Professional Documents
Culture Documents
AP
Refers to the development of a
general strategy and a detailed
approach for the expected nature,
timing, and extent of audit
PSA 300
PRE-ENGAGEMENT ACTIVITIES
-investigate new and existing clients
-obtain an engagement letter
-assign partner, manager, and staff to eng
PLANNING ACTIVITIES
-obtain knowledge of the clients business
-obtain preliminary understanding of IC
-design a preliminary account balance
audit program (considering knowledge of
IC)
FACTORS TO CONSIDER
Understanding
Experts
Materiality and Risk
Fraud and Non-compliance
Going Concern
OUTPUTS OF AP
1. An overall audit strategy that sets
out the direction, scope, and focus
of the audit teams efforts
Audit Strategy-approach to be
taken in performing the audit
a. w/ reliance on IC approach
-strong/eff. IC, fewer misstatements,
less ST
-inverse- controls
ST
b. no reliance on IC approach
-weak/missing IC, more
misstatements, more ST
-inverse- controls
ST
MATERIALITY
-omission or misstatement that could
influence the economic decision of users on
the basis of the FS
Preliminary estimate of materiality-evidence
Inverse relationship
formula: % of NI, total assets, SHE, Sales
Design audit procedures that would be
expected to detect misstatements that
aggregatethe SMALLEST
ST
ST
INHERENT RISK
ST
CONTROL RISK
ST
DETECTION RISK
ST
TYPES OF PROCEDURES
RAP- RISK ASSESSMENT PROCEDURES
-required
-used to obtain an understanding of
the entity and its environment,
including its IC, to assess the risks of
MM at the FS and assertion levels
-done during planning
INCLUDES:
a. INQUIRY - seeking info
b. INSPECTION physical examination
c. OBSERVATION looking at the
process
d. ANALYTICAL PROCEDURES- ratio
analysis, variance analysis, trend
analysis
-required during planning
-PSA 520-analytical procedures
CORNIK
Coordination, Direction, Supervision, &
Review
Other Matters- going concern, related
parties
Risk and Materiality
NET of Audit Procedures
Internal Control
Knowledge