Engagement Planning (Audit Planning) [Auditing]

Pre-Engagement Activities -Client ______ or Continuance --Communication between predecessor and prospective auditors -Compliance with ______ and _____ requirements -________ Letters

Acceptance Independence, Ethical Engagement

Engagement Letters -When a new client is ____ or when an audit engagement ______ from year to year, and engagement letter should be prepared -Acts as a contract between _____ and _____ -Serves as a means of _____ the risk of misunderstandings with the client and as a mean of _____ legal liability for claims that the auditors did not perform the work promised -Should include: --_____ of the engagement --Management's ________ --Auditors' _______ --Any _____ of the engagement

Accepted,Continues Auditor, Client Reducing, Avoiding Objectives Responsibilities Responsibilities Limitations

Audit report date = ____ ____ ____ ____

Last day of fieldwork

Perform Preliminary Analytical Procedures 1) Analytical Procedures are computation of _____ and other comparisons of recorded amounts to auditor expectations (only as good as expectations that auditors set) 2) They are used in _____ to understand the client's business and industry 3) They are used throughout the audit to identify possible _____ , reduce detailed _____ , and to assess going-concern _____

Ratios Planning Misstatements, Tests, Issues

Three Main Reasons for Planning 1) To obtain _____ , competent (appropriate) evidence 2) To help keep audit costs ______ 3) To avoid ______ with the client

Sufficient Reasonable Misunderstanding

Audit ____ date is the day the auditor signs off on his work (got sufficient and enough evidence to make their opinion)

Report

Substantive Audit Plan -Should contain a list of audit procedures for gathering evidence related to the relevant ______ identified for the significant financial statement accounts and _____ of an audit client -Two ways to conduct substantive test: --Substantive _____ _____ --Test of ______

Assertions, Disclosures Analytical Procedures Details

Communication between Predecessor and Prospective Auditors -______ to communicate is required -If ____ permits, issues to discuss --Basic information regarding issues that reflect directly on the _____ of management --________ about accounting principles or audit procedures --Communications the _____ auditors gave the former client about fraud, illegal acts, and internal control recommendations --The ______ auditors' understanding about the reasons for the change of auditors (particularly about the predecessor auditors' termination)

Attempt Client Integrity Disagreements Predecessor Predecessor

Planning an Audit and Designing an Audit Approach 1) Accept ____ and perform initial audit planning 2) Understand the client's _____ and industry 3) Assess client _____ risk 4) Perform _______ analytical procedures 5) Set _____ and assess acceptable audit risk and inherent risk 6) Understand _____ control and assess control risk 7) Gather information to assess ____ risks 8) Develop overall audit ____ and audit _____

Client Business Business Preliminary Materiality Internal Fraud Plan, Program

Understanding of the Client's Business and Industry -Industry and ______ environment -Business _____ and processes -______ and Governance -______ and Strategies -______ and Performance

External Operations Management Objectives Measurement

Assess Client Business Risk Client business risk is the risk that the client will _____ to achieve its _____ -SOX requires that management ____ it has designed disclosure controls and procedures to ensure that ____ information about business risks is made known to them -SOX also requires that management certify it has informed the auditor and audit committee of any significant _____ in _____ control

Fail, Objectives Certify, Material Deficiencies, Internal

Time Budget -Used to ____ control of the audit by identifying problem areas early in the engagement, thereby ensuring that the engagement is _____ on a timely basis -_____ audit work refers to procedures performed several weeks or month before the balance sheet date -_____-_____ audit work refers to procedures performed shortly before and after the balance sheet date

Maintain, Completed Interim Year-End

Assess Client Business Risk What is the auditor's primary concern?

Material misstatements in the financial statements due to client business risk

Compliance with Independence and Ethical Requirements -The ______ principle requires auditors to comply with appropriate ethical requirements for each audit engagement -Auditors must maintain independence in _____ _____ and independence in _____ -Independence in ______ relates to the perceptions of auditors' independence -A lack of ______ can result in disciplinary action by regulators and/or professional organizations and _____ by those who relied on the financial statements

Responsibilities Mental Attitude, Fact Appearance Independence, Litigation

Use of Audit Procedures -To gain an understanding of the client and the ____ associated with the client -To test the operating effectiveness of client _____ _____ activities -To produce evidence about management's _____ related to the amounts and _____ in a client's financial statements

Risk (Risk assessment procedures) Internal Controls (Test of controls) Assertions, Disclosure (Substantive procedures)

A ______ ______ is a restriction on the applicability of an auditor's report that may arise from the inability to obtain sufficient appropriate evidence about a component in the financial statements

Scope Limitation

Documentation Retention -Documentation must be retained _____ years from report _____ date. If no report is issued, documentation should be retained from the _____ day of field work -Documentation to be retained include those documenting discussion and subsequent resolution of _____ in professional judgments among team members -All documentation must be finalized within ____ days of the audit report's release date

Seven, Release, Last Differences 45

Audit Plan -A comprehensive list of the specific audit procedures that the audit team needs to perform to gather _____ appropriate evidence on which to base their opinion on the financial statements -When planning the engagement, the auditor needs to _____ and _____ a plan that describes the procedures to be performed to assess the risk of material misstatement at the financial statement and assertion level -The auditor must then carefully plan the nature, timing and extent of control tests and substantive tests that are designed to _____ these risks to an acceptable level

Sufficient Develop, Document Mitigate

Audit Documentation Requirements -Audit documentation should be prepared in _____ detail to enable an experienced auditor having no previous connection with the engagement to: --Understand the nature timing, extent, and results of ____ , _____ obtained and _____ reached --Determine who performed the ____, ____ of work, reviewer and date of review -Audit documentation should provide a clear link to significant _____ or _____ and: --Demonstrate compliance with _____ standards --Support basis for _____ for each relevant _____ --Document that accounting records ____ with financial statements

Sufficient Procedures, Evidence, Conclusions Work, Date Findings, Issues Professional Conclusions, Assertion Agree