How to Conduct an Audit: Step-by-Step Guide

A well-planned audit helps ensure the accuracy of financial statements, strengthens internal controls, and improves regulatory compliance. At Goyal K & Co., Chartered Accountants in Gurgaon, we follow a systematic audit approach to deliver reliable and efficient audit services.

1. Pre-audit planning

• Define the scope and objectives of the audit
• Obtain financial statements and trial balance
• Collect GST returns, income tax returns, and statutory records
• Review bank statements, loan statements, agreements, and asset registers
• Understand the business model, key processes, and risk areas

2. General Ledger review

• Extract ledger data from Tally, SAP, Zoho, or ERP systems
• Review unusual journal entries
• Check negative balances and suspense accounts
• Verify large or non-routine transactions

3. Revenue and sales audit

• Match sales records with GST returns and financial statements
• Verify revenue recognition and cut-off procedures
• Review credit notes, rebates, discounts, and unbilled revenue
• Check compliance with accounting standards and GST provisions

4. Purchases and expense verification

• Match purchases with invoices and supporting documents
• Reconcile Input Tax Credit with GSTR-2A and GSTR-2B
• Verify TDS deductions and compliance
• Identify non-business or personal expenses charged to the company

5. Bank and cash verification

• Perform bank reconciliations
• Verify bank balances with confirmations and statements
• Review cash book and physical cash verification records
• Check for unusual withdrawals or transfers

6. Fixed assets review

• Verify additions, disposals, and transfers
• Check supporting invoices and approvals
• Review depreciation calculations
• Confirm the physical existence of significant assets

7. Statutory compliance review

• Review GST filings and payments
• Verify TDS compliance and return filings
• Check PF, ESI, Professional Tax, and Labour Law compliance
• Review income tax and other statutory obligations

8. Receivables and payables review

• Analyse ageing of debtors and creditors
• Verify balances with supporting records
• Review doubtful debts and provisioning
• Identify long-outstanding balances requiring action

9. Inventory verification

• Review stock records and inventory controls
• Verify physical stock count reports
• Check valuation methods and accounting treatment
• Identify obsolete, damaged, or slow-moving inventory

10. Loans and advances review

• Verify loan agreements and supporting documents
• Check balances, interest calculations, and repayments
• Review related-party transactions and disclosures

11. Internal controls assessment

• Review approval mechanisms and authorization levels
• Evaluate segregation of duties
• Identify control weaknesses and fraud risks
• Recommend process improvements

12. Finalisation and reporting

• Discuss observations with management
• Resolve audit queries
• Prepare audit report and management recommendations
• Ensure proper disclosures in financial statements

A systematic audit not only helps ensure compliance but also improves financial discipline, strengthens controls, and enhances business decision-making.

Looking for statutory audit, internal audit, or financial review services? Connect with Goyal K & Co., Chartered Accountants in Gurgaon.