module02 - Module 2: Engagement planning Overview Module 2...

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Module 2: Engagement planning Overview Module 2 covers the planning of an audit engagement, beginning with the decision of whether or not to accept the potential client. It builds on important concepts from your External Auditing [AU1] (or equivalent) course, including understanding the entity and its environment, materiality, and risk. You work through the planning process of a typical financial statement audit using GAAS. In the process, you learn the steps required to complete the planning section of an audit file and consider the specific matters that arise on the first audit of a new client. After completing this module, you will be able to evaluate and consult on an organization's assurance needs, and advise on whether to accept an assurance engagement. You will also know how to identify and evaluate the impact of risk factors and business issues in an audit engagement and execute the audit program in accordance with professional standards. Through your study of fraud and illegal acts at the planning stage, you will learn to apply professional skepticism and exercise due diligence. Test your knowledge Begin your work on this module with a set of test-your-knowledge questions designed to help you gauge the depth of study required. Learning objectives 2.1 Identify the issues that must be considered before accepting an audit engagement, and outline the content of the engagement letter for audits, reviews, and compilations. (Level 1) 2.2 Explain the importance to the auditor of understanding the entity and its environment, the type of knowledge required, its sources, and how the auditor obtains it. (Level 1) 2.3 Evaluate the quantitative and qualitative factors in the calculation of materiality, and establish a preliminary materiality level for an audit. (Level 1) 2.4 Explain the risk of material misstatement and its components inherent risk and control risk and outline the auditor's responsibility at the planning stage regarding possible fraud and illegal acts. (Levels 1 and 2) 2.5 Justify the use of analytical procedures in engagement planning, explaining the steps to follow in applying them and their effect on the audit plan. (Level 1) 2.6 Develop the overall audit strategy and audit plan, and outline the considerations in developing each. (Level 1) 2.7 Evaluate the basic areas of concern for first-time audits and appropriate actions that may be taken to address these concerns. (Level 1) AU2 - Module 2 Page 1
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2.1 Accepting audit engagements Learning objective Identify the issues that must be considered before accepting an audit engagement, and outline the content of the engagement letter for audits, reviews, and compilations. (Level 1) Required reading AU2 Readings Book : Reading 2-1: Risky business (Level 1) Reading 2-2: Engagement letters (Level 1) CICA Handbook : Section 5110 (CAS 210) (Level 1) Paragraphs 5150.06 (CAS 300), 8100.09-.14, 8200.02-.22, 9200.11-.14, and the Appendices to sections 8200 and 9200 (Level 1)
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module02 - Module 2: Engagement planning Overview Module 2...

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