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Audit Planning and Control.


Audit Planning and Control

It is common industry knowledge that an audit plan provides the specific guidelines auditors must follow when conducting an external audit. External public accounting firms conduct external audits to ensure outside stakeholders that the company’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS).
Use the Internet to select a public company that appeals to you. You may also use the company dossier in the Nexi Uni database to find company information.
Imagine that you are a senior partner in a public accounting firm hired to complete an audit for the chosen public company.
Write a 4–6 page paper in which you:
1. Outline the critical steps inherent in planning an audit and designing an effective audit program. Based upon the type of company selected, provide specific details of the actions that the company should undertake during planning and designing the audit program.
2. Examine at least two performance ratios that you would use in order to determine which analytical tests to perform. Identify the accounts that you would test and select at least three analytical procedures that you would use in your audit.
3. Analyze the balance sheet and income statement of the company that you have selected and outline your method for evidence collection which should include, but not be limited to, the type of evidence to collect and the manner in which you would determine the sufficiency of the evidence.
4. Discuss the audit risk model and ascertain which sampling or non-sampling techniques you would use in order to establish your preliminary judgment about materiality. Justify your response.
5. Assuming that the end result is an unqualified audit report, outline the primary responsibilities of the audit firm after it issues the report in question.     


The offer partner1 is primarily liable for the proposition along with its certain productivity. Accordingly, the engagement partner is responsible for planning the audit and may seek assistance from appropriate engagement team members in fulfilling this responsibility. Engagement team members who assist the engagement partner with audit planning also should comply with the relevant requirements in this standard.

Planning an Review .04 The auditor should properly strategy the audit. This standard describes the auditor’s responsibilities for properly planning the audit.2

.05 Organizing the audit consists of setting up the overall audit technique for the engagement and creating an audit prepare, consisting of, specifically, organized threat assessment treatments and arranged replies on the perils associated with materials misstatement. Planning is not a discrete phase of an audit but, rather, a continual and iterative process that might begin shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit.

Preliminary Engagement Activities .06 The auditor should perform the following activities at the beginning of the audit:

Perform treatments regarding the continuance of the customer romantic relationship along with the specific audit engagement,3 Establish compliance with independence3A and integrity requirements, and

Be aware: The determination of conformity with self-reliance and values needs is not really limited by preliminary engagement actions and must be reevaluated with changes in conditions.

Create a preliminary understanding in the regards to the review engagement together with the review committee in accordance with AS 1301, Telecommunications with Review Committees. Planning Activities .07 The nature and extent of planning activities that are necessary depend on the size and complexity of the company, the auditor’s previous experience with the company, and changes in circumstances that occur during the audit. When developing the audit strategy and audit plan, as discussed in paragraphs .08-.10, the auditor should evaluate whether the following matters are important to the company’s financial statements and internal control over financial reporting and, if so, how they will affect the auditor’s procedures:

Discuss the audit risk model and ascertain which sampling or non-sampling techniques you would use in order to establish your preliminary judgment about materiality. Justify your response.

Knowledge of the company’s interior control of economical exposing acquired during other engagements performed by the auditor Issues impacting the marketplace in which the company runs, including economic verifying methods, economic circumstances, guidelines, and design alterations Issues concerning the company’s business, which include its company, performing attributes, and capital framework The diploma of newest modifications, if any, in the enterprise, its surgical procedures, or its interior control of economic affirming The auditor’s preliminary determination about materiality,5 hazard, and, in built in audits, other variables regarding the perseverance of textile flaws Take care of inadequacies previously communicated to the audit committee6 or handling Lawful or regulatory concerns in which the organization is aware The type and levels of presented confirmation relevant to the strength of the company’s inside control of fiscal revealing Preliminary decision about the strength of inside control over economical confirming General public specifics about the business highly highly relevant to the assessment from the chance of materials economic declaration misstatements and the strength of the company’s inside power over monetary uncovering Knowledge about threats connected to the business examined in the auditor’s customer acknowledgement and preservation assessment and The member of the family problems in the company’s surgical treatments.

Notice: Numerous more compact businesses have significantly less intricate procedures. Additionally, some larger, complex companies may have less complex units or processes. Factors that might indicate less complex operations include: fewer business lines; less complex business processes and financial reporting systems; more centralized accounting functions; extensive involvement by senior management in the day-to-day activities of the business; and fewer levels of management, each with a wide span of control.

Review Method .08 The auditor should set up a general audit approach that sets the extent, the right time, and route from the audit and manuals the development of the audit plan.

.09 In establishing the overall audit strategy, the auditor should take into account:

The revealing aims in the proposal along with the the outdoors of your communications essental to PCAOB requirements,7 The factors that happen to be significant in directing the activities of the proposal team,8 The outcome of preliminary engagement activities9 as well as the auditor’s assessment of the significant is important in line with section .07 on this normal, and The character, timing, and level of sources needed to perform engagement.10 Audit Prepare .10 The auditor should develop and record an audit strategy that includes a explanation of:

The organized persona, the correct time, and degree from your chance examination procedures11 The structured character, the correct time, and level of reviews of takes care of and substantive procedures12 and Other planned review methods needed to be performed in order how the proposition conforms with PCAOB requirements. Multi-location Engagements .11 In an audit of the financial statements of a company with operations in multiple locations or business units,13 the auditor should determine the extent to which audit procedures should be performed at selected locations or business units to obtain sufficient appropriate evidence to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. This includes determining the locations or business units at which to perform audit procedures, as well as the nature, timing, and extent of the procedures to be performed at those individual locations or business units. The auditor should assess the risks of material misstatement to the consolidated financial statements associated with the location or business unit and correlate the amount of audit attention devoted to the location or business unit with the degree of risk of material misstatement associated with that location or business unit.

.12 Parameters that happen to be related to the analysis in the perils of fabric misstatement linked to a a number of location or company product along with the self-control of your necessary review processes comprise of:

Analyze the balance sheet and income statement of the company that you have selected and outline your method for evidence collection which should include, but not be limited to, the type of evidence to collect and the manner in which you would determine the sufficiency of the evidence.

The nature and amount of assets, financial obligations, and dealings accomplished at the location or enterprise system, which include, e.g., substantial dealings which can be outside of the standard length of company for your company or that otherwise seem to be uncommon because of the the right time, dimensions, or character (“important unusual purchases”) carried out with the spot or business unit14 The materiality in the place or organization unit15 The actual threats associated with the area or enterprise unit that current an acceptable possibility16 of materials misstatement to the company’s consolidated economic statements If the perils associated with fabric misstatement associated with the area or enterprise system pertain to other locations or enterprise devices such that, in combination, they present a good potential for substance misstatement on the company’s combined fiscal statements The standard of centralization of data or details handling The potency of the handle environment, notably regarding management’s power over the workout of authority delegated to others and its capability to effectively supervise actions with the location or organization unit and The frequency, the right time, and scale of monitoring routines through the company or others at the area or organization device.

Notice: When performing an audit of interior control over economic reporting, refer to Appendix B, Unique Subjects, of AS 220117 for considerations when a business has multiple areas or organization devices.

.13 In determining the locations or organization models from which to perform audit processes, the auditor may think about appropriate pursuits performed by internal audit, as defined in AS 2605, Factor of your Interior Audit Work, or others, as defined in AS 2201. AS 2605 and AS 2201 establish requirements regarding using the work of internal audit and others, respectively.

.14 AS 1205, Portion of the Audit Done by Other Personal-enough Auditors, pinpoints the auditor’s commitments about while using the operate and documents of other impartial auditors who evaluation the economic assertions of a number of of your own areas or company types that happen to be inside the combined economic assertions.18 In those problems, the auditor should carry out procedures in sentences .11-.13 from the standard to search for the regions or company versions where review techniques has to be done.

Alterations During the Course of the Audit .15 The auditor should alter the overall audit approach as well as the review prepare as essential if conditions change significantly throughout the review, which include modifications as a result of adjusted assessment of the risks of substance misstatement or perhaps the development of a previously unidentified probability of material misstatement.

Folks with Specialised Talent or Info .16 The auditor should analyze if expert skill or expertise is needed to execute appropriate possibility reviews, program or carry out review procedures, or analyze assessment outcomes.

.17 When someone with skilled talent or understanding hired or involved together with the auditor takes part inside the review, the auditor needs to have satisfactory expertise in this problem topic becoming tackled by such anyone to let the auditor to:

Interact with the targets of this certain person’s job Decide if that person’s therapies match the auditor’s aims and Measure the effects of that person’s methods whilst they interact with the type, the correct time, and scale of other prepared overview processes plus the effects of the auditor’s record. Additional Considerations in Initial Audits .18 The auditor should undertake the following activities before starting an initial audit:

Conduct processes about the recognition of the buyer partnership and the specific review engagement and Talk to the predecessor auditor in scenarios where there has been a change of auditors as outlined by AS 2610, First Audits—Communications Between Forerunner and Successor Auditors. .19 The purpose and objective of planning the audit are the same for an initial audit or a recurring audit engagement. However, for an initial audit, the auditor should determine the additional planning activities necessary to establish an appropriate audit strategy and audit plan, including determining the audit procedures necessary to obtain sufficient appropriate audit evidence regarding the opening balances.