Back to: Auditing
Hello, Students
Last week we talked about the qualities of a good auditor. This week, we will break down the stages of auditing – the step-by-step process from beginning to end. Like football match that has first half, second half and full time, auditing also has stages. Let’s dive in!
Lesson Objectives:
By the end of today’s class, students should be able to:
List the major stages of an audit.
Explain what happens at each stage.
Understand why following the stages is important.
Five Main Stages in Standard Audit
There are usually five main stages in a standard audit. These stages help the auditor to work in an organised and effective way. Let’s take them one by one.
1. Planning Stage
This is the first and most important step. Like we discussed in Week 6, the auditor prepares for the audit by:
Learning about the client’s business
Identifying risky areas
Preparing the audit programme
Sending the audit engagement letter
Why it matters: Without proper planning, the auditor can waste time or miss important details.
2. Fieldwork Stage (or Execution)
This is where the real audit work begins. The auditor visits the company (or works online if needed) and:
Collects audit evidence
Interviews staff
Reviews documents and records
Tests internal controls
This stage may take days or even weeks, depending on the size of the company.
3. Evaluation of Evidence
After collecting evidence, the auditor now sits down to analyse everything. They check:
If the documents match the company’s reports
If the internal control is working
If any fraud or error is found
If more evidence is needed
This stage is like connecting the dots. The auditor begins to see the full picture.
4. Reporting Stage
Here, the auditor prepares the audit report. This report contains:
What the auditor checked
The findings
The auditor’s opinion (e.g. clean, qualified, or adverse opinion)
Any advice or recommendations
This is the stage that gets public attention – because it tells people whether they can trust the company’s financial records or not.
5. Follow-Up (if needed)
Sometimes, the auditor may check again later to confirm if the company took action on the advice given. This is called a follow-up audit or management letter review.
Example Scenario:
Imagine you’re auditing a private secondary school. First, you plan by understanding how they collect fees. Then, you visit the school and review their books. After that, you go through the evidence and discover some students were not properly recorded. You write your report and advise the school to improve their system. Two months later, you return to check if they followed your advice – that’s the full audit process.
Summary of Lesson:
An audit goes through five main stages: planning, fieldwork, evaluation, reporting, and follow-up. Each stage is important and must be done carefully. Following these steps helps the auditor to work professionally and avoid missing anything.
Evaluation:
What is the first stage of an audit?
What happens during the fieldwork stage?
Why is evaluating audit evidence important?
What does an audit report contain?
What is a follow-up audit?
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