Lecture 3- The audit process- offsite work

First stage of audit process is . Second stage is . Third stage is & final stage is

When looking at client acceptance process, has to go through number of so that they can gain they can take on this & with them

First stage of client acceptance process is evaluating . This involves evaluating