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Audit Process: From Planning to Reporting

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In our recent article, we delved into the intricacies of the audit process, highlighting the importance of pre-engagement activities, evaluation and review, reporting, follow-up procedures, and quality assurance reviews.

Pre-Engagement Activities: A Crucial Step in the Audit Process

Before embarking on an audit engagement, it is essential to perform preliminary activities to ensure that auditors have considered any events or circumstances that may adversely affect their capability to plan and perform the audit. This step helps reduce audit risk to an acceptably low level.

  • In Bhutan, the Supreme Audit Institution (SAI) has a mandate to conduct audits of all public sector entities.
  • While SAI Bhutan does not have the option to decline or withdraw from an audit engagement, it is still essential to perform pre-engagement activities to ensure that auditors are equipped to plan and conduct a thorough audit.

Evaluation and Review: A Critical Step in the Audit Process

After completing the audit fieldwork, the next step is to evaluate and review the work performed by auditors. This involves ensuring that the opinion and observations prepared by auditors are adequately supported by audit evidence and that professional judgment has been applied.

  • Auditors and reviewers must ensure that the audit plan was followed during the conduct of the audit.
  • The detailed processes and methodologies for evaluation and review are highlighted in Chapter 6 of this manual.

Reporting: A Key Component of the Audit Process

Based on the evaluation and review of the work done by auditors, the next step is to prepare and issue an audit report. Typically, the audit report contains the auditor’s opinion on the financial statements, which is based on evidence as to whether the Financial Statements are fairly presented or presented in accordance with Financial Reporting Framework and any laws and regulations affecting their presentation.

Follow-Up Procedures: Ensuring Compliance and Accountability

ISSAI 100 (Level 3) emphasizes the importance of monitoring action taken by audited entities in response to matters raised in an audit report. This follow-up focuses on whether the audited entity has adequately addressed those matters, including any wider implications.

  • In the event of non-submission or unsatisfactory Action Taken Report (ATR) by the audited entity, the SAI may take further course of action.
  • The follow-up procedure is considered a good practice under principle 3 of ISSAI 20.

Quality Assurance Review: Ensuring Audit Quality and Independence

ISSAI 1220 requires review of audit work performed at different times throughout the audit process. This includes independent quality assurance (QA) reviews to ensure that the audit process has been followed and the audit of financial statements has been conducted as per the requirements of ISSAI or equivalent standards.

  • The QA review process enables the Head of SAI to reach a conclusion as to whether the audit process has been followed and the audit of financial statements has been conducted as required.
  • The detailed guidance and methodologies for conducting QA reviews are covered in a separate QA Review Manual.

Conclusion

In conclusion, the audit process is a critical component of ensuring transparency, accountability, and compliance in public sector entities. By understanding the pre-engagement activities, evaluation and review, reporting, follow-up procedures, and quality assurance reviews, SAI Bhutan can ensure that its audits are thorough, effective, and independent.

References

  • ISSAI 100 (Level 3)
  • ISSAI 20
  • ISSAI 1220

About the Author

The author is a seasoned auditor with extensive experience in auditing public sector entities. He has worked with various organizations, including SAI Bhutan, and has expertise in financial audit and assurance services.