AUDIT PLANNING & PROCEDURES

Audit Planning and Procedures

Audit Planning and Procedures

Introduction

In Audit, it is very important to have a knowhow of the client business and the environment in which it is operating. This know of client business is done through proper planning. ISA 315 of UK obtains the understanding of the business and the environment in which it is operating. It also finds out the material misstatement risk so it is a good guideline relating to these issues. The auditors need to have a good understanding of the clients business together with its environment, so that they can better evaluate risk, choose the best audit strategy and at the same time introduce effective audit procedure. The auditor will have to look into five different aspects of our client business and environment. Five Different Aspects

Applicable Financial framework means what level of understanding we can have regarding the industry in which the company is trying to sustain, the level of competition that it is facing, the level of relations it is maintaining with its customers and suppliers. To know the technology level that the industry is using and what the company has implemented. To know the laws that the industry has and what are impact of it on the business. The auditors need to look into the other factors like changing interest rate and the exchange rate impact on the client. These factors are assessed so that their impact on the financial statement can be seen, when making planning and future decisions (Weatherill 2011, pp 139). Like if, a business is operating in a highly regulated industry, than auditors who have experience of those regulations should be considered. Regulations can be like restriction for the use of specific international or local financial reporting.

The other aspect is that accountants should look into accounting policies and the nature of business. There should a thorough understanding of the legal structure of the company. The company ownership structure, its pattern and the various source of company financing. Material misstatement can be increased in the case of complex ownership structure having different subsidiaries. The auditors should also look into the accounting policies whether they are consistent with the applicable financial reporting framework.

Strategic goal setting and the risk relating to it is also one of the aspects that the accountants should look .In it the Mission and Vision are to be clearly defined in the business. The long-term strategies are the plans through which these visions are achieved. For Example if a company wants to be a market leader, than it should try to capture the market share by launching new product and increasing market share accordingly. The factor that stops the company from achieving its stated objective is the business risk. For example, company launches new product but that product gets out of fashion than it is a business risk. These business risks have direct impact on the financial statement of the company. This is the reason business risk are shown in the financial ...