Introduction

The word audit came from the Latin word audire, meaning to hear. According to Flint
(1988), audit is a social phenomenon which serves no purpose or value except if its practical
usefulness and its existence is wholly utilitarian. Flint (1988) further explains that the audit
function has evolved in response to a perceived need of individuals or groups in society who
seek information or reassurance about the conduct or performance of others in which they have
an acknowledged and legitimate interest.
Flint (1998) further argues that audit exists because interested individuals or groups are unable
for one or more reasons to obtain for themselves the information or reassurance they require.
Hence, an audit function can be observed as a means of social control because it serves as a
mechanism to monitor conduct and performance, and to secure or enforce accountability.
Mackenzie in the foreword to The Accountability and Audit of Governments made the following
remark:
Without audit, no control; and if there is no control, where is the seat of power?
All in all, an audit function plays a critical role in maintaining the welfare and stability of the
society.

Definition of audit
The Auditing Standard defined an audit as the independent examination of and an expression of
opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that
appointment and in compliance with any relevant statutory obligation.
According to R. K. Mautz, auditing is concerned with the verification of accounting data, with
determining the accuracy and reliability of accounting statements and reports.
Lawrence R. Dicksee, puts it this way an audit is an examination of accounting records
undertaken with a view to establishing whether they correctly and completely reflect the
transactions to which they relate. In some instances, it may be necessary to ascertain whether the
transactions themselves are supported by authority.

The evolution of auditing practices

To facilitate the examination of the historical development of auditing, this review will be
divided into the following five chronological periods:
The period Prior to 1840;
The period 1840s to 1920s;
The period 1920s to 1960s;
The period 1960s to 1990s; and
The period 1990s to present day.

Objectives Of Audit
Basic objective of auditing is to prove true and fairness of results presented by profit and loss
account and financial position presented by balance sheet. Its objectives are classified into two
groups which are given below:
1.

Primary Objectives Of Audit

The main objectives of audit are known as primary objectives of audit. They are as follows:
Examining the system of internal check.
Checking arithmetical accuracy of books of accounts, verifying posting, costing,
balancing etc.
Verifying the authenticity and validity of transactions.
Checking the proper distinction of capital and revenue nature of transactions.
Confirming the existence and value of assets and liabilities.
Verifying whether all the statutory requirements are fulfilled or not.
Proving true and fairness of operating results presented by income statement and
financial position presented by balance sheet.

2. Subsidiary Objectives Of Audit

i. Detection and prevention of errors
Errors are those mistakes which are committed due to carelessness or negligence or lack
of knowledge or without having vested interest. Errors may be committed without or with
any vested interest. So, they are to be checked carefully.
ii. Detection and prevention of frauds
Frauds are those mistakes which are committed knowingly with some vested interest on
the direction of top level management. Management commits frauds to deceive tax, to
show the effectiveness of management, to get more commission, to sell share in the
market or to maintain market price of share etc.
ii. Under or over valuation of stock
Normally such frauds are committed by the top level executives of the business. So, the
explanation given to the auditor also remains false. So, an auditor should detect such
frauds using skill, knowledge and facts.

Audit engagement
Audit engagement refers to audit performed by an auditor. It is the very first stage of an audit
procedure where the client is notified by the auditor that the work pertaining to audit has been
accepted by him/her and also provides clarifications with regard to the scope and purpose of
audit.
To be more specific, audit engagement can be referred to the written letter that the auditor uses to
notify the client that he/she would be engaging in auditing services. Thus, the audit engagement
procedure is basically a negotiation based on professional terms that takes place between
prospective customer and a public accounting entity. This procedure is used for finding new
customers and offer accounting related services to different businesses.
The auditor uses the term audit engagement when the entity has to undergo the auditing
procedure. This could imply varied things and therefore it is necessary that the auditor clarifies
what she/he exactly means by the term. Irrespective of the definition followed by the auditor,
he/she makes it a point to follow certain specific guidelines and procedure for offering the
services.

I.

Pre-engagement procedures

Prior to actually beginning an audit, there are several important steps. First, the audit firm
should decide whether or not to accept the client, or whether to continue to perform work
on its behalf.
If the client has been involved in unethical business conduct or has changed its business to
a riskier industry, the renewal of an annual engagement is not an automatic process. The
important steps of pre-engagement procedures are given below.

An independence assessment
A pre-engagement assessment
Communications with the previous auditor (if applicable). Throughout this process, you
should expect a letter that discloses and communicates the auditors independence of the
entity and confirmation of the auditors compliance with relevant professional standards.

