The Big Four are the 4 prime expert auditing firms in the world. These auditing firms include Deloitte, Ernst & Young, PricewaterhouseCoopers, and KPMG. They mutually make up the prime auditing firms in the world. They are famous because of best audit procedure quality, assurance, and consulting services. The Big Four firms have a good worldwide presence, and status. In this article, we will explore their steps to conduct thorough and efficient audits.
What is the audit procedure at the Big 4?
The step-by-step audit procedure at the Big 4 is as follows;
1) Pre-Audit Planning
The primary step included in the audit process at the Big 4 is detailed pre-audit planning. This phase includes a deep understanding of the business of the client, its domain, and its internal control systems. The auditors at the Big 4 perform a risk assessment. They identify zones with a higher risk of material mistakes. It comprises 3 major steps;
- Auditors assess whether the audit firm should agree to take or continue the engagement in compliance with certain factors such as independence and expertise.
- Auditors collect information about the client’s procedures, financial reporting practices, and business atmosphere.
- Auditors classify and categorize risks linked to financial records and internal controls.
2) Engagement Team Planning
After completing pre-audit planning, the auditors at Big 4 accumulate a team of experts with suitable skills and involvement. The team contains;
- A Lead Auditor that handles the audit engagement and ensures obedience to auditing protocols.
- Audit Staff that manages fieldwork, together with testing and evidence gathering.
- The Specialists that involved as required for areas demanding particular knowledge, such as IT systems or multipart financial instruments.
3) Audit Strategy and Approach
The audit strategy of Big 4 plans the tactic for the audit. It includes;
- Materiality Levels that govern thresholds for corporality to focus on noteworthy extents of financial reporting.
- Audit Procedures that design specific actions based on the evaluated risks and the client’s internal controls.
4) Internal Control Assessment
Assessing internal controls is a fundamental step of the audit process at Big 4. It helps auditors to understand the client’s financial reporting processes. It includes;
- They conduct control Testing that shows the design and operating effectiveness of internal controls.
- They check control Deficiencies and identify any weaknesses in controls
- Auditors also assess the overall impact of these on the audit.
5) Evaluation of Audit Findings
Evaluating the audit findings is the next step included in the audit procedure at Big 4. It helps to check their consequences for the financial records. This step includes;
- Assessing whether identified blunders are serious or it may disturb the financial records.
- After that, auditors review audit finding. They recommend some modifications to correct any issues.
6) Functional Testing
In the next phase, Auditors also conduct the functional testing. In this point, they gather evidence that backs the assertions in the financial records. The major 3 steps are;
- Auditors uses analytical procedures that use financial ratios and trends. It helps to identify unfamiliar fluctuations or variations.
- Auditors conduct detailed Testing. It verifies account balances and transactions through selection and vouching such as testing of revenue, expenses, and asset evaluations.
- Auditors get direct confirmation from 3rd parties, such as banks or customers. They have to authenticate account balances and transactions.
7) Reporting
The last step in the audit procedure at Big 4 is reporting. The audit team makes the audit report. It includes certain things such as;
- An Audit Opinion that expresses a view on whether the financial records present a factual and fair view in compliance with the applicable accounting standards.
- A Management Letter that provides feedback on internal controls. It also highlights the points of improvement.
- A Compliance Report that ensures the audit has been conducted in compliance with authorized and regulatory obligations.
Conclusion
The audit procedure at the Big Four firms is a thorough and wide-ranging process. It is essential for guaranteeing the precision and consistency of financial records. From pre-audit planning and risk valuation to detailed testing and reporting, each step is considered to support the peak standards of audit quality. In the modest land of corporate, it is recommended to get assistance from Farahat & Co. It is a prominent name among the top audit firms in the UAE. Their well-capable team can enhance financial transparency and support informed decision-making for stakeholders. Their rigorous approach highlights the important role of audits in enhancing confidence in financial reporting.
