Question

Write a four to six (4-6) page paper about a big accounting firm from any state outlining the criteria below.

Outline the critical steps inherent in planning an audit and designing an effective audit program. Based upon the type of company selected, provide specific details of the actions that the company should undertake during planning and designing the audit program.

Examine at least two (2) performance ratios that you would use in order to determine which analytical tests to perform. Identify the accounts that you would test, and select at least three (3) analytical procedures that you would use in your audit.

Analyze the balance sheet and income statement of the company that you have selected, and outline your method for evidence collection which should include, but not be limited to, the type of evidence to collect and the manner in which you would determine the sufficiency of the evident.

Discuss the audit risk model, -

and ascertain which sampling or non-sampling techniques you would use in order

to establish your preliminary judgment about materiality.

Justify your response.

Assuming that the end result is an unqualified audit report, outline the primary responsibilities of the audit firm after it issues the report in question.

Answer 1

Part I

Specific action to be taken while planning and designing the audit.

1) Terms of his engagement and any statutory responsibilities.

2) Nature timing of reports or other communication.

3) Applicate legal or statutory requirements.

4) Study the MOA and AOA of the entity to ensure that object clause of moa permits the entity to engage in business.

5) Examination of internal Control aspect that whether internal control has been working effectively and efficiently or not.

6) Identification of significant audit area.

7) Setting of maternity levels of audit purpose.

8) Degree of reliance to be placed on accounting system and internal control.

9) Nature and extent of audit evidence to be obtained.

10) Allocation of works to be undertaken between join and the procedure to be followed.

11) Establishing the coordinating staffing requirement.

Part- II

Performs ratio that you used to determine analytical test of perform.

Stock turnover ratio

Asset turnover ratio

Net profit turnover ratio

Identification of accounts that we will test

Cash account

Fixed assets account

Capital Account

Debtor account

Analytical procedure that would use in audit.

1. Understanding the client business.
2. Identify areas of potential risk.
3. Determine the nature timing and extent of his other audit procedure.
4. Analytical procedures in planning an audit use both financial data on non financial information such as number of employee, machine hours, Number of goods produced and similar information.

Part III Statistical Sampling

1. I random selection of sample items and
2. The use of probability theory to evaluate sample result, including measurement of sampling risk. This method is more scientific as it involves use of laws of probability.
3. This method has reasonably wide application where a population consists of a large number of similar items.

Non-statistical sampling

1. A sampling approach that does not have characteristic of random selection and use the probability theory is considered as non statistical sampling.
2. In this method the sample size and it composition are determined on basis of personal experience and knowledge of the auditor.
3. This method because of simplicity in operation was in common application for many years.

If that end result is an unqualified audit report the auditor's primary responsibility to issue audit report to share holder describing financial statement are free from material miss statement and share holder can take decision on the basis of the report.