Disclosure of all relationships between the auditor and the entity and its related entities
that may reasonably be thought to bear on the auditors independence.
Once the pre-engagement assessment is completed, the auditor will then issue an
Engagement Letter, which will include the following:
Engagement objectives, scope and limitations
Managements responsibilities;
Responsibility for adjustments;
The auditor's responsibilities; and
Other matters, such as fees.

Engagement letter
An engagement letter defines the legal relationship (or engagement) between a professional firm
(e.g., law, investment banking, consulting, advisory or accountancy firm) and its client(s). This
letter states the terms and conditions of the engagement, principally addressing the scope of the
engagement and the terms of compensation for the firm.

Standard format for letters of engagement

Addressee: Typically addressed to the senior management (e.g. CEO) of the client.
Identification of the service to be rendered: One type of service is a financial statement
audit. Provided in this section is a brief description of the nature of the particular service.
Other services that are planned for the audit (e.g. evaluation of internal control,
preparation of regulatory reports) are also identified in this section.
Specification of the responsibilities of the auditor of the company: This section refers to
the specific professional standards and responsibilities of the auditor.
Constraints on the accounting firm: For example, timing of access to client facilities and
accounting records may delay the engagement.
Deadlines: This section lays out the estimated date of completion and release of the
financial statements, as well as the general guidelines for the timing of the audit work.
Description of any assistance to be provided by the client: Typically, the clients
personnel will prepare some schedules (e.g. bank reconciliations) and retrieve documents
from files. The letter should describe the assistance of client personnel. If the assistance
is not provided and the auditors must complete the work themselves, this section of the
letter would provide justification for additional fees to the client.
Interactions with specialists, internal auditors, and the predecessor auditor needed to
conduct the audit: Some specialists needed on an audit may include engineers to verify
the stage of completion of electronic components, real estate appraisers to appraise
realizable value of real estate used as collateral for loans, actuaries to evaluate the
funding requirements and future cash flows associated with pensions or post-retirement
health costs, and attorneys to evaluate the likely disposition of contingent losses arising
from litigation.
A disclaimer: Describing the limits of the audit. Typically this expresses that an audit is
not designed to detect all forms of fraud or illegal acts; rather, an audit checks the
financial position of a client with reference to generally accepted accounting principles.
A description of the basis for fees: This may include a fixed fee or an estimate of fees
based on expected completion time and billing rates of firm employees assigned to the
engagement.
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Pre-engagement Planning Meeting

The purpose of the pre-engagement meeting is to create tentative plans for an audit. The
engagement leader may communicate the following information to the in-charge accountant:

Changes in the client's business operations, accounting systems, and internal control.
The reporting entity's business environment and operations, including any going concern
issues.
The entity's applicable financial reporting framework, and if a special purpose framework
is the most appropriate and reasonable presentation of financial position and results of
operations.
Questions from the review of the prior year's audit documentation, including whether
financial statements in the first year of transition to a special purpose framework will be
single period or comparative. (Restatements of prior period would be required.)
Possible modifications of the prior year's audit strategy to increase efficiency.
Suggestions for modifying the prior year's procedures and documentation to save time,
particularly considering the use of a new special purpose framework.
Staffing and on-the-job training suggestions.
Administrative details such as timing, budgets, and billing arrangements.

Audit Planning
Once the auditor has been formally retained by the client, substantive audit planning can begin.
A critical element of planning the audit is determining materiality. Materiality is a flexible
concept that is the subject of much academic research and professional best practices, but it is
basically a function of assets or income that would impact the decision-making of a user of
financial statements.
Planning procedures are the first and perhaps most important step in conducting a successful
internal audit. Without adequate planning, the likelihood of missing relevant control weaknesses
or encountering engagement-related problems increases considerably. Moreover, improper
planning can lead to changes in scope or objectives after much of the audit work has already
been completed.

Objectives and scope

Audit objectives represent the high-level goals and anticipated accomplishments of the review
and address controls and risks associated with the client's activity. The audit's scope defines the
parameters to be used toward achieving those objectives.
Auditors should determine the review's scope and objectives well in advance of fieldwork.
Objectives should address the risk and controls associated with the activities under review.
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Client operations
The engagement team should gain an understanding of the auditable unit's business and
operations as well as any of its unique characteristics or business practices. To begin, the team
should review any prior-year work papers related to the client. They should also consider
obtaining background information on the client's responsibilities and processes via web searches,
company document reviews, and discussions with senior management or other personnel familiar
with the client's business area.

