Planning An Audit And Audit Essay

Different materiality bases are considered when determining planning materiality because the magnitude and nature of financial statement misstatements or omissions have different influences on different financial statement users. For example, investors are more interested in the accuracy of numbers involving net income because they are mainly concerned with the company’s ability to increase shareholder wealth. For an audit company, the primary concern when planning materiality is to take into account all expected financial statement users. These different expected users all have different

“The nature and extent of planning activities that are necessary depend on the size and complexity of the company, the auditor 's previous experience with the company, and changes in circumstances that occur during the audit. When developing the audit strategy and audit plan, the auditor should evaluate whether the following matters are important

documentation, materiality and risk, internal control, statistical tools, and the overall audit plan and program.

a. Describe the purpose of analytical procedures performed in the planning stage of the audit.

Properly prepared audit documentation should provide 1) a basis for planning the audit, 2) a record of evidence collected and results of tests performed on the evidence, 3) a basis for determining the appropriate audit report and 4) a basis for review by supervisors of the work performed. Achievement of these four purposes aids the auditor in providing reasonable assurance that the audit was conducted in accordance with the auditing standards.

• Given the changes in the company, there should be some periodic review of the organizational chart to assess whether changes are needed (having the same organizational structure for over 30 years may not be the most effective or efficient)

Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.

* Developing an overall audit plan and program. The objective of the firms audit plan is to achieve the audit risk objectives and to provide a reasonable basis and assurance for the auditor’s report and opinion. (1)

Under audit planning, the auditor decides whether to accept a new client or continue serving an existing one. This determination is

1. To provide the schedule for major portions of the audit, and the staffing requirements for the engagement.

Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

Integrity might cause problems in this case as the main persons in this organization are family members and there are also family members with high functions in the bank and JRW Realty with which Prefab has close business relations. Moreover, the members of the audit and compensation committee are not all independent of the firm and therefore, the likelihood of fraud or material misstatements in the financial statements is quite high. The profitability of the engagement to the auditor should be considered as well. Due to the extensive investigation the auditor has to do, especially due to the relationships between the people at the top management and the independence of the audit and compensation committee, the profitability might be a concern. Furthermore, from the analysis of the business risks of accepting the audit it can be concluded that there are several severe problem areas in which fraud or material misstatements in the financial statements can take place. At the Prefab Sprout Company the risk of fraud or material misstatements is considered to be very high and therefore, the engagement should not be accepted.

* On the job training is the primary method for employees to learn policies and procedures.

This article initiates with the introduction on what is audit planning. It basically addresses the audit plan strategy of K & S Corporation limited’s Financial Statements. Being an external auditor of the company, key factors to be considered in auditing the financials of the subject company have been discussed in the article. The most significant accounts at risk being materially misstated have been critically examined citing the possible risks associated with such accounts. Last but not the least, the article concludes with recommendations with respect to audit assessment plan of the company. Hence, this article seeks to act as a ready reckoner guide for an audit manager in audit planning of K & S Corporation Limited.