Kế toán, kiểm toán - Chapter 03: Engagement planning

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinChapter 03Engagement Planning"Vision without action is a daydream. Action without vision is a nightmare.” Japanese Proverb3-2Learning ObjectivesList and describe the required pre-engagement activities that auditors undertake before beginning an audit engagement.Understand the importance of planning the audit engagement so that it is conducted in accordance with professional standards.Define materiality and explain its importance in the audit planning process.List and describe the eight general types of audit procedures for gathering evidence.List and discuss matters of planning that auditors should consider related to the client’s computer environment and describe how CAATs can be used to improve the efficiency of the audit process.Define what is meant by the proper form and content of audit documentation. 3-3Pre-Engagement ActivitiesClient Acceptance or ContinuanceCommunication between predecessor and prospective auditorsCompliance with Independence and Ethical RequirementsEngagement LettersTermination Letter3-4Audit PlanA comprehensive list of the specific audit procedures that the audit team needs to perform to gather sufficient appropriate evidence on which to base their opinion on the financial statementsWhen planning the engagement, the auditor needs to develop and document a plan the describes the procedures to be performed to assess the risk of material misstatement at the financial statement and assertion levelThe auditor must then carefully plan the nature, timing and extent of control tests and substantive tests that are designed to mitigate these risks to an acceptable level3-5Considering the Work of Internal AuditorsMust obtain an understanding of a client’s internal audit department and its workAudit efficiency can be realized when the two groups work togetherPrior to using the work of internal auditors, external auditors should consider internal auditors’ objectivity and competenceInternal auditors should not be delegated tasks that require extensive professional judgment3-6Use of SpecialistsSpecialists are persons skilled in fields other than accounting and auditing who are not members of the audit teamAuditors must know about the specialist’s professional qualifications, experience and reputationShould be unrelated to the company being auditedAuditors should obtain an understanding of the specialist’s methods and assumptionsSpecialists are not referred to in the audit report unless the specialists’ findings cause the auditors’ report to be modified3-7Use of IT AuditorsSpecialized skills are often needed to evaluate the effect of computerized processing on the audit, to understand the flow of transactions, or to design and perform audit proceduresIT auditors are members of the audit team and are called in when the need for their skills arisesAudit managers and partners should possess sufficient knowledge to know when to call on specialists and to supervise their work3-8MaterialityQuantitative Criteria:Absolute sizeRelative sizeCumulative effectsQualitative CriteriaNature of the item or issueCircumstancesUncertaintyMateriality refers to an amount (or transaction) that would influence the decisions of users (i.e., an amount (or event) that would make a difference). The emphasis is on user, rather than management or the audit team.Materiality Criteria:Ultimately, materiality is a matter of professional judgment.3-9Using Materiality on the AuditAs a guide to planning substantive procedures—directing attention and audit work to those items or accounts that are important, uncertain, or susceptible to errors or frauds.As a guide to evaluation of the evidence. Auditors use performance materiality to make sure that the aggregate of uncorrected and undetected immaterial misstatements does not exceed materiality for the financial statements as a whole. As a guide for making decisions about the audit report. 3-10Use of Audit ProceduresTo gain an understanding of the client and the risks associated with the client (risk assessment procedures)To test the operating effectiveness of client internal control activities (test of controls)To produce evidence about management’s assertions related to the amounts and disclosures in a client’s financial statements (substantive procedures)3-11Substantive Audit PlanShould contain a list of audit procedures for gathering evidence related to the relevant assertions identified for the significant financial statement accounts and disclosures of an audit clientTwo ways to conduct substantive tests: Substantive analytical proceduresTests of details3-12Planning in a Computerized EnvironmentTemporary transaction trailsUniform processing of transactionsPotential for errors and fraudPotential for increased management supervisionInitiation or subsequent execution of transactions by computerUse of cloud computing applications3-13Effect of Client’s Computer Processing on Audit PlanningExtent to which computers are usedComplexity of computer operationsOrganizational structure of computer processingAvailability of dataNeed for specialized skillsUse of CAAT’s3-14Computer Assisted Audit Tools and Techniques (CAATs)With CAATS, the auditor is able to access and extract client information without disrupting data processing.Some CAATs Procedures:Calculate field statistics (totals, high, low and average value)Perform complex recalculations Join and compare different data filesPerform detailed analysisStratificationGap and duplicate detectionSample selection3-15Audit DocumentationDefinitionThe written record of the basis for the auditor’s conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise.ObjectivesImprove audit qualityEnhance public confidence3-16Audit Documentation RequirementsAudit documentation should be prepared in sufficient detail to enable an experienced auditor having no previous connection with the engagement to:Understand the nature timing, extent and results of procedures, evidence obtained and conclusions reached.Determine who performed the work, date of work, reviewer and date of review.Audit documentation should provide a clear link to significant findings or issues and Demonstrate compliance with professional standards.Support basis for conclusions for each relevant assertion.Document that accounting records agree with financial statements.3-17Documentation RetentionDocumentation must be retained seven years from report release date.If no report—from last day of fieldworkDocumentation to be retained include those documenting discussion and subsequent resolution of differences in professional judgments among team membersAll documentation must be finalized within 45 days of the audit report’s release date3-18