We mentioned in previous articles that companies are no longer limited to the internal audit process and are oriented to the external auditor to assess the validity of the company’s data and the success of its accounting system through thoughtful steps, external audit, and study of all the objectives and information of the company, or what is known as the stages of the audit process external.

The external audit program and stages vary depending on the size and data of the company and its branches. The functions of the external auditor are determined by the results obtained by the auditor after planning the external audit. We will cover the planning steps until reaching the program. The audit will follow, but let’s learn about the objectives of the external audit.

The objectives of the external audit process

The external audit aims to increase confidence in the information mentioned in its financial statements and ensure its integrity. It also aims to improve that information by detecting its errors, early modification, and detecting any manipulation that occurs. Therefore, the external audit process result is considered to be more correct and reliable than the audit interior.

However, it should be borne in mind that there are many factors affecting the quality of the external audit, including:

  • Factors related to the audit office such as the size of the office, reputation, fees, specialization, and allocation of auditors, and are there any cases filed against the office or not?
  • Factors related to the auditors’ team include experience, independence, reputation, supervision, and communication between the team and the client.
  • Factors related to the company such as the size of the customer's company, the company's internal control system, accounting system, and the integrity of accounting processes

Planning the external audit process

The steps to planning the external audit process can be summarized within six steps, namely:

  1. Initial prelude to planning.
  2. Access information about the customer.
  3. External audit procedures.
  4. The relative importance of the audit.
  5. Evaluate the internal control system and assess control risks.
  6. Prepare the general plan and audit the program.

Here is a simple explanation of each of these steps:

Pre audit setup

This step means the beginning of agreeing with a customer on the external audit process, whether this client is old or new, considering that there are some companies that are better not to deal with them, such as loans, savings, and health insurance companies because their work is hazardous compared to companies The other. They prepare the contract letter with the customer, which confirms the agreement between the client and the audit company. All data specified for the form of contract are specified, such as the type of audit, the time specified for it, the restrictions allowed for the auditor, and the fees to which the external auditor is entitled. Finally, select the auditor team to help you perform the audit task.

Access customer information

This step includes obtaining all possible information about the customer, such as: Activity and field of work: This includes knowing the accounting system on which the company is based and the risks of the company's activity? The auditor also determines the extent of the average risk facing the customer. Visit the customer's company to learn about operations, learn about the team, see assets on the ground, means to protect them, Determine whether the company has branches or units associated with it that directly affect it. Determine the extent to which the company needs an external audit process.

How do we get customer information?

By inquiring with previous references or current auditors, meetings with the company's team, or using external books and references.

External Audit Process

It means analyzing financial and operational data using methods and tests to achieve stable relationships between operations. The existence of stability between these relationships means the integrity of the system, but changing the relationship means that there are risks; for example, the stability of machinery depreciation rate at 3% each year means safety for The system, but to find it 20%, is an indication that there are risks and manipulation.

External audit procedures include the random selection of analytical examination samples. The analytical procedures aim to understand the customer's activity more, predict the company's financial viability, and help detect indicators of discipline or deviation of the company.

Planning the review process and evaluating the results

Relative importance in the audit

One of the essential things in the external audit process is how information affects economic decisions. Relative importance in an audit can be defined as the importance or relative weight of misrepresenting or deleting accounting information and affecting the judgment of persons and auditors.

The external auditor will be required to issue an opinion on any deviations or omissions of that information. It also shows the extent to which such deviations affect the financial statements. When determining the relative importance of net profit before tax, net sales, and total assets, relative, therefore, relative, and profit are relied upon.

The external auditor will rule on the relative importance of the audit through the following steps:

  • Identify references to a preliminary judgment of the maximum value that can be misrepresented within the financial statements that do not affect the issuance of its final judgment.
  • Imposing initial judgment on the sectors that are being audited.
  • References determine the extent of deviations in each sector.
  • The total value of deviations is estimated to be combined for all sectors.
  • Compare the total deviations with the value of relative importance that he specified in advance.
  • Reaching a ruling on whether deviations are acceptable or need to be modified.

 Evaluation of the internal control system and assessment of control risks

The information system and accounting system are examined, and records, processes, and invoices are audited. Control errors are detected by identifying any deviations or manipulation of numbers and data and determining whether these deviations are acceptable and straightforward or not.

Control risks mean a misrepresentation in a balance in a simplified manner. Still, when collected in the end, we find it affects the decisions of the external auditor. These risks cannot be detected by internal control

Preparation of the General Plan and Audit Program

The auditor uses the audit team to develop a detailed plan for the external audit process. First, the type of audit program is determined… Is it a static audit program or binding on auditors? Is this program modified or changed? Is it possible to hire an external expert or an external party? And outline the external audit process.

External Auditor worksheets

The auditor’s records and books to document the audit process and include applications, tests, conclusions, and information obtained.

External auditor worksheets are one of the most critical factors affecting the quality of an external audit. They increase the quality and reliability of the external audit and help facilitate the examination and evaluation of evidence in the audit and results reached.

External references worksheets include:

·  Permanent audit file:

It includes legal documents, customer activity information, administrative details of his company, accounting system, financial and operational processes, and risks.

·  Current audit file:

It includes external audit papers, financial statements, audit program, settlement restrictions, audit balance issues, supporting schedules, general information, and planning papers for the external audit process.

· Proof evidence in the audit:

Proof evidence in the audit includes inquiries, physical examination, samples, observations, endorsements, acknowledgments, procedures, analyses, and others.

External Audit Process Services

ECPA accounting office is One of the most prominent accounting offices in Egypt and the Arab world, we provide the best external audit services and various accounting services. We pledge to provide the best quality services in the fastest time and at the lowest prices.

ECPA  team is composed of experts and specialists in accounting and law who have practical, scientific, and study qualifications, training courses, and studies and are informed of all international and Egyptian law developments.

Over the past years, we have become one of the largest accounting companies in Egypt and the Middle East. One of our most essential services has been:

  • External audit services.
  • Make periodic, annual, semi-annual, and quarterly audit reports.
  • Audit all financial and accounting statements.
  • Work by Egyptian and international accounting and auditing laws and standards.
  • Write recommendations and observations by international standards.
  • Internal audit of lists and documents.
  • Verify the validity and effectiveness of the accounting system.
  • To express a legal opinion on the company’s performance during the accounting period.
  • Express an opinion on the integrity of the accounting system.
  • Check the compatibility of actual performance and goals set.
  • Protect the company from embezzlement and manipulation.
  • Discover and address deficiencies and avoid their consequences.
  • Control the size of inventory and assets.
  • Many external and internal accounting and auditing services.
  • Contact us now and get your first consultation for free.

Member of the Board of Directors for Auditing

our team - Amer Ibrahim