Audit and Assurance in Malta
Having an annual audit of the financial statements is a statutory requirement as per the laws of Malta. At Borg Galea & Associates, we strive to carry out auditing work to add value to our clients. This is how we do it.
Audit Process
Every audit engagement carried out by us involves detailed planning and is carried out in a constructive atmosphere between the client and the firm.
Every audit is unique however the audit process is similar most of the times. It usual involves four distinctive stages: Planning (which is also referred to as preliminary review), Fieldwork, Audit Report and Follow-up Review. Client involvement is critical at each and every stage of the audit process. Attention from the directors and accounting is crucial in all stages. Our objective is to minimize the time required from our clients as to reduce the ongoing activity disruption by utilising Smart Audit Systems and other technological tools which help us gather and analyse more information.
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Planning
During the planning portion of the audit, we notify the client of the audit, discuss the scope and objectives of the examination in a formal meeting with organization management, gather information on important processes, evaluate existing controls, and plan the remaining audit steps.
Engagement Letter
Once the planning stage is conducted, we analyse prospective clients in line with our business risk assessment and successful clients are sent an official engagement letter. This letter communicates the scope and objectives of the audit, the auditors assigned to the project and other relevant information.
Initial Meeting
During this opening conference meeting, the client describes the unit or system to be reviewed, the organization, available resources (personnel, facilities, equipment, funds), and other relevant information. A senior auditor from our team meets with an officer from the client responsible for the organization and any staff members s/he wishes to include. As our audit client, we stress out the importance to identify issues or areas of special concern that should be addressed.
Preliminary Survey
In this phase we gather relevant information about the organization in order to obtain a general overview of operations. Most of the time, this is conducted with key personnel and by reviewing reports, files, and other sources of information provided by yourself.
Internal Control Review
We also review the organizations internal control structure, a process which is usually time-consuming. In doing this, we use a variety of tools and techniques to gather and analyze information about the operation. The review of internal controls helps us determine the areas of highest risk and design tests to be performed in the fieldwork section.
Audit Program
Preparation of the audit program concludes the preliminary review phase. This program outlines the fieldwork necessary to achieve the audit objectives.
Fieldwork
The fieldwork concentrates on transaction testing and informal communications. It is during this phase that we determine whether the controls identified during the preliminary review are operating properly and in the manner described by the client. The fieldwork stage concludes with a list of significant findings from which we will prepare a draft of the audit report.
Transaction Testing
After completing the preliminary review, we perform the procedures in the audit program. These procedures usually test the major internal controls and the accuracy and propriety of the transactions in line with our risk-based methodology. Various techniques including sampling are used during the fieldwork phase to ensure that our energy is directed on the most important areas.
Advice & Informal Communications
As the fieldwork progresses, we discusse any significant findings with the client and collaborate together to resolve the issues identified. Usually these communications are verbally. However, in more complex situations, memos and/or e-mails are written in order to ensure full understanding between us. Our goal is not to create surprises.
Audit Summary
Upon completion of the fieldwork, we summarize the audit findings, conclusions, and recommendations necessary for the audit report discussion draft.
Working Papers
Working papers are a vital tool of our profession as auditors. They support the audit opinion. They connect the client’s accounting records and financials to our audit opinion. They are comprehensive and serve many functions.
Audit Report
Our principal product is the final report in which we express our opinions, present the audit findings, and discuss recommendations for improvements. To facilitate communication and ensure that the recommendations presented in the final report are practical, Internal Audit discusses the rough draft with the client prior to issuing the final report. It is important to understand that as auditor we do not guarantee that the financials are perfect but we state whether or not they provide a true and fair view of the organization.
Discussion Draft
At the conclusion of fieldwork, we draft the report. This discussion draft is prepared for the organization’s management and is submitted for the client’s review before the exit conference.
Exit Conference
When the organization has approved the discussion draft, we meet with the clients’ management team to discuss the findings, recommendations, and text of the draft. At this meeting, the client comments on the draft and the group works to reach an agreement on the audit findings.
Formal Draft
We then prepares a formal draft, taking into account any revisions resulting from the exit conference and other discussions. When the changes have been reviewed by audit management and the client, the final report is issued.
Final Report
We print and distribute the final report to the clients’ management team. This report is primarily for internal management use. The approval from one of our Audit Directors is required for release of the report to the public.
Client Response
The client has the opportunity to respond to the audit findings prior to issuance of the final report which can be included or attached to our final report. However, if the client decides to respond after we issue the report, the first page of the final report is a letter requesting the client’s written response to the report recommendations.
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In the response, the client should explain how report findings will be resolved and include an implementation timetable. In some cases, managers may choose to respond with a decision not to implement an audit recommendation and to accept the risks associated with an audit finding. The client should copy the response to all recipients of the final report if s/he decides not to have their response included/attached to Auditor’s Report.
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Client Comments
Finally, as part of Internal Audit’s self-evaluation program, we ask clients to comment on Internal Audit’s performance. This feedback has proven to be very beneficial to us, and we have made changes in our procedures as a result of clients’ suggestions.
Audit Follow-Up
Within approximately one year of the final report, we will perform a follow-up review to verify the resolution of the report findings.
Follow-up Review
The client response letter is reviewed and the actions taken to resolve the audit report findings may be tested to ensure that the desired results were achieved. All unresolved findings will be discussed in the follow-up report.
Follow-up Report
The review will conclude with a follow-up report which lists the actions taken by the client to resolve the original report findings. Unresolved findings will also appear in the follow-up report and will include a brief description of the finding, the original audit recommendation, the client response, the current condition, and the continued exposure to the identified risks. A discussion draft of each report with unresolved findings is circulated to the client before the report is issued. The follow-up review results will be circulated to the original report recipients and other client officials as deemed appropriate.
Internal Audit Annual Report to the Board
In addition to the distribution discussed earlier, the contents of the audit report, client response, and follow-up report may also communicated to the Audit Committee of the Board as part of the Internal Audit Annual Report (only applicable to large organizations).
The Process: A Collaborative Effort
As pointed out, during each stage in the audit process–preliminary review, field work, audit reports, and follow-up–clients have the opportunity to participate. There is no doubt that the process works best when client management and we have a solid working relationship based on clear and continuing communication.
Many clients extend this working relationship beyond the particular audit. Once the audit department has worked with management on a project, we have an understanding of the unique characteristics of your unit’s operations. As a result, we can help evaluate the feasibility of making further changes or modifications in your operations.
For professional assistance, please contact:
Nathaniel Borg
Director & Founder
Contact us to learn more
To learn more about our services, do not hesitate to get in touch. Kindly submit your information via the form and one of our expert advisors will get in touch with you within 24 hours. Alternatively, do not hesitate to give us a call on +356 2703 7012 or just send us an email on info@borggalea.com.
Contact us to learn more
To learn more about our services, do not hesitate to get in touch. Kindly submit your information via the form and one of our expert advisors will get in touch with you within 24 hours. Alternatively, do not hesitate to give us a call on +356 2703 7012 or just send us an email on info@borggalea.com.
