Steps to preparing the audit, Auditing

With reference to the case study business, plan an audit. You should make specific reference in your plan to:

  1. Scope of the audit
  2. Materiality
  3. Risk factors including fraud detection

PLANING AN AUDIT

Focused on

  1. Scope
  2. Materiality
  3. Risk Factors

PLAN AN AUDIT

Steps involved in planning an audit are

1-Preliminary Audit Engagement Activities

Includes auditors consideration of client continuance and relevant ethical requirements including independence, it occurs through out audit engagement as conditions and changes in circumstances

Auditor should undertake following activities of beginning of current audit engagement

a)   Performing procedures required by it is 220 regarding the continuance of client relationship and specific audit engagement

b)  Evaluating compliance with relevant ethical requirements, including independence.

c)  Establishing an understanding of term of the engagement

PLANING ACTIVITIES

Auditor shall establish an overall audit strategy that seeks scope, timing and director of the audit and that guides development of the audit plan.

In establishing the overall audit strategy auditor shall:

  1. Identify characteristics of the engagement that defines its scope
  2. Ascertain the reporting objectives of the engagement to plan the timing of audit and nature of communication required
  3. Consider results of preliminary audit engagement
  4. Ascertain nature, timing, extent of resources deployed i.e. appropriately experienced people in high risky areas suppose in their business sales mostly on cash basis
  5. Assign the experienced people to observe inventory purchase
  6. Allocate time of audit budget, move hours to high risky areas such as cash management
  7. At what point of time resources are deployed of an interim stage or at key cut off dates.
  8. How resources are directed, supervised and managed
  9. Briefing and debriefing meetings

During devolving understanding of the company's business, auditor perform risk "RAP"/ assessment procedures

Like in this case study

  1. Nature of business segment
  2. Reporting requirements
  3. Reporting currency
  4. Availability of work of internal audits

2-Depending upon risk and nature

Extent of RAP are applied, risk assessment is basis of extent risk assessment procedures applied.

3-Nature, extent of further or audit at assertion level

4-Other planned further audit procedures

 Dreumentation is essential part of the audit

Overall audit strategy

Audit plan

Any significant changes made during the audit engagement to overall audit strategy and audit plan

MATERIALITY

Nature timing and extent of risk assessment procedures depends upon degree of risk in particular areas. Where auditor finds that risk of material misstatement is high auditor applies further audit procedures and enhance extent of audit procedures like in cash in sales risk is high so we have to increase our sample size to reduce the audit risk to increase reliability of financial statements that the they are presenting true and fair view

Risk factors and including frauds

In case of fraud auditors applies further audit procedures to conform or to identify further evidences it any body from management is involved in fraud then integrity is challenged and all the basis of audit is damaged, auditor will start audit and apply audit procedures right from the very beginning and auditor relies somewhere

Posted Date: 3/14/2013 2:40:03 AM | Location : United States







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