An auditor should conduct audit of business organization as follows:
1. Preparing Audit Program
An auditor should prepare audit program to make work of audit effective and efficient. Program refers to the system, procedures and order so as to see the performance of activities smoothly. While preparing audit program, an auditor should determine the following things:
* Observation
* Interview
* Documentation
* Test and check
* Analysis
2. Review Of Internal Control System
Effective and efficient internal control system ensures correct accounting. Effectiveness of internal control system determines the system of audit. If internal control is effective, an auditor can apply test check, otherwise s/he needs to check in detail. Thus, an auditor should review the internal control system to assess its effectiveness.
3. Conducting Tests
Before proving the truth and fairness of results of income statement and balance sheet presented by an accountant, an auditor needs to test various facts. Such facts are given below
* Collection, use and recording of evidence
Auditing is made on the basis of evidence, so an auditor should collect physical evidence, records, information etc. Such collected documents should be analyzed. While testing evidence, an auditor should consider its reliability and sufficiency.
* Field visit and inspection
An auditor can visit the field to test the reliability of records and evidence. He can hold discussion with the concerned parties. Facts which are found during field visit can be incorporated in the report.
* Discussion and interview
Duty of an auditor is not only to detect frauds but also to find out its weakness and suggest the client to improve such errors and frauds. So, an auditor should hold open discussion and interview so that the facts found during such discussion can be incorporate in the report. Thus, auditor has to note down such points serially.
* Data collection and working paper management
An auditor should collect data from reliable sources which are essential for the purpose of audit. Working paper management is very important to make an audit reliable. Working paper refers to the classification and recording of particulars, details and information found during the course of audit.
* Comparative study and analysis
An auditor should compare the statement of client to the similar type of organization or statement of previous years. So that an auditor can find out whether the progress has been made or not. An auditor should rectify the achievement with objective so that s/he can analyse whether objectives have been achieved or not.
4. Developing Audit Points
After performing all the above functions, an auditor should develop points where special attention is to be given while conducting audit which makes work of audit easier, simpler and more reliable.
5. Conducting Audit
An auditor should check the books of accounts and information so that s/he can express opinion in the report.
