Conducting the Audit: A Brief Overview
CGAP
Publication Date: 1998
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper (PDF)
CGAP guidelines on conducting a credible audit of an MFI
This chapter briefly describes the roles and responsibilities of the auditor and the client during a microfinance institution (MFI) audit.
The audit process consists of three phases:
- Preparation and planning include:
- Understanding of the microfinance industry;
- Knowledge of the targeted MFI's business;
- Understanding of accounting methods and control systems;
- Assessment of risk;
- Definition of materiality.
- Obtaining audit evidence, besides a representative sample size of all accounts, includes:
- Complete and valid recorded transactions in the correct period;
- Correct valuation of assets or liabilities;
- Items described as per the applicable financial reporting framework.
- Reporting - includes preparation of an audit report and a management letter.
The client's responsibilities include:
- Appointing an individual to liaison with the external auditor with the following responsibilities:
- Ensuring that all requests are delivered timely;
- Notifying the auditor of timings;
- Researching or delegating issues and questions to be raised;
- Receiving auditors comments and coordinating their response;
- Receiving audit adjustments and coordinating their resolution.
- During an external audit, the MFI management should:
- Responsibility for the financial statements;
- Its policies and procedures;
- Ensure the MFI's compliance with applicable laws and regulations.
Refusal of information or responsibility can be considered a limitation of the scope of the audit, and may prevent the auditor from giving an unqualified audit opinion.
The chapter concludes with timing the audit, its planning and its execution.
| 
View this Document (104 KB)
Email this Document
