are expected to be asked, and in return, we can prepare for it.. Download Mango's 20 Questions Checklist for free. They’re just the starting point. Visit BDO's Crisis Response Resource Center. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues. The residue of the process was used in farming near the school. Is the lawn in good condition? Beyond asking the right questions, it’s important to involve the right set of stakeholders, to analyze the responses for new insights, and measure any changes in performance over time – all of which is possible with our platform. We’re developing our audit plan. For example, changes in the control environment may affect the relevance of information obtained in the prior year. The internal auditors should develop an audit program and an audit schedule. Scan cleared checks to see if the payees are appropriate. For the latest insights and updates, visit our Crisis Response Resource Center. Walkthroughs are cradle-to-grave reviews of transaction cycles. If the auditor decides to use walkthroughs to confirm his or her understanding of internal control, how often do walkthroughs need to occur? Each time a new vendor is added, the computer system automatically sends an email to the CFO notifying her of the addition. What to look for / What to ask 9101 Auditor Guidance Material – Dated: 26 September 2011 Why? What … And I know of no better way. Did you have enough time to complete all phases of your audit? They are also often performed during business transitions, such as mergers, or for internal documentation activities. The best questions for you to ask depends on your organizations priorities, risks, and customer requirements. I want to hear all the details.” (For sample transaction-level You start at the beginning of a transaction cycle (usually a source document) and walk the transaction to the end (usually posting to the general ledger). So I can link them to my risk assessment summary. It’s just as important to pay attention to the exterior features of your … Working Mother Names BDO USA, LLP as one of the 100 Best Companies. Were you provided with all the information you requested? So there’s no getting around it. These days, every one of us is asking the same question: What’s next? If an item requested by the auditor is unclear, ask for clarification prior to the start of fieldwork to avoid potential delays and additional fees. What is the scope of your audit? How are internal audits conducted? Because each question tends to elicit an in-depth response, we tend to ask fewer questions per assessment so as not to overwhelm participants. One of the guide’s highlights is a comprehensive checklist of audit steps and considerations to keep in mind as you plan any audit project. For additional information about risk assessment, see my article Audit Risk Assessment: The Why and How. How do actual engagement fees incurred for the year compare to the estimated fees? One observation during the audit is that there is a specific audit sequence. Regarding computer controls, a walkthrough of one transaction might be sufficient to prove effectiveness if general computer controls are working—namely, change control. Did management impose any limitations on you? Please try again. It’s easy for clients to tell you about normal procedures, but they may not think about unusual situations such as the absence of an employee or how errors are corrected. Companies are ready to turn the page on a challenging year and focus on the future. It allows auditors to gain an understanding of processes, objectively evaluate the function and reach logical conclusions regarding the … Purchasing. Accountants are often more comfortable with numbers than processes. While answering the question, point out basic things such as being professional and to avoid being judgemental. (For multi-locations) Do you and the external auditors plan to visit all of the organization’s locations this year? For example: Charles Hall interviewed Johnny Mann, Hector Nunez, and Suzanne Milton on October 25, 2019. Are appropriate changes being instituted? This extensive list of questions can be asked during an interview for an inventory audit. Ask questions. This sample list of questions is just a small part of the Inventory Management Training Guide on KnowledgeLeader. Placing a copy of the operating and accounting system manual in the audit file is not a walkthrough. He frequently speaks at continuing education events. Remember: You do not need to ask a ton of questions, but do ask at least one. If not, why? The control weakness created by Johnny Mann’s duties increases the risk of theft. I find it hard to blame board members, though. Were there any changes in accounting principles? This answer will change depending on your industry, but try to be specific when responding to this question. Does it follow up on suggested changes? Employers will likely ask this question to make sure you have a wide range of skills and can complete different types of internal audits based on the company’s needs. Does management have the appropriate resources to assess the effectiveness of internal control over financial reporting? (For example, that facilities audit question about archive media should be modified to include cloud solutions.) (For more information about Livescribe, see my article: Livescribe, Note Taking Magic (for CPAs). Posted by Peter Heinicke on Tue, Jan 18, 2011 @ 11:40 AM Are there any significant concerns about information systems and their ability to process, record and report financial transactions? Get The Why and How of Auditing on Amazon. This