Q Provide examples of the typical audit procedures the auditor performs during planning phase of the audit Home, - Planning phase of the audit Question 1 - Prior to commencing any type of assurance engagement, it is essential that the auditor plan effectively to identify key issues or challenges faced by the client in its industry sector. With reference to the appropriate auditing standard (ASA), explain why this is an essential part of the audit process and provide examples of the typical audit procedures the auditor performs during the planning phase of the audit. Answer - ASA 300 is the relevant auditing standard pertaining to audit plan. ASAASA 200 is the accounting standard that explains how audit should be done. ASA 315 details how risks of material misstatements should be identified. It is essential that the auditor plan effectively to identify key issues or challenges faced by the client in its industry sector. Only then the auditor will be able to identify areas where the risk of material misstatements in financial reports is higher. Only then the auditor will be able to assess the level of Audit risk in the case of the client. Assessment of level of audit risk is necessary to determine the level of Materiality in the case of the client. Typical audit procedures that auditors perform during the planning phase of the audit are: 1. Identification of matters and issues that affect the industry of the client. 2. Understanding the internal controls of the company with respect to financial reporting and auditing. 3. Understanding the business of the company. 4. Making preliminary or initial assessments regarding audit risk, materiality etc. 5. Looking into publicly available information about the company. 6. Looking into the level of audit complexity specific to the company that is being audited. Question 2 - Discuss how auditors adequately document the details of the evidence gathered in the audit working papers, including the referencing and filing system required, and with reference to the appropriate auditing standard (ASA), explain why audit working papers are so important. Answer - ASA 230 is the relevant auditing standard with regard to documentation of evidence gathered in audit working papers. As per ASA 230, all evidence gathered in audit working papers should be put in the audit file. This audit file can be in electronic form or non-electronic form. The audit file should be prepared within 60 days from the issuance of the audit report. The auditor cannot delete any document that is there in the audit file, during the retention period. According to ASA 230, audit working papers are so important because they record the basis on which the auditor issued the audit report. They also provide evidence regarding whether the audit was performed as per Australian Accounting standards. Audit Working papers therefore contain evidence regarding how the audit of a particular entity was done. This evidence can be needed in future too. Related: Conflict of interest situations Planning phase of the audit Discuss different types of subsequent events
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