What activities does the auditor perform during the initial phase of the audit engagement?
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Terms in this set (44)In considering materiality for planning purposes, Ash, auditor believes that misstatements aggregating P60,000 would have material effect on an entity's income statement, but that misstatements would have to aggregate P40,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate: a. P40,000 Sets with similar termsSets found in the same folderOther sets by this creatorRecommended textbook solutions
Other Quizlet setsRelated questionsWhat is a Preliminary Audit?A preliminary audit is fieldwork performed by auditors before the end of the period under examination. By engaging in this advance work, the auditors can reduce the volume of activities that must be completed after the client has closed its books. No audit report is issued as part of a preliminary audit; instead, this work should be considered an early phase of the regular audit that an organization undergoes. Preliminary Audit ActivitiesThere are a number of tasks that can be completed during a preliminary audit, including the following:
Advantages of a Preliminary AuditConducting a preliminary audit has the following benefits:
Auditors know there’s never been a more challenging time to monitor and meet evolving regulatory changes and professional standards. How their jobs are performed now requires more than accounting and audit knowledge and skills. In fact, the accounting and audit professions have gradually been drawn into the world of automation and automation tools. To that end, we’ve prepared an audit engagement checklist that explores how automated tools and techniques can enhance the processes and steps. Each audit engagement is unique, but most share the basic steps of preparation, planning, field testing, and audit procedures, as well as subsequently rendering the audit opinion. To ensure a timely and successful audit, creating and following a succinct outline of your audit strategy (including planning and preparation) is paramount. Prior to the global pandemic, technology and automation started to take root as necessary tools for audit professionals. But as the pandemic marches on, the utilization of technology — including automated tools — has become mandatory, especially in the tax and audit profession. Pre-audit engagementAfter the decision is made to accept an audit engagement, the auditing team does a thorough risk assessment of the client’s company, which includes assessing the industry, management’s integrity, governance procedures, and internal controls. Today, most companies and industries rely heavily on data, and the ability for auditing teams to examine and analyze the client’s data is necessary. The use of technology at this point can greatly assist in determining the right scope of the data in order to make it relevant to the intended audit. Having a checklist not only organizes but provides a comprehensive approach to the audit. Audit engagement checklistAn audit engagement checklist can clarify the audit elements, allowing the auditing team to undertake a holistic review, research, and execution of the audit. An engagement checklist can be as specific as required, based on the specificity of the audit; however, here is a basic framework to create an effective checklist. A useful tool to create the audit engagement checklist is Smartsheet, which allows multiple people to work on the same document without overriding work being done by others. Below is a list of items to consider for the checklist: 1. Prepare & Plan“One of the most common causes of unsuccessful audits is inadequate planning” says Wade Brylow, Internal Audit Director at Northrop Grumman. Engagement planning starts with creating a strategy for how to approach and execute the audit, and the engagement plan should include the following steps:
2. Conduct fieldworkFieldwork is done based on the planning and includes gathering evidence, statistical and analytical analyses, and all information identified in the parameters. In this step, information is gathered and reviewed, and then audit testing is done to ensure the proper controls are selected. In addition, at this point key staff members are interviewed and assessments of risk are determined. Obviously, given the restrictions on face-to-face access as a result of the global COVID-19 pandemic, the way audit evidence now is gathered has changed. Automated tools and techniques are required, including, for example, the use of cameras and drones to observe inventory counts. And the use of video conferencing services to conduct interviews is now a necessity. 3. Gather evidenceWhen planning to gather evidence, it is important that the practitioner maintains a focus on the engagement objectives. Traditionally, proper evidence gathering included physical observation and staff interviews; however, there were some acceptable exceptions, such as the use of telephone interviews if individuals were dispersed around the globe. In fact, the American Institute of Certified Public Accountants (AICPA) recently issued its Statement on Standards Number 142, which included a list of automated tools and techniques. The Statement also highlighted innovative ways to gather evidence when working remotely. 4. Report findings & file supporting documentsAfter all the evidence is gathered and the fieldwork is completed, the final piece of the audit engagement checklist is, naturally, to report your findings and file any necessary supporting documents. Using robotic process automation (RPA) and cloud-based software can aggregate all information and data, and allow for more thorough analysis and collaboration among team members. Further, these tools can make vast quantities of data more manageable with much greatly accuracy. In addition, automatization of this steps removes the arduous manual tasks of copying and pasting between applications or cross-referencing data. As Amy Pawlicki, VP in Assurance and Advisory Innovation at AICPA, said in a recent blog post: “Better access to more data, cloud storage, and technologies such as AI in particular bring tremendous potential to support deeper analytics and greater insights for the benefit… of audits”. Today, auditors are now finding ways to work differently, and by using the technologies and automation tools that allow them to gather and analyze data, collaborate across teams, and present their findings clearly and more accurately, they are ensuring that these key as aspects of remote work will continue. To learn more about how to be successful in your audit engagement, check out the Cloud Audit Suite from Thomson Reuters.What is the first step in an audit engagement?Step 1: Planning
The auditor will review prior audits in your area and professional literature. The auditor will also research applicable policies and statutes and prepare a basic audit program to follow.
What are the phases stages of an audit engagement?Audit engagements are performed in three general phases: planning, fieldwork & review, and reporting.
What is involved in the preliminary engagement activities of the auditor?Preliminary activities
Performing procedures regarding the continuance of the client relationship and the specific audit engagement. Evaluating compliance with relevant ethical requirements, including independence. Establishing an understanding of the terms of the engagement.
What do you do during an audit engagement?Audit engagement checklist. Prepare & Plan. “One of the most common causes of unsuccessful audits is inadequate planning” says Wade Brylow, Internal Audit Director at Northrop Grumman. ... . Conduct fieldwork. ... . Gather evidence. ... . Report findings & file supporting documents.. |