sample provides questions and recommendations to consider for Sarbanes-Oxley walkthrough process. Charles Hall. What is your relationship with the external auditors? Did the scope of the audit differ from the audit plan? What is the planned scope of your audit, (i.e., will all of the subsidiaries be examined, what percentage of inventories will be observed, what percentage of accounts receivable will be confirmed, how will you verify accounts payable?) How is security over these systems maintained? For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. I am the quality control partner for our CPA firm where I provide daily audit and accounting assistance to over 65 CPAs. Usually, audit walkthroughs are not sufficient to support lower control risk assessments (those less than high). When it comes to business, innovation is changing everything. Here are examples (from a payables interview): So my inputs into the walkthrough document are as follows: I write my narratives in Word and embed pictures as needed. Are there any major write-downs or other significant transactions that will affect the financial statements? visit our Crisis Response Resource Center. To determine whether changes have occurred that may affect the relevance of such information, the auditor may make inquiries and perform other appropriate audit procedures, such as walk-throughs of relevant systems. We have developed questions to our key processes, and will perform the process approach in our assessment. Walkthroughs and Lower Control Risk Assessment, Regarding computer controls, a walkthrough of one transaction, An auditor can determine whether a control has been, I begin the interview by saying, “Tell me what you do and how you do it. Has management provided adequate disclosures within the financial statements? Another key feature of the walkthrough documentation is the, Identification of Controls and Control Weaknesses, Response to Risk of Material Misstatement. Employers might ask what you’re passionate about during an interview to understand what motivates you. How do you document walkthroughs? The words Control Weakness (as shown above) makes it easy to locate control weaknesses. What is the percentage of assets, revenues and net income for which they will be responsible? My sweet spot is governmental and nonprofit fraud prevention. Observations and inspections must also occur. July 26, 2018 - Learn the 20 best networking questions to ask that will help you build rapport and demonstrate interest in others while also gathering important information. How do you ensure independence? Question 35. Sample questions include: Are work areas properly illuminated? This is an exploratory question aimed at assessing … Accounting and Auditing. If so, how were they resolved? I am the author of The Little Book of Local Government Fraud Prevention, Preparation of Financial Statements & Compilation Engagements. The walkthrough documentation takes this shape: Why identify control deficiencies in the walkthrough? Are there appropriate training mechanisms in place? This extensive list of questions can be asked during an interview for an inventory audit. At the same time, my Livescribe pen records the audio. Though this article focuses on planning and risk assessment, the identification of control weaknesses will impact our end-of-audit communications. Another key feature of the walkthrough documentation is the identification of who I spoke with and when. Is that material? What does the COVID-19 crisis mean for your business, and for you? Where are the records of non … Even so, passing this responsibility off to lower staff is not a good choice. How will you determine the quality of their work? As you write your narrative of the accounting system and controls, highlight both controls and control weaknesses. I begin the interview by saying, “Tell me what you do and how you do it. Were there any significant changes in financial statement amounts from the prior year? After logging in you can close it and return to this page. The system’s weaknesses tell me where risks exist. What was the extent of your work on the audit and were there any changes to the scope of work performed? This makes sure he is clear on what you are doing and establishes more equal footing—more of a peer-to-peer relationship. It’s too complicated–and too important. If someone can—even though they don’t normally—perform key controls, you need to know. Focus your audit process on what is relevant, and you will achieve tangible results. 11+ security questions to consider during an IT risk assessment by Michael Kassner in Security on May 26, 2016, 1:40 PM PST IT risk assessments … ), As I listen, I write notes. You should be adding entries designed to catch issues you found during audits that are not covered by your current checklist. Why? Are there any matters that might reasonably be thought to bear on your independence? Risk assessments have been used by company management to determine which is more detrimental: the cost of preventing a risk from occurring vs. the cost of recovering from a potential risk. Are worksites clean and orderly? What to Ask Your Company’s Auditors Despite Sarbanes Oxley, corporate executives still seem awfully good at keeping their boards in the dark. My response? I find it hard to blame board members, though. Here are several examples of questions you might ask during the second interview: What is a typical day like for the person in this position? Later the conversation can be played from the pen. In other words, the auditor can’t default to high. Were there any related party transactions