AUDIT PLANNINGAND DOCUMENTATION 8 AN AUDITOR WHO DOES NOT UNDERSTAND A CLIENT'S BUSINESS TAKES A GREAT RISK Arens, Loebbecke: Auditing, &/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 8 AUDIT PLANNING AND DOCUMENTATION AN AUDITOR WHO DOES NOT UNDERSTAND A CLIENT’S BUSINESS TAKES A GREAT RISK
1. Need an effective and efficient audit plan 2. Under-audit- see you in court 3. Over-audit-lose clients to competitors Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 1. Need an effective and efficient audit plan 2. Under-audit - see you in court 3. Over-audit - lose clients to competitors
The work is to be adequately planned, and assistants, ifany, are to be properly supervised. 1. Preplan 2. Obtain client background information 3. Obtain information about legal obligations 4. Perform preliminary analytical procedures Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. 1. Preplan 2. Obtain client background information 3. Obtain information about legal obligations 4. Perform preliminary analytical procedures The work is to be adequately planned, and assistants, if any, are to be properly supervised
FIGURE 8-1 Planning an Audit and Designing an Audit Approach Preplan Obtain background information Obtain information about client' s legal obligations Perform preliminary analytical procedures Set materiality, and assess acceptable audit risk and inherent risk Understand internal control and assess control risk Develop overall audit plan and audit program Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Preplan Obtain background information Obtain information about client’s legal obligations Perform preliminary analytical procedures Set materiality, and assess acceptable audit risk and inherent risk Understand internal control and assess control risk Develop overall audit plan and audit program FIGURE 8 - 1 Planning an Audit and Designing an Audit Approach
Do we want this client? Are we independent? Are we technically competent? Is client reputable? Who will use financial statements? (Ke ey part of acceptable audit risk discussed in Chapter 8) Auditing, 8/E @2000 Prentice hall. Inc
Arens, Loebbecke; Auditing, 8/E ©2000 Prentice Hall, Inc. Do we want this client? - Are we independent? - Are we technically competent? - Is client reputable? Who will use financial statements? (Key part of acceptable audit risk - discussed in Chapter 8)