Category Archive for: Planning an Audit of Financial Statements

QUESTIONS AND ANSWERS

What may be the possible sources of obtaining information in respect of client’s business for the purpose of preparation of  an audit plan? Possible sources of obtaining information in respect of client’s business include: Prior year’s working papers. Predecessor auditor’s working papers. Articles and memorandum of association. Minutes of directors and shareholders. Significant contracts such as loan…

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INITIAL AUDIT ENGAGEMENT

In a first year’s audit the auditor should: Consider following matters in accepting client: – Integrity of management – Ethical and legal requirements – Ability to serve the client. Communicate with previous auditor The client should be asked to give permission to communicate with previous auditor. If the permission is not given the audit should not be accepted.…

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HOW DOES THE KNOWLEDGE OF THE BUSINESS AFFECT PLANNING?

The auditor’s assessment of inherent risk is based on the knowledge of the business. Inherent risk is the susceptibility (likelihood, sensitive, touchy, receptive or quick to be affected, having a tendency, prone to) of an account balance to misstatement. Inherent risk also exists at financial statements level. Susceptibility of financial statements to misstatement is affected by general economic factors, and…

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INTRODUCTION

ISA-300 requires that the audit should be adequately planned. Planning is therefore mandatory and not discretionary. Generally the planning starts quite a few months before the end of accounting period to be audited. Audit firms do not have anything to sell except the time of their staff. Effective time management is therefore necessary so that costs can be minimized commensurate…

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