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8. Accept client and perform initial planning
Understand the client’s business and industry
Assess client business risk
Perform preliminary analytical procedures
Set materiality, and assess acceptable audit risk and inherent risk
Understand internal control and assess control risk
Gather information to assess fraud risks
Develop overall audit plan and audit program 8-11
principal owner of the client company, or any other party with which the
client deals where one of the parties can influence the management or operating
policies of the other.Material related party transactions must be disclosed in the
financial statements by management. Therefore, the auditor must identify related
parties and make a reasonable effort to determine that all material related party
transactions have been properly disclosed in the financial statements.
8-25 a.(3) b.(3) c.(4) d. (1) 8-26 a.(1) b.(4) c.(4) 8-18
Client business risk is the risk that the client will fail to achieve its
objectives. Sources of client business risk include any of the factors affecting the
client and its environment, including competitor performance, new technology,
industry conditions, and the regulatory environment.
The auditor’s primary concern when evaluating client business risk is the risk of
material misstatements in the financial statements due to client business risk. The
auditor’s assessment of the risk of material misstatements is then used to classify risks
using the audit risk model to determine the appropriate extent of audit evidence. 8-21 (1) during the planning phase to assist the auditor in determining the nature,
extent, and timing of work to be performed.
(2) during the completion phase, as a final review for material misstatements or
financial problems. Analytical procedures are also often done during the testing phase
of the audit, but they are not required in this phase. 8-27 a.(4) b.(1) c.(2) d.(4) ...
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- Spring '11