Company Audit Checklist
October 24, 2011
Examining the business management system of a company
The need for auditing a company’s business activities and operations appears each time when the senior management or other parties involved or interested in business control and growth looks for ways to mitigate business risks, improve governance processes, and ensure success of organizational goals and objectives. A professional assigned as an auditor needs to provide the seniors with an in-depth understanding of the business structure, systems, and processes, through performing an internal audit activity that aims to provide assurance that business controls in place are effective and efficient.
The following Company Audit Checklist is designed for auditors and other professionals involved in the auditing activity. It lists the key questions to be considered when performing the activity. The checklist aims to help the auditor to review and examine the business management system of a company. It can be used as an additional guide when planning for the auditing procedure.
1. Strategic Business Planning
Auditing strategic business planning means examining the company’s top level goals and objectives for the purpose of check the current state of strategy achievement and determine what issues are not resolved. In one of our previous articles we’ve already talked about this. Please read this article “Strategic Business Planning and an Audit Checklist” to learn more.
2. Organizational Structure
- Is there an organizational chart that documents current positions and roles of people working for the company?
- Are proper relationships between the employees set clearly?
- Can you confirm every individual clearly realizes the functions and duties?
- Does the document specify authorities per individual employed?
- Do the employees know their responsibility and accountability within the authorities?
- Is there a clear documented description of job for every worker?
- Does that document accurately state all job duties and responsibilities as well as the superior-subordinate relationship?
- Is there a formal document specifying rules for delegation?
- Do the workers know and understand this document?
- Do supervisors delegate rights and authorities on the principle of mutual understanding of responsibilities?
3. Finance & Accounting
- Does the company use an accounting software system that provides a full range of functionality and options for managing accounting data and making management decisions?
- Do people working in the account department understand how to best use the system?
- Does that system provide capabilities for generating regular (daily, monthly, quarterly) reports and statements regarding current financial conditions?
- Does the company provide necessary training and materials for the employees?
- Does the business hire an independent public accountant for financial audit? Do you use expert judgment as an efficient method of audit?
- Do the accountants consistently conduct break-even analysis and cost-benefit analysis to audit business operations?
- Does the analysis help age accounts receivable on a regular basis?
- Does the accounting software provide capabilities for monitoring and managing payroll taxes, deposits, income tax deposits, payments of employments compensation taxes and employee compensation liabilities?
- Does the department audit tax dedications and reconcile company bank statements regularly (monthly, quarterly)?
- Can the system be used to adequately manage cash through a cash budget?
- Does that system help forecast business growth and cash-flow change?
4. HR Management
- Does the company presently operate in compliance with all local and state laws and regulations regarding workforce?
- Does it hire external trainers or use its own experts to train workforce?
- Does it provide the workers with a training programme dedicated to self-improvement and development?
- Does it provide and maintain other special programmes for treating employees? For example:
- Employee recruitment and selection
- Training and coaching
- Performance evaluations
- Workplace safety
- Employee health
- Wages, working hours, and employment conditions
- Does the HR department use validated job specifications in recruiting new workforce?
- Is there a well-developed programme of new employee orientation available in the company?
- Does the department use that programme to orientate new workers? Is it efficient?
- Is there an efficient policy for managing employee transfers and transitions? Do necessary records on the workers are kept as required by state and local governmental reporting rules?
- Are the wages, salaries and employee benefits comparable to industry level?
- Is there an adequate system of employee performance appraisal in the organization?
- Does the company spend as much as it’s expected by the existing budgeting system?
- Is there budget overspending? Iа so, what are available options for solving the issue?
- Is the budget developed in terms of time periods and performance standards?
- Is there a need to make a budget proposal for future business operations?
- Does the company use the budgeting system to control the amount and rate of expenditures?
- Does it use the system to plan for improvements?
- Has the budget been established in discussion with key employees of the organization?
- Is the break-even analysis used to develop an improved model for the business?
- Are the expenditures and profit figures of the company comparable with against industry data?
- Are actual expenditures and revenues analyzed at the end of every accounting period?
6. Cash Management
- Does the finance department deposit all cash receipts to the company’s bank account?
- Does it control cash withdrawals by numbered checks?
- Does it continuously track and reconcile cash disbursements against the original authorization?
- Are cash inflow and outflows registered, estimated and reported on regularly?
- Do the accountants make and maintain records on cash receipts?
- Are purchase orders numbered and kept in a single inventory of purchase orders?
- Does the organization efficiently invest excess cash?
- Does it benefit from reinvestment opportunities?
- Does it exploit an opportunity of using lines of credit to reduce the demand for cash?
- Does the purchasing division or team regularly audit the quality of products purchased?
- Does it use the history of purchases to track the most successful deliveries and the best suppliers that provide high-quality products?
- Is there evidence that the company is fully satisfied with the quality of products/services purchased?
- Is the purchasing division authorized to buy goods and services on behalf of the company?
- Do the suppliers provide goods and services in line with delivery schedules?
- Is there a strong need to stop co-operating with current suppliers and start looking for another, more productive and efficient suppliers?
- Does the company have more than two alterative suppliers that can provide any critical item within desired delivery time?
- Does the purchasing division solicit bids for a product/service when the final price is not certain yet? Are all purchases are made at the right price?
- Does the company deal with the suppliers under the rules of purchase agreements?
- Does it largely purchase by product specifications?
- Is there a policy for managing purchasing procedures within the organization?
- Does the company consider dealing directly with manufacturers, instead of agents and brokers?
- Does the organization offer products/service that can make the company leading in the market?
- Do the products/services have a good reputation in the minds of target audience?
- What marketing and promotion activities are undertaken to overcome the competitors?
- Does the organization use honest and straightforward marketing and promotion efforts?
- Are prices for marketed and promoted products/services established under the quality and services that go with each product/service offered?
- Are marketing and promotion efforts coordinated with production planning?
- Are there delays between the period of product production and the period of product marketing?
- Does the company control marketing and promotion? In what way?
- Does the marketing dept. use the break-even analysis in computing cost for marketing and promotion?
- Is an efficient a pricing strategy developed? Is this policy performed in line with marketing and promotion activities?
- Has the company created and does it maintain now a tax calendar to monitor dates when there’s a need to file various local and state tax reports as well as to review payments made?
- Is there a person who takes responsibility for managing all tax reports and payments?
- Does that person keep adequate payroll records?
- Are those records used to ensure that quarterly payroll returns for local and state authorities are completed without undue difficulty?
- Does the person keep the records up-to-date?
- Do the records adequately differentiate between taxable and nontaxable sales?
- Are all necessary business licenses kept up-to-date?
- Does the company operate under required governmental permits?
- Does it make timely deposits with a state/local depository?
- Does it company have a pension plan or a profit-sharing plan? If so, have you discussed such a plan with your attorney to be sure legal obligations are met?
10. Risk & Insurance
- Is there an established a process of managing risks and exploiting opportunities?
- Are business risks analyzed and responded?
- What opportunities are available to the company?
- What kinds of risk are the workers exposed?
- Does the firm use insurance service to protect its assets against possible risks?
- Does a professional insurance agent inspect the business for threats and uncertainties?
- Is there an insurance policy for the personnel? If so, is the policy periodically reviewed and updated?
- Does the company take advantage of premium cost-cutting possibilities?