Audit of a limited liability company step by step

Where the audit starts

The first stage is agreement on scope, timing and document flow. The auditor needs to understand the business model, ownership structure and the areas that could materially affect the financial statements. At this point it already becomes visible whether the company is organised for smooth cooperation.

For management, the key issue is appointing one person on the company side to coordinate the checklist, questions and deadlines. Without that, even correct numbers can arrive too late or without the context needed for efficient review.

What the auditor focuses on most often

In a typical limited liability company, the main attention goes to revenue, receivables, inventories, liabilities, leases, provisions and subsequent events. If the company reports into a group, intra-group balances and reporting packages are added to the list.

• whether ledger balances agree to the supporting reports,
• whether material contracts are reflected in notes and accounting policies,
• whether management can document the assumptions and judgements behind key balances.

What remains management's responsibility

Management remains responsible for preparing the financial statements, selecting the accounting principles and ensuring adequate documentation. The auditor does not take over that responsibility; the auditor independently evaluates what the company has prepared.

If management wants to shorten the process, it needs early reconciliations, complete notes and a clear path for decisions where judgement or correction may be required.