Question

 

1. Describe the main reasons for audit planning.

2. Why we have to understand the client's business and industry.

3. Explain the Key parts of planning a audit.

Answer 1

1. Auditing is an important function of control, verify and confirm the organizational financial and business informations. Audit planning is important to audit risk to acceptably to the level to the objectives. The main reasons for audit planning is a. Identify the areas of risk of material misrepresentation. b. To plan the audit procedures to address the risk. c. To obtain sufficient evidence. d. Audit cost control e. Avoid clash with the clients.

2. An Auditor or the Audit team is required to understand client's business and industry to assess the risk of misstatement of information i.e, financial statements, fraud, or appropriate presentation and Identify the internal control system etc. For example: Some clients will have internal auditors or corporate auditors.  

3. The Key Parts of planning a audit.

a. Firstly we need to accept the client and plan for audit. How to do the audit and howmany man power is requied to apply and which areas of functions.

b. Understanding the business or Industry of the client. Organizations are different business, for example service, manufacturing and trading etc. The Auditor should understand the business.

c. Understand and access the clients business risk. Auditors should focus which are the eareas will be risk or threat to the business, internally or externally of the organisation..

d. Understand Internal Control, where the company have strong internal control the risk is considerably low.

e. Undergo, preliminery check and analytical control.

f. Informations should be gathered, sufficient to to understand fraud or other risks.

g. Build Over all Audit Plan. This stage will complete the planning and will go for performance.