MEMORANDUM
To:
From:
Date:
Subject:Key business processes of a company
Finding out about the main business operations and the environment of the firm that hires you to provide financial services is a crucial step in the audit planning process. To assess risk, the auditor must thoroughly grasp the entity's operations and surrounding environment. After considering these factors, they will develop an effective and efficient audit strategy and method.
Consider a scenario where an auditor is hired by a dairy company that produces goods like cheese, butter, and milk.The auditor must now consider a wide range of factors to comprehend the client's business. These consist of
Nature of entity and applicable accounting policies
The client's business's ownership, legal, financial, organizational, and governance structures must all be known to the auditor. The danger of a substantial misstatement will be higher if the company has numerous subsidiaries or a complicated ownership structure. The auditor should also notice inconsistencies between the company's accounting policies and the applicable financial reporting framework.
Industry regulation and external factors
The auditor must be familiar with the client or firm’s sector. He ought to know the level of technology employed, the relationships with customers and suppliers, and the degree of competition. The auditor must also consider how well the laws and regulations related to the industry are.
The following process and procedure should be observed at the planning stage as it aids the auditor in understanding.
Since it stems from the initial step of understanding a client's business, the inquiry should take the shape of a conversation with management. These questions might come from management, customers, suppliers, or employees.
Another crucial factor is observation, which supports the first queries made when management and others, for example, visit the company's facilities to ascertain the actual status and situation.
Examining the financial statements and meeting minutes is one action that helps to support the inquiry process carried out with the management and others. A good action plan is essential to the success of any firm and will help it operate in line with its goals. For instance, an auditor’s job in a dairy company is to prepare financial statements. This task calls for using essential talents, such as the ability to develop the best business ideas to increase the company's profitability and competitiveness.
The company plan is formed by considering both internal and external elements. According to the experts, each firm is significant and capable of achieving its aims so long as it follows the necessary steps and accomplishes its goals. In general, I advise that the key business process outlined above to be used by a company that employs accountants to offer financial services, as evidenced by the journal.
