Question

In recent years globalization of business and factors such as technological disruption, tax reform, trade policies, and changing demographics in the workplace cause uncertainty in volatility in stock and bonds markets. Why my might it be important for you to consider current economic and other events as part of planning an audit?

Answer 1

Audit Planning includes preparation of audit programme from allocation of resources to preparation of Financial Reports. While doing this preparation, the auditor need to consider all the factors that affects the business of the auditee. This factors can be internal or external, qualitative or quantitative, positive or negative impact, etc. All these factors need to be assess and to be incorporate in the audit planning. So when the auditior is performing the audit, such considerations need to be paid attention. The factor related to current economic events need also need to be addressed as they also affect the audit planning and business such as:

• Technology Disruption of auditee will fail to provide necessary data and information to the auditor which ultimately restrtict the auditor to give a true and fair opinion. Thus it is important to consider the technology development of auditee while performing the audit planning.
• Any significant developments in tax reform helps the auditor to assess the provison for taxation for the year as well as to compute any deferred tax asset or deferred tax liability while performing the audit procedures.
• Any significant developments in trade reforms of the auditee in which it is operating will help the auditor to assess any possible threat which may arise question on the auditee's going concern assumption.
• Volitality in stock and bond market may result into improper financial reporting. Therefore at the time of audit planning, the auditor to take into consideration that such stock and bond will be valued at its fair value to represent actual gain or loss and represnt fair posiition on the date of reporting unlike cost method.