noted as a result of your audit? Will your opinion be unmodified? They work for me, and they will work for you. We've created the BDO Library as a "go to" source for informative and thought provoking knowledge resources. The publication can also be used by management and members of the internal audit community to guide their Auditors are generally happy to answer accounting questions regarding unusual or infrequent transactions the organization may need assistance in accounting for. Always ask who performs control procedures when a key person is out. As I’m writing about the last thing they’ve said, they are moving to the next, and I fall behind. While the auditor can assess control risk at high, she must first gain an understanding of the cycle and the related controls. For example, if a person does not normally issue checks but can, and that person also reconciles the bank statement, he might issue fraudulent checks. Have your audits identified areas of concern to the overall entity environment? Why? Are you aware of any conflicts of interest between officers or employees and the organization? So, at the top of the transaction cycle description, I name the persons I interviewed and the date of the conversation. How long have you been performing these duties? Risk assessment procedures are required. Following a transaction through the accounting system–without reviewing controls–is not an audit walkthrough. Tell him what you hope to accomplish with this meeting. I communicate other deficiencies in a management letter (or verbally and document the discussion in my work papers). Please log in again. Did you seek the opinions of other auditing firms on any accounting or auditing issues? We like things that “tie,” “foot,” or “balance.” We may not enjoy probing accounting systems for risk. Read my full bio…. To do that, performing a walkthrough would be a good practice. Well written management letters that highlight control weaknesses allow you to do just that. What criteria do you use to determine materiality? This action causes the pen to play the audio for that part of the conversation. Johnny can write checks to himself. What actions do you contemplate in response to these suggestions? Were any problems or difficulties identified as a result of the audit that we should know about? ). It is important to be extremely objective when exploring a new process. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. How is management remaining current with respect to changes in accounting and financial reporting requirements? Are there any subsidiaries or activities that will not be audited that present operational or financial risks but are not viewed as “material?”. What will be the scope of your activities this year? Being armed with an array of questions will help you feel confident in keeping conversations going and make a strong impression with new contacts. Persons adding new vendors cannot process signed checks. | Is the organization contemplating any changes in accounting methods? What work will you be doing to assist the external auditors? Desk audits will vary from one position to the next. What are the organization’s revenue recognition policies? What was the extent of your work on the audit and were there any changes to the scope of work performed? In those situations, the auditor is required to perform audit procedures to establish the continued relevance of the audit evidence obtained in prior periods (for example, by performing a walkthrough). An AP audit usually consists of four stages: planning, fieldwork, audit report, and follow-up review. Were there any significant systems implemented or modified that could impact processing of transactions? What additional work could you do to reduce the work of the external auditors? So I write simple phrases in my Livescribe notebook such as: Later, as I’m typing the walkthrough narrative, I touch the letter “A” in “Add vendor” with the tip of my pen (I’m doing so in my Livescribe notes). We like things that “tie,” “foot,” or “balance.” We may not enjoy probing accounting systems for risk. How does the organization minimize the risk of fraudulent financial reporting? What is your reaction to the suggestions contained in the external auditors’ management letter? Do purchasing personnel have access to the A/P system? These sequences happen most of the audit that I encountered and it is a very helpful guide to trace down the things that are expected to be asked, and in return, we can prepare for it.. Internal Audit consists of a number of questions that needs to be asked during the audit and if you have conducted audits in the past, you know nothing is worse as running out of your questions during the audit. The danger is that starting a discussion with the toughest questions first can be hard on a client relationship. I find that most interviewees talk too fast—at least faster than I can write. These process audit questions are just a few examples of what may work for your organization. Did you observe any areas of serious concern over the corporate control environment? How is the audit result documented? These are by no means the only questions you’ll want to ask. As you can see, there is a mix of project planning questions and other pre-project questions in the list. In other words, they don’t answer the implementation question. and The Why and How of Auditing, and I frequently speak at continuing education events. Being armed with an array of questions will help you feel confident in keeping conversations going … Are there any other items that should be discussed with the audit