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An audit program aims to develop a comprehensive structure for any independent auditor to comprehend what formal exams have been carried out, what findings have been made, and the logic that supports each result. The objectives of the audit, its scope, and its timing should all be explained in the framework. The review process should also outline how working papers, the documented evidence gathered during the audit, would be evaluated and reported. However, drafting the audit plan will consider the audit's pertinent legal deadlines, staff skills and production reports, and overall goals(Kozachenko, 2021). Audit program elements are particular to individual organizations depending on the unique demands of those organizations.
Cash auditing refers to reviewing all or a subset of the cash transactions performed by your business over a given time frame. A cash audit can verify the integrity of the cash on hand, the veracity of deposits, and the accuracy of all related records, such as receipts and disbursement reports. A cash audit reviews financial activities between two points in time. Generally accepted accounting principles and company policies require you to analyze these cash dealings—control environment. The term "control environment" refers to the framework within an organization that includes the policies, procedures, and systems that support the implementation of internal control(Choi &song, 2020). Leadership, particularly the board of directors and upper management, sets the tone for the importance of internal control and the expected behaviors of employees. The management of a company consistently stresses the need to meet high standards.
There are five guiding principles for the Control Environment section:
- The organization provides evidence that it is committed to upholding moral and ethical standards.
- The governing board maintains its autonomy from management and is responsible for monitoring the establishment and operation of internal controls.
- Management creates structures, reporting lines, and proper authority and responsibilities to accomplish their goals. All of this is done under the watchful eye of the board.
- The organization is committed to attracting, developing, and retaining capable personnel aligned with the firm's goals.
- Individuals are held accountable by the organization for the internal control responsibilities they are responsible for to achieve their goals.
These guiding concepts have methodologies that can be used as road maps to get things done. The approaches are not intended to constrain entities' application in that they can propose their policies, particularly in situations where the framework does not directly address them.
The procedures should incorporate the following elements of risk assessment:
Discussion between management, internal audit staff (if any), and anybody else who, in the auditor's professional opinion, could know something that could be useful in preventing major misrepresentation issues brought on by fraud or error.Questions are directed at the right people in the audit department(Kozachenko, 2021).
Risk assessment
The auditor can take some of the following measures to mitigate the inevitable risk. He is staying current on the state of the legislation, regulations, etc. In-depth familiarity with the client's field and an appreciation for where they excel. Ensuring he takes time to hire and train his employees includes detailed auditing methods, procedures, and schedules. Careful deliberation is required while choosing an outsourced company or consultant. Thorough preparation and careful execution of the processes. The particular method used by trained professionals(choi &song, 2020).
Control activities
In most organizations, you'll find these internal control operations. Whether or not their day-to-day work involves any of the tasks mentioned above, every worker plays a part in the larger picture of internal control within the company.
- Separation of Responsibilities- To lessen the likelihood of mistakes or activities that are not appropriate, responsibilities are delegated to a variety of staff members. For instance, several people should be responsible for receiving cash or cheques, creating the deposit, and verifying the warranty.
- Authorization and Approval- Authorization and approval of transactions are necessary to ensure the action is in line with the mission of the relevant department or institution. The director may be required to sign off on all purchase orders and invoice vouchers as part of a department's policy. Those who sign off on business deals must be appropriately vested with authority and knowledgeable enough to make sound judgments.
- Examining and Balancing- Performance reviews may address compliance, financial, or operational issues. Reconciliation verifies transactions or activity records. To verify income and spending activities on accounting reports and reconcile or compare supporting documents.
Information and communication
The entity's internal control obligations cannot be fulfilled without the information needed to carry them out and assist in fulfilling the entity's objectives. Management acquires or generates accurate information in real-time to monitor the performance of internal controls. Constant, iterative exchange of information between individuals is what we mean when we talk about communication. Through internal communication, information is shared within a company, both vertically and horizontally(El Nashar,2022). This helps upper management communicate to all employees that they must take their control responsibilities seriously. Communication with the outside world has a dual purpose: it allows for the inbound transmission of pertinent information from the outside world. It provides details to third stakeholders in response to their needs and expectations. Establishing clear lines of communication during all stages of the auditing and reviewing process is essential. The auditee or reviewer can be helped to stay updated about developments in our work through effective communication. It improves efficiency, boosts motivation, and ultimately leads to greater satisfaction in work that has been completed successfully.
Monitoring Activities
Each of the internal control's five components and the rules that put those components' guiding principles into practice must be assessed on an ongoing basis, in isolation, or in some other way that combines the two. Continuous assessments, embedded in organizational processes at all levels, yield timely data. The scope and frequency of these independent reviews will change over time based on the level of risk, the quality of the ongoing assessments, and other managerial factors(El Nashar,2022). Deficits are reported to management and the board of directors after being compared to standards set by regulators, standard-setting agencies, or direction and the board of directors. A company's ability to discover, avoid, and deter abnormalities depends on the effectiveness of its internal auditing and monitoring procedures. The goal is to build a system of third-party audits that will help pinpoint problem areas and guarantee the accuracy of the current setup.
References
El Nashar, T. A. (2022). Size of Auditing Firms and their Preferences to International Corporations concerning Earnings Quality. Available at SSRN 4228898.
Kozachenko, A. (2021). A comprehensive approach to the organization and methods of auditing the enterprise's cash. In Colloquium-journal. 2021.№ 17 (104), сzęść 5. Р. 52-59.
Nghiêm, T. H. (2021). COMPLETING AUDIT PROCEDURES FOR CASH AND BANK ACCOUNTS ON FINANCIAL STATEMENTS AT THANG LONG–TDK AUDITING AND VALUATION COMPANY, LTD.
Choi, S., Han, J., Jung, T., & Song, B. (2020). Audit committee members with CEO experience and the value of cash holdings. Managerial Auditing Journal.
