What Is The First Stage Of The Audit Of Smackey Dog Foods, Inc.

Keller CPA has been asked to audit this dog manufacturing company. Since this company started as family owned business and quickly grew, the sister’s did not have much experience in understanding the accounting principles or in understanding the importance of having internal controls. In order for the business to continue to grow, there needs to be some changes to the way they operate. Smackey Dog Foods has made an important first step by hiring a CPA firm to conduct an audit of their financial statements.

The Securities and Exchange Commission can have a pretty big influence on the audit of Smackey Dog Foods, Inc. It does not say whether Smackey Dog Foods is a public company or private company, but I will assume it is private due to

The first step of this would be to understand Smackey’s business and its industry. The auditors would need to know what type of risk would be involved in this particular industry. The next step would be for the auditor’s to gain a list of the client’s internal control procedures. This would help the auditors determine what type of documentation would be needed. Keller CPA would then need to be able to assess the control risk for each transaction related audit objective (Aren, et al., 2016). These audit objectives would be occurrence, completeness, accuracy, classification, timing and posting and summarization. The next stage for the audit would be the test of internal controls (Aren, et al., 2016). The audit team can perform these internal controls testing by requesting the appropriate employees at Smackey to provide them with documentation and reports for the control they are testing. The auditors can also observe some of the inventory procedures for returned dog food to see if there are proper procedures in place. The auditors could also observe how Smackey deals with uncollected accounts receivable. The next stage for the audit would be substantive tests (Aren, et al., 2016). Keller CPA would need to perform substantive tests on the accounts receivable and inventory balances. These substantive tests can be completed thru tests of details of balances, analytical procedures, and tests of transactions (Aren, et al., 2016). The auditor would want to see if they can come up with the same inventory balance that Smackey has reported on their financial statements. The last stage would be audit finalization (Aren, et al., 2016). The auditor would now send a report to Smackey’s management for all the issues that were found during the audit. They would also review all the evidence they had discovered and communicate what the audit decision would be based on their