Audit Planning

Topics: Auditing, Audit, Internal control Pages: 8 (2694 words) Published: October 5, 2013

Audit Planning

Audit Planning
Auditing is a vital activity, in every business activity. The International Auditing and Assurance Standards Board (IAASB) is the overall organization that sets international standards for assurance, auditing and other related fields, globally. The organization ensures that there is the harmonization of all international and national auditing and assurance standards to enhance uniformity, in accounting, globally (Spencer, 2006). In addition, the IAASB ensures that there is consistency, in auditing, across all nations, in the world. Further, IAASB seeks to maintain support from the public over the reports regarding auditing and assurance. Before an accountant starts his audit work, there is a need for him to have a plan of work. This paper focuses on the significance of audit planning to an auditor who is willing to engage with a multinational company. In this case, the paper focuses on the value of having an audit plan for Golden Ale, a multinational company dealing in the manufacture and bottling of brews. Audit Planning

Audit planning is vital for every business that seeks to have a competitive edge over its neighbors. The purpose of a plan to the auditor is to ensure that there is consistency in the work he/she carries out during the plan. The engagement process involves a team of engagement partners. The team members offer assistance to the engagement partner, and must comply with the relevant standards of auditing. Further, the generally Accounting Standards (GAAS) explains the responsibilities of the auditor, in audit planning. According to GAAS, audit planning involves establishing the overall rules of engagement with the client. In particular, audit planning involves the planned risk assessment and also planned response to material misstatement. It is worth noting that audit is not an isolated process, in an organization; rather, he/she forms a repetitive process that seeks to interact closely with the previous audit. In this regard, an auditor should continue with his work even after the completion of the current one. Additionally, it is imperative for the auditor to perform the numerous functions before the engagement process. These include performing investigations to determine the client’s continued compliance with a specific audit engagement; determining the client’s compliance with ethics and independence requirement and establishing the understanding with regard to the terms of engagement with auditing committee as per the rules of engagement. Further, audit planning is an extensive process that emphasizes the understanding of the size and complexity of the client organization, the experience of the previous auditor with the client, as well as changes in circumstances that may occur during the audit process (Larry et al., 2011). During or before making of the audit strategy or audit plan, the auditor should understand the importance of several issues as regards the organization’s financial statement and internal controls and how they affect the audit work. The auditor must also familiarize himself with the company’s internal and financial reporting before the engagement. He must also understand other market dynamics that may influence the client’s financial reporting, matters relating to an organization such as operations and capital structure, effects of any occurrence that may have affected the operations of the business such as internal controls and financial reporting, as well as legal matters that the business must comply with, in its operations. The auditor must also understand the type and the effectiveness of the company’s internal control and efficiencies of the control mechanisms the auditor may have communicated with the audit committee (Spencer, 2006). He must also gather any public information as regards the company’s likelihood to have a financial misstatement or the public view...

References: Efrim, B., & Institute of Internal Auditors: Research Foundation. (1983). Planning for the internal audit function. Michigan: Institute of Internal Auditors Research Foundation.
Larry, E., Karia, M., & Audrey, A. (2011). Auditing: A business risk approach, 8th ed.: A business risk approach. Stamford: Cengage Learning.
Michael, C. (2013). Contemporary auditing: Real issues and cases. Mason, OH: southern west Cengage Learning.
Ravinder, K., & Virender, S. (2005). Auditing-Principles and practice. New Delhi: Prentice- hall of India.
Spencer, P. (2006). Audit planning: A risk- based approach. Hoboken: John Wiley & Sons.
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