Administrative steps
Administrative planning items help lay the foundation for planning work and should be
completed before fieldwork begins. Internal auditing should begin by creating a checklist to
guide the planning process, including items such as client notification, client contacts, any
documentation needed before fieldwork, and creation of the audit program and budget. Auditors
should also draft an announcement letter or similar communication to the auditable unit and
company leadership.

Client opening meeting

The project planning meeting should be held before fieldwork begins. During the meeting,
auditors should inquire about any recent or proposed changes in the client's organization,
including system changes. They should also discuss other practical and logistical concerns.

Audit program
The audit program sets forth the procedures necessary to complete an efficient and effective
audit. It consists of a detailed plan of the work to be performed and includes the steps required to
achieve audit objectives. In most instances, a well-structured audit program:

Provides an outline of the work to be performed and encourages a thorough

understanding of the audited unit.
Assists in controlling work and assigning responsibility.
Aids in reviewing the audit.
Furnishes evidence that the work is adequately planned.
Provides a record that can be reviewed and approved by management before
performance of work, thereby contributing to assignment supervision.
Provides assurances that all appropriate risk areas have received adequate
consideration and that important aspects of the audit have not been omitted.
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Risk Assessment
During the planning phase, auditors will gather information about your entity and its operating
environment by:
Making enquiries of all key employees to help identify potential risk factors; and
Reviewing results from previous year to identify any major changes and establish/confirm
the scope, materiality, timing, who will be assigned to the audit, and the basic audit approach.
In addition, we will seek information such as:
Financial statements, budgets, financial performance measures/metrics, audit committee
minutes, filings with regulators, judgements and estimates.
Vision, mission, values, objectives, strategies, organizational structure, board of directors
meeting minutes, job descriptions, operating performance, business drivers, policy &
procedure manuals and non-financial performance measures.
Creditors, media, analyst reports, government agency reports and the internet.
Professional standards require auditors to obtain a reasonable understanding of internal controls
in order to plan the audit. Documenting the systems of internal controls or updating existing
documentation can be made more efficient by having the appropriate staff from your office assist
the auditor in obtaining this information.
If there are any significant changes in specific business processes, you should inform the auditor
at once so that the potential impact of the changes can be assessed well in advance of the critical
audit completion target and so that audit plans can be adjusted accordingly.
For each significant business process identified, the auditor will perform a walkthrough to ensure
that they are operating as documented. A walkthrough includes making inquiries of personnel,
observing the application of specific controls and inspecting documents and reports. It addresses
control implementation at a point in time.
After the walkthroughs are completed, the design and implementation of internal control are
evaluated. The risk of material misstatement is evaluated and segments that require special
consideration are identified. Audit procedures are then designed by our staff.

Risk Response
The audit team spends much of this phase performing the procedures outlined in the risk
assessment phase. This typically involves obtaining confirmations, performing substantive tests,
analytical procedures and enquiring with management. Evidence obtained in the risk assessment
phase will continue to be evaluated.
The auditor should have provided you with information needs list prior to coming for their yearend visit.
This list should itemize schedules and working papers required by the auditor for each financial
statement component along with the scheduled completion date.
In addition:
We suggest that preparation of each schedule be assigned to specific employees in your
office in order to make the process easier to manage.
Schedule and working paper formats should be determined and agreed upon by both
yourself and the auditor. This should minimize the time spent by your staff in assembling
the information and help avoid the need to revise the material.
An effective way of providing the auditor with the schedules and documentation
identified in the information needs list is by assembling a well-structured financial
statement file.
A good file that supports the preparation of financial statements will decrease questions
and information requests by the auditor.
A good file has the following characteristics:
It supports all numbers in the financial statements and all numbers presented in the notes.
It includes all schedules and reports used to compile the financial statement numbers.
The schedules and reports tie directly to the accounting records. This should be done in
such a way that one is easily able to see that all accounts in the trial balance have been
completely included in the financial statements.
The organization of the file is driven by the financial statement components. For
example, the file could be organized in order of assets, liabilities, revenues and expenses.
Explanations of significant variances from year to year will always be required by the
auditors. Analytical review is a valuable tool for understanding the nature of changes in
the balances and transactions of an organization and in evaluating the reasonableness of
the numbers. An analysis of significant changes should be incorporated into the
supporting file.

A good analytical review will incorporate:

A description of the nature of the component (ie, what is it comprised of).
A description of what occurred during the year, and whether that is reasonable given the
nature of the component.

