How to Conduct a Mandatory Public Company Audit

Mandatory audits are now required by public companies as a result of the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act has transferred the responsibilities of auditing company records from the CEO and CFO to audit committees that devote their entire effort and expertise to the audit.

Difficulty: Challenging

Instructions

1. Put together a team. The team will appoint a group or individual to perform the audit. The team must consist of key personnel, for example, CEO, CFO and human resources directors.

2. Create a plan and document the result to the company. Note where, when and how the team must conduct the audit. Identify the scope and objectives of the audit.

3. Communicate with key finance personnel in the organization about any accounting issues. Uphold an unbiased attitude.

4. Assess the company's annual financial statement. Look for red flags. For example, a significant amount of stock slated for sale or the company not meeting its projections.

5. Review the performance of top management. Note the efficiency of decisions made, strategies for improvement and efforts to increase customer awareness and appreciation.

6. Include a statement in the report that the team conducted the audit in compliance with the International Standards for the Professional Practice of Internal Auditing.

Tips & Warnings

• Interview key personnel separately. This strategy encourages individuals to address their concerns freely.
• The International Standards for the Professional Practice of Internal Auditing provides the standards by which you have to conduct internal auditing.

Resources

• Read important developments affecting audit committees of Nasdaq.
• View international standards for professional internal auditing.

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