Chapter 4 PP - Chapter 4 Engagement Planning...

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Unformatted text preview: Chapter 4 Engagement Planning "Vision without action is a daydream. Action without vision is a nightmare. - - Japanese Proverb 4-1 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 4-2 Pre-Engagement Arrangements Client selection and retention Communication between predecessor and prospective auditors Engagement letters Staff assignment Time budget 4-3 Communication between Predecessor and Prospective Auditors 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). 4-4 Understanding the Clients 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 Spets Analytic procedures 4-5 Enterprise Risk Management Framework Internal Environment Monitoring Information and Communication Risk Response Risk Assessment Objective Setting Event Identification Control Procedures 4-6 Planning Memorandum Summary of planning procedures Basis for audit plan 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. 4-7 Planning Memorandum Considerations 6. Computer system control environment. 7. Utilization of the companys internal auditors....
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This note was uploaded on 04/15/2011 for the course ACC 5996 taught by Professor Miller during the Winter '11 term at Wayne State University.

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Chapter 4 PP - Chapter 4 Engagement Planning...

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