Chapter 4 - Chapter 4 Engagement Planning "Vision without...

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Chapter 4 Engagement Planning "Vision without action is a daydream. Action without vision is a nightmare.” - - Japanese Proverb
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Chapter 4 Learning Objectives 1. List and describe the activities auditors undertake before beginning an engagement. 2. Identify the procedures and sources of auditors can use to obtain knowledge of a client’s business and industry. 3. Perform analytical procedures to identify potential problems. 4. List and discuss matters of planning auditors should consider for clients who use computers and describe how a computer can be used as an audit tool. 5. Review audit documentation for proper form and content. 4-2
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Goals of Planning Obtain (or update) an understanding of important events that have affected the client and its operations Identify areas of the engagement that may represent special risks to the public accounting firm. Ensure that the engagement can be completed in a timely fashion 4-3
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Pre-Engagement Arrangements Client selection and retention Communication between predecessor and successor auditors Engagement letters Staff assignment Time budget 4-4
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Communication between Predecessor and Successor Auditors ( SAS 84 ) Attempt to communicate required If client permits, issues to discuss Disagreements about accounting principles or audit procedures. Communications the predecessor auditors gave the former client about fraud, illegal acts, and internal control recommendations. The predecessor auditors’ understanding about the reasons for the change of auditors (particularly about the predecessor auditors’ termination). 4-5
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Understanding the Client’s Business Methods and sources of information Inquiry, including prior year working papers Observation Study Other aspects of planning Materiality and planning First-time audits Internal auditors Identification of related parties Specialists Analytic procedures 4-6
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Enterprise Risk Management Framework Internal Environment Monitoring Information and Communication Risk Response Risk Assessment Objective Setting Event Identification Control Procedures 4-7
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Planning Memorandum Summary of planning procedures Considerations 1. Investigation or review of the prospective or continuing client relationship. 2. Provision of special services or reports and needs for special technical or industry expertise. 3. Staff assignment and timing schedules. 4. Assessed level of control risk. 5. Significant industry or company risks. 6. Computer system control environment.
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This note was uploaded on 02/05/2011 for the course ACCT 461 taught by Professor Staff during the Spring '08 term at George Mason.

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Chapter 4 - Chapter 4 Engagement Planning "Vision without...

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