Chp06 - AuditPlanning Slide 6- 1 AuditPlanning Decide...

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Slide 6- 1 Audit Planning
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Slide 6- 2 Audit Planning Decide whether or not to accept the prospective client Obtain knowledge of client’s business and industry Make preliminary arrangements with the client Prepare the engagement letter Prepare the audit plan, preliminary program, and time budget
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Slide 6- 3 Obtaining Clients Deciding Whether to Accept Clients Engagement risk – auditors’ overall risk of association with a client. Reduce engagement risk by considering management’s reputation and the financial strength of the prospective client. With client’s permission contact third parties concerning: » Financial history and credit rating (banker) » Legal environment (attorneys)
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Slide 6- 4 Obtaining Clients  Communications with Predecessor Auditor SAS 84 (AU 315) requires the successor auditor to attempt to communicate with the predecessor auditor before accepting the engagement. » Recall Rule 301 pertaining to confidential client information. Must ask client to authorize the communication. SEC Form 8-K for public companies » Discourages “opinion shopping”
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Slide 6- 5 Engagement Letters Responsibilities of Each Party Management responsibilities » Financial statements » Establishing effective internal control over financial reporting » Compliance with laws and regulations » Making records available to the auditors » Providing written representations at end of the audit, including that adjustments discovered by the auditors and not made to the financials are not material Auditor responsibilities » Conducting an audit in accordance with GAAS » Obtaining an understanding of internal control to plan audit and to determine the nature, timing and extent of procedures » Making communications required by GAAS
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Slide 6- 6 Engagement Letters
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This note was uploaded on 07/13/2011 for the course ACCT 1110 taught by Professor Bleecker,d during the Spring '11 term at Kwantlen Polytechnic University.

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Chp06 - AuditPlanning Slide 6- 1 AuditPlanning Decide...

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