Reporting
The audit matters and findings will be initially communicated to management in the form of an
audit report, which will include the draft audit opinion. A management letter will also be created
that will outline issues encountered during the year and recommendations for improvement.
Once the findings are agreed upon, a final version of the report will be approved by the Auditor
General and presented to the audit committee.

Audit reporting Procedures

The key deliverable from your web accessibility audit will be a report. The report should record
the findings of the audit and recommend actions to improve accessibility.
There is no set format for such reports but a report should contain enough detail for your
technical staff to act to improve accessibility where required.
At the same time, other sections of the report should be written for non-technical staff if they are
the intended audience. (For example, required changes to content should be written for the
content team.)
The report should not be any longer than it has to be to accommodate the key information:

Summary;

Background and methodology;

Findings;

Prioritized action list, with suggested fixes and timeline;

Appendix of audit detail.

Any report longer than 15 pages should contain a table of contents.

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Summary
The report summary (sometimes called an executive summary) should contain the key points of
the report in very condensed form. It should contain about 400 words, summarising all sections
of the report but with most emphasis on the report's findings and what should happen in
response.
The summary should be written in plain, non-technical language as far as possible. Its intended
audience is anyone involved in or interested in the website.

Background and methodology

The background and methodology section should contain the what, where, who detail of the
audit, including:

the goals of the site;

the reason for the audit;

a summary of the audit requirements;

who carried out the audit and when;

what methodology the audit used;

what the page sample was;

The WCAG level for which the site was audited.

Findings
Each report should contain a section containing the findings of the audit. You will probably want
to know straight away if your website achieves conformance rating Single-A, Double-A or
Triple-A with the WCAG. It should also give a high-level description of some of the main issues.
For example, it may report that the site contains a substantial number of images that did not have
alternative text. It should not, however, list every image without alternative text. This
information should be presented in a detailed appendix.
This section should be longer than the summary but not a page-by-page description of every
accessibility check.

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Prioritized action list

To help you to remedy accessibility problems uncovered in the audit, a key component of the
report is an action list. This should contain enough detail to rectify the problems identified.
In some cases, this may be an exact fix. For example, where absolute font sizes are used on the
site it should suggest a fix such as: "Replace absolute font size of 12pt for the body style in file
mysite.CSS with a relative size of 80%." In other cases, the action may be more generic, e.g.
"Ensure that all staff handling images are aware of the need for appropriate alt text and have the
skills to create it."
In either event, the action should be clear and unambiguous. Carrying out the action, as
described, should be enough to deal with the accessibility problem identified.
The accessibility auditors should also prioritize the actions recommended. This should be done
primarily on the basis of gravity: a Level A breach is more significant than a Level Double-A
breach, even if the target is to have none of either.
The prioritization can also take account of how easy or otherwise it is to rectify a breach. "Quick
wins" that improve accessibility in the short term should not be deferred just because there are
more grave breaches that will take longer to rectify.
The action list should also contain a timeline or roadmap giving an outline of the timescale
involved. Timescale is, of course, highly dependent on the budget and other resources available.
However, it is still worthwhile to have accessibility specialists set out their view on a realistic
timescale to deliver fixes.

Audit detail - appendix

There will probably be further detail arising from the audit. This might include the results from
automated tools. The findings of these tools and the actions arising from those findings should be
covered in the body of the report.
The results from the tools do not belong in the body of an action-oriented report but it can be
included in an appendix. An example of an audit template taken from the WAI website is
included for reference in the appendix of this document. Likewise, the completed audit template
for each page should be included in an appendix. In this way, supporting detail is available for
future reference without cluttering the main report text.

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The organization of detailed appendices may vary. The essential requirement is a full listing of:

audit checkpoints;

pages checked;

Conformance of the pages checked with the audit checkpoints.

Findings of the Report

Auditing is an organized and systematic process.
From Pre-Engagement to Reporting, all auditing process steps need
to be maintained step by step.
In Pre-Engagement meeting a total framework of audit process
needs to be drawn.
Good communication must exist between the audit team members and the
organization being audited.
Audit Risk must be assessed properly - important to meet the audit standards
concerning errors, irregularities and illegal acts.

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Conclusion
Audit, or more accurately, an audit of financial statements, is the verification of the financial
statements of a legal entity, with a view to express an audit opinion. The purpose of an audit is to
provide an objective independent examination of the financial statements, which increases the
value and credibility of the financial statements produced by management, thus increase user
confidence in the financial statement, reduce investor risk and consequently reduce the cost of
capital of the preparer of the financial statements. The engaged audit firm always try to follow
the rules and laws related with this. They always try to draw a reasonable opinion on their
observed evidences.

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