The Preliminary engagement activities in Auditing-Accounting aud finance

Additional considerations in initial audit engagements

The reason and objective of preparing the audit are the same whether the audit is a first or recurring engagement.

However, for a first audit, the auditor may need to get bigger the preparation behavior because the auditor does not normally have previous knowledge of the entity.

That is considered when preparation chronic engagements. For an initial audit appointment, additional matters the auditor may believe in establishing the general audit policy.

And audit arrangement includes the following:

1.  Unless forbidden by law or regulation, arrangements are to be made with the precursor.

2.  Auditor, for example, to review the predecessor auditor’s working papers.

3.  Any major issues (contain the application of accounting rules or of audit and

4. Coverage standards) argue with management in connection with the initial selection as.

5. Auditor, the message of these matters to those charged with supremacy and how.

6.  These matters affect the general audit policies and audit plan.

7.  The audit events necessary to attain enough appropriate audit proof regarding.

8.  Opening balances.

9.  Other procedures required by the firm’s organization of quality control for initial audit appointments (for example, the firm’s organization of quality control may necessitate the participation of another partner or older personality to review the overall audit strategy prior to commencing important audit events or to review reports previous to their issuance).

Understanding the entity and its situation.

The auditor is necessary to identify and tax the dangers of misstatement, whether due to fraud -or fault, through sympathetic the entity and its environment, including its interior controls.

This will involve believing such factors as       

  • Relevant engineering, regulatory, and other outside factors, including the applicable financial
  • Coverage framework.
  • The nature of the entity, counting its operations, ownership, management arrangement.
  • Types of current and designed investments.
  • The entity’s selection and application of accounting policies, counting whether they are.
  • Apposite for its business and consistent with the business and the appropriate financial.
  • Coverage framework.
  • The entity’s purposes and policy and those connected business dangers that may result in  
  • Dangers of material misstatement.
  • Business dangers are dangers occurring as a result of important conditions, events, circumstances.
  • Actions or functioning’s that could affect an entity’s facility to reach its objectives and carry out.
  • Its strategies. Business dangers can also happen as a consequence of setting unfortunate purposes policies or goals.

Understanding the accounting and interior control organizations

Initial audit engagements

ISA 315 necessitates the auditor to obtain an understanding of interior controls pertinent to the audit.

Although most of the entity’s interior controls will narrate to financial exposure, not all will be pertinent to the audit.

If the entity has an interior audit function then the auditor shall obtain an understanding of the nature of the interior audit function’s farm duties.

Its managerial status, and the activities presenting or to be carried out.

The auditor should try to reach a decision about how burly (or weak) the interior controls are in order to make a finish about the amount of testing that should be approved out in the audit.

He should believe:

·       His preceding knowledge of the client corporation.

·       Any fresh changes.

·       Any known troubles in the interior controls of the client.

·       The result of any new auditing or accounting obligations.

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