Additional considerations in initial audit engagements
The reason and objective of preparing the
audit are the same whether the audit is a first or recurring engagement.
However, for
a first audit, the auditor may need to get bigger the preparation behavior
because the auditor does not normally have previous knowledge of the
entity.
That is
considered when preparation chronic engagements. For an initial audit appointment,
additional matters the auditor may believe in establishing the general audit policy.
And audit arrangement
includes the following:
1. Unless forbidden by law or regulation,
arrangements are to be made with the precursor.
2. Auditor, for example, to review the
predecessor auditor’s working papers.
3. Any major issues (contain the application of
accounting rules or of audit and
4. Coverage standards)
argue with management in connection with the initial selection as.
5. Auditor,
the message of these matters to those charged with supremacy and how.
6. These matters affect the general audit
policies and audit plan.
7. The audit events necessary to attain enough
appropriate audit proof regarding.
8. Opening balances.
9. Other procedures required by the firm’s organization
of quality control for initial audit appointments (for example, the firm’s organization
of quality control may necessitate the participation of another partner or older
personality to review the overall audit strategy prior to commencing important
audit events or to review reports previous to their issuance).
Understanding
the entity and its situation.
The auditor
is necessary to identify and tax the dangers of misstatement, whether due to
fraud -or fault, through sympathetic the entity and its environment, including
its interior controls.
This will
involve believing such factors as
- Relevant engineering, regulatory, and other outside factors, including the applicable financial
- Coverage framework.
- The nature of the entity, counting its operations,
ownership, management arrangement.
- Types of current and designed investments.
- The entity’s selection and application of accounting
policies, counting whether they are.
- Apposite for its business and consistent with the business
and the appropriate financial.
- Coverage framework.
- The entity’s purposes and policy and those connected business dangers that may result in
- Dangers of material misstatement.
- Business dangers are dangers occurring as a result of important conditions, events, circumstances.
- Actions or functioning’s that could affect an entity’s facility to reach its objectives and carry out.
- Its strategies. Business dangers can also happen as a consequence of setting unfortunate purposes policies or goals.
Understanding the accounting and interior control organizations
ISA 315 necessitates the auditor to obtain an understanding of interior controls pertinent to the audit.
Although
most of the entity’s interior controls will narrate to financial exposure, not
all will be pertinent to the audit.
If the
entity has an interior audit function then the auditor shall obtain an
understanding of the nature of the interior audit function’s farm duties.
Its managerial
status, and the activities presenting or to be carried out.
The auditor
should try to reach a decision about how burly (or weak) the interior controls
are in order to make a finish about the amount of testing that should be approved
out in the audit.
He should believe:
· His preceding
knowledge of the client corporation.
· Any fresh
changes.
· Any known troubles
in the interior controls of the client.
· The result of any new auditing or accounting obligations.