Auditing Research Memo

Auditing Research Memo - Memo To: Fellow Auditing Students...

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Memo To: Fellow Auditing Students From: Patricia Langowski Date: July 28, 2011 Re: Audit Planning – Understanding the Client, Assessing Risk This memo addresses audit planning with emphasis on the importance of understanding the client and assessing risk. Audit planning should allow us to perform an effective audit in a well organized and timely approach. The plans need to be based on knowledge of client’s business along with their accounting system, internal controls and policies and procedures. Planning is an ongoing process and can easily entail continual revisions based on changes in situations or unexpected results of audit procedures. This planning will help us, as auditors, ensure attention to important areas of the audit and promptly indentify any potential problem areas. It will also allow us to complete the audit efficiently and provide effective use of our auditing team. It should be our systematic approach to performing the audit and below I’d like to outline ways we might achieve this. Before engaging a potential client a general knowledge of the economy as well as an understanding of the industry in which the company operates and any regulatory and other external factors are essential. This can be obtained in a number of ways such as gathering information from senior management, discussions with legal advisors or industry experts and review of internal audit reports. This is necessary to obtain an understanding of management’s assessment of the risk that the financial statements may be materially misstated. As well as to assess if accounting and internal control systems have been put in place to prevent and detect errors or fraud. This will also reveal if management is aware of, or has discovered any known fraud that has affected the organization. Another way to help minimize our risk and better understand our potential customer is a
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This note was uploaded on 07/27/2011 for the course ACCT 102 taught by Professor Huxhold during the Spring '11 term at UCSD.

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Auditing Research Memo - Memo To: Fellow Auditing Students...

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