committee? What is management’s attitude toward establishing strong internal controls? Where are they located? These inquiries should take place in a private location, if possible. How are deductions impacting wages? Are there any areas where the organization could be of greater assistance to reduce the amount of time spent by you? Are the financial statements fairly presented? In some situations, AU-C section 315 allows the auditor to rely on audit evidence obtained in prior periods. Control Weakness: Only one signature is required on check disbursements. Are there any unresolved questions from the prior year’s audit? Communication of Internal Control Weaknesses, Though this article focuses on planning and risk assessment, the identification of control weaknesses will impact our. Multiple brilliant answers to 25 most common internal audit interview questions will help you get rid of stress, streamline your interview preparation , and prepare for every challenge you may face in this interview. What improvements would you recommend? Efficient and effective interviews are the key to a successful audit. Safety. How do you plan to detect the existence of related party transactions? Are spilled materials or liquids cleaned up immediately? What is your evaluation of the external auditors’ services this past year? Were there any disagreements between you and the external auditors? What’s the most important thing about your job? Why identify control deficiencies in the walkthrough? If we’ve documented walkthroughs in prior years, then we need to do so again in the current year to prove the continuing relevance of the audit documentation. ), did you identify any inconsistencies or material misstatements of fact? July 26, 2018 - Learn the 20 best networking questions to ask that will help you build rapport and demonstrate interest in others while also gathering important information. Sample Audit Committee Questions to Ask of Auditors and Management, Managing Partner; Nonprofit & Education Advisory Practice National Co-Leader, Assurance Office Managing Partner; Institute for Nonprofit Excellence Executive Director, National Director, Nonprofit Tax Services, National Assurance Partner – Nonprofit & Government, Business Restructuring & Turnaround Services, International Financial Reporting Standards, Financial Institutions & Specialty Finance, BDO Center for Corporate Governance and Financial Reporting, UP NEXT: Other Questions an Audit Committee Should Ask. Additionally, they allow us to add value to our audits. What percentage are the audit fees for this engagement in relation to your firm’s total fees? The login page will open in a new tab. What risk assessment techniques will you use? Were there any disagreements regarding accounting, auditing or reporting matters between you and management? So I can link them to my risk assessment summary. If you … Reply—In accordance with AU Section 314 (now AU-C 315), the auditor is required to obtain an understanding of internal control to evaluate the design of controls and to determine whether they have been implemented. How will you utilize computer auditing techniques to review our computer processes? Are there any concerns with how management controls key business processes? What is the purpose of audit walkthroughs? What are the advantages to the organization in continuing its relationship with your firm? Netwrix lists the most common compliance questions asked by auditors. This site uses cookies for analytics, marketing, and other purposes as described in our Privacy Policy. Once you’ve gathered data across the previous seven layers of this audit, you have the tools you need to optimize your contract management process to provide greater value to clients and lower overall costs and risk outcomes. Personnel; Headcount and associated roles? If not, what are your criteria for site visits? Process Walk-through Checklist of Questions to Ask. We are now going to perform a transitional audit to AS9100D of our QMS. What is the purpose of the walkthrough? Join BDO’s subject matter experts as they discuss this relief fund program, it’s related requirement, and what any additional matters that institutions should consider prior to expending funding for HEERF’s most recent allocation. Did the organization or its counsel impose any limitations on you? How does the planned scope of your audit differ from the prior year? I didn’t even mention management review, corrective action, or improvement—all of which are crucial to an effective audit management software.The seven topics discussed here are the biggest newrequirements that auditors need to probe.I would be very interested in hearing from … Ask for a volunteer (who is not an auditor) to walk through the audit process with you as an assistant. Auditors need to make sure that rules and regulations … Answer: Once per year, if this is how you corroborate your understanding of the cycle. Clients want more than just an opinion. Was there adequate coordination with the external auditors? Should the audit committee be aware of any problems, tax or legal difficulties? Looking for more effective audit questions, contact us. It's probably not a tactic you should use during the kick-off meeting for your next audit, but every time you plan to meet with a client, it's important to consider the best sequence for your questions. Ask them to use a 1-to-10 scale and only allow them to give you a 10 on one of them in order to get a more realistic picture. They desire to keep assets safe and to maintain accurate records.

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