Planning activities and procedures

Planning Activities and Procedures

Planning Activities and Procedures

Mind map of the whole procedure described in recent articles

The auditor shall institute a general audit policy that sets the capacity, timing, and ways of the audit.

And that leads to the progress of the audit arrangement.

a) In setting up the general audit policy, the auditor shall recognize the uniqueness of the engagement that defines its capacity.

b) Ascertain the coverage objectives of the appointment to plan the occasion of the audit and the nature of the connections necessary.

c) Believe the facts that, in the auditor’s qualified decision, are significant in ways the engagement team’s exertions.

d) Believe the outcome of beginning appointment activities and, where applicable.

Whether information obtain on other engagements execute by the appointment partner for the entity is related.

e) Determine the environment, occasion, and extent of possessions necessary to execute the engagement.

Auditor’s Risk Assessment Process

1. Inquiries

 (i.e. asking queries and receiving responses) of:

      I. Management

 II. Appropriate individuals within the internal audit        function if such a function exists

 III. Others who may have knowledge that is likely to support in recognizing dangers of material misstatement due to scam or fault.

2. Analytical procedures

Which engage the study of fractions and trends to recognize the survival of abnormal transactions or proceedings or amounts, proportion.

Or tendency that might have insinuation for the audit (IT may be of use here in manipulative changes to balances in the financial statements from last years and graphing tendency).

For example, psychiatry of payables days evaluate in the preceding years might designate that the corporation is having complexity in paying its balance dues.

As a consequence, the auditor may plan to do more work in this region.

3. Observation and inspection

    (for example, examine internal control manuals or industry arrangements).       

Note-

The auditor should look for issues that could be important and to which exacting notice should be given by the audit squad.

For example, the auditor may be conscious that there is a depression in the manufacturing in which the client corporation operates.

But that growing commodity prices have forced corporations to up the prices of their products and so pass on the higher costs to purchasers.

In total, the auditor may also be attentive that the client corporation has a poor track record in getting trade receivables.

This information of the manufacturing might make the auditor reach the finale that the audit should give particular notice to the measurement of deals receivables.

And the estimation for poor and unsure debts.

Just to clear the concept….

Audit risk

Mind map of the whole procedure described in recent articles

Audit danger is the risky (chance) that the auditor reaches an unfortunate (wrong) finish on the region under audit.

The audit danger is derivative from errors that occur out of inherent danger.

Which are not banned/detected by the entity’s internal controls and
are not notified by further audit events.

For example, if the audit risk is 5%, this means that the auditor accepts that there will be a 5% risk that the audited item will be misstated in the financial statements.

And only a 95% probability that it is materially correct.