phasesofauditplanning.docVIP

PHASES OF AUDIT PLANNING Client Acceptance and Continuance With a prospective client, there must be communication between the successor auditor and the predecessor auditor. Successor auditor initiates communication after authorization from the client. The successor auditor should inquire about: The predecessor auditor should respond fully to the successor’s requests. If the responses are limited, the successor auditor must be informed that the responses are limited. If the client does not permit the predecessor, the successor auditor should have serious reservations about accepting the client. If the client has not been previously audited, the auditor should conduct the following procedures: Public accounting firms should evaluate existing clients to determine whether to retain; Usually done at the end of the audit or when some significant event occurs. When there are conflicts over accounting and auditing issues or disputes over fees, the firm may want to withdraw from the client. Establishing the Terms of Engagement The auditor and the client must agree on the terms of the engagement, including the type, scope, and timing of the engagement. Establishing the terms of the engagement: Engagement Letter Formalizes the arrangement between the auditor and the client Components of letter on Exhibit 5-1 Additional items could include: Internal Auditors External auditors must assess the _______________ and ____________ of internal auditors Discuss Figure 5-2 Audit Committee Comprised of members of the BOD who are otherwise independent; One member must be “financial expert” Responsibility for financial reporting and disclosure process. Preplanning Determine the audit engagement team requirements after considering these factors: Engagement size and complexity Level of risk Need for any special expertise Personnel availability and timing Assess independence Document compliance: All personnel com