Process Audit

Physical examination of primary documents and audit trail to accounting software:

1. Compare receipts books/logs and accounting software records– are all receipts entered in accounting software? If no, investigate and resolve.
2. Compare the images of a sample of cancelled checks in the bank statement with the accounting software record – are any payees or amounts different? If yes, investigate and resolve.

Routine examination of items in the accounting software:

1. Scan Chart of Accounts for any anomalies.
2. Sample P&L and Balance Sheet (examine Trial Balance) to ensure that transactions are booked to the appropriate accounts. If inappropriate bookings are due to memorized transactions or to inventory item mis-assignment, resolve the error at the root cause.
3. Run a report showing all closed customer accounts and any balances – are they all zero? If no, investigate and resolve.
4. Run a report showing all new customer accounts – have all been charged? If no, investigate and resolve.
5. Run similar reports for vendor accounts; sample to ensure vendor payments have not been posted to unusual accounts.
6. Examine bank, cash and credit card accounts – have all been reconciled regularly? If yes, what is the total amount (per period) of any reconciliation discrepancies? If unusually large, investigate and resolve. If accounts were not reconciled, investigate and resolve.

Special circumstances:

1. If trainees/temps are entering data, look at some of their work to see how well initial standards have survived levels of translation and interpretation.
2. If inventory is used, examine the process of adjusting and reconciling inventory.
3. Look at any specific items or files parent company may be particularly concerned about.
4. See if there are any opportunities to cross-check between front office and accounting software that can shorten the processing and/or audit process.
5. Determine what the data backup process is and if it’s being used regularly.
6. Determine what the accounting software update process is and if it’s being used correctly.

Send preliminary report of findings to parent company for distribution/action.

1. List closed audit items, noting any minor findings corrected during the audit.
2. List open audit items.
3. Give/request timeline for remediation and to close open items.

After remediation/resolution:

1. Send final audit report to parent company and auditee showing all audit items closed.
2. Make a backup of the accounting data and send to parent company for archive.
3. Send the data to accountant and do a preliminary close so nothing can be changed until s/he issues closing entries.
4. Parent company should institutionalize correction (via written Policy documents) of any misunderstandings or broken processes.

If all goes well, on-site should take 4-6 hours, overall 8-12 hours.

© 2005, 2006, 2007 Qualitics, Inc.