There are three types of audits that CPAs perform—an audit, a compilation, and a review. Each comes with varying degrees of assurance. The assurance comes in the form of an auditor’s letter. The wording in the letter is controlled as carefully as the moves in a kabuki dance. I just wish it were possible to talk about auditing without sounding like my mouth is full of peanut butter. Still, notice how many of the audit standards tie back into GAAP.

Selection of an auditor kicks off a chain of fairly standard procedures. The auditor and/or members of the audit team will interview key personnel through the various departments to learn about the current standing procedures. At this stage, they’re just interested in how work is actually done.

In discussions with management, the auditor prepares an Objectives and Scope Document, detailing the work to be performed. This document is presented to management. If management accepts, the auditors will proceed with the work in accordance with the objectives and parameters outlined. All this is in the planning phase.

The auditors will be looking at the control environment, information systems and communication, risk assessment, and the various control activities.

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