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Basic Auditing Procedures

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The Importance of a Bookkeeping Audit Trail

Good business bookkeeping systems leave good audit trails. An audit trail is a sequence of events leading up to a bookkeeping entry in your business's accounts. You start with the source documents and [more…]

How to Read an Auditor's Report

Your business's financial statement audit report can give your business a clean bill of health, or the auditor's report may state that your financial statements are misleading and should not be relied [more…]

How to Decide Whether Your Business Needs an Audit

Audits provide the opportunity for a second set of eyes (usually those of a certified professional accountant) looking over your business’s accounts. An annual audit of your business may be a requirement [more…]

Generally Accepted Auditing Standards

The generally accepted auditing standards (GAAS) are the standards you use for auditing private companies. GAAS come in three categories: general standards, standards of fieldwork, and standards of reporting [more…]

The Four Concepts of Audit Evidence

Audit evidence consists of the documents you use during an audit to substantiate your audit opinion. While working on an audit, you encounter many different types of evidence [more…]

Gathering Audit Evidence

While you work on your client’s audit, you gather sufficient appropriate evidence to come to a determination on whatever it is you’re auditing. The methods you use to gather audit evidence aren’t one-size-fits-all [more…]

How to Become an Auditor

Becoming an auditor is a process that spans quite a few years of your life. First comes the awesome educational requirement. Then you have to pass the Uniform CPA Examination. Depending on the state in [more…]

Types of Auditing Careers

After you pass the CPA exam, you’ll probably be itching to get into the job market to start making some money! Chances are good that with a CPA license in hand, you can choose to do external auditing. [more…]

What Does an Auditor Do?

The goal of a financial statement audit is for you (the auditor) to form an opinion regarding whether those statements are or aren’t free from error. To do so, you use your best professional judgment when [more…]

Who Gets Audited and Why

The types of auditing clients you may encounter and the reasons they require audits are, of course, expansive. As a new auditor, you may not be qualified to conduct some of these audits discussed here, [more…]

Rules for Auditing Private Companies

Auditors of privately owned businesses must follow a code of conduct. As an auditor, you abide by your state’s code of conduct, but you also follow the code of conduct established by the American Institute [more…]

Rules for Auditing Public Companies

The standard of professional conduct for the audit of all publicly traded companies comes from the Public Company Accounting Oversight Board (PCAOB). The Audit Standards Board [more…]

Adhering to Generally Accepted Accounting Principles and Standards

Generally accepted accounting principles (GAAP) define acceptable practices in the preparation of financial statements in the United States. Keep in mind that when you’re wearing your auditor hat, you [more…]

How to Research a New Auditing Client

Here’s something every auditor should remember: Just because a client comes to you and wants you to audit its financial statements, you don’t have to accept the engagement. After all, you’re not selling [more…]

How to Establish Independence with Auditing Clients

When deciding whether to accept an auditing engagement, you must judge your independence and objectivity. If your audit firm lacks independence or objectivity, you can’t accept the engagement. Independence [more…]

How to Check for Conflict of Interest with New Auditing Clients

As an auditor, to make sure you don’t have any conflict-of-interest problems, you have to look at any third-party transactions your potential client may have been part of. If your potential client has [more…]

Auditing Basics: How to Assess a Potential Client’s Reliability

You have to judge a client’s accounting competence and integrity before accepting an auditing engagement. If the client lacks accounting skills and integrity, you should seriously consider not accepting [more…]

Auditing Basics: Assessing What Services Your Potential Client Requires

If a potential auditing client’s records appear reliable and your firm can provide an impartial audit, you still need to make sure you can perform all the tasks the client needs. You also have to figure [more…]

Auditing Basics: How to Prepare an Engagement Letter

When taking a new client, an auditor creates an engagement letter to solidify audit arrangements between the audit firm and the client. The letter serves as the contract, detailing the duties and obligations [more…]

How to Prepare Working Papers for an Audit

Part of your job as a staff associate in an auditing firm is to document your findings in working papers (also known as workpapers) and schedules. Workpapers summarize your audit actions, such as planning [more…]

How to Determine What Is Material in an Audit

Auditors refer to financial statement information that’s not 100 percent correct as a misstatement. You’ll probably never see a set of financial statements that’s completely accurate. But misstatements [more…]

Assessing Financial Statement Presentation and Disclosure

As an auditor you have to assess management’s financial statement presentation and disclosure. The financial statements (income statement, balance sheet, and statement of cash flows) and notes to the financial [more…]

Monitoring Classes of Transactions

When you are performing an audit, you are responsible for assessing management assertions about classes of transactions. Five management assertions are related to classes of transactions. Four of them [more…]

What to Look for When You Analyze Account Balances

As an auditor you have to analyze your client’s account balances. Management assertions address the correctness of balance sheet account balances at year-end. These account balances include the company’s [more…]

How to Assess Audit Evidence

Audit evidence documents give you the substantiation for your professional audit opinion. When performing an audit, you must assess the nature, competence, sufficiency, and evaluation of the audit evidence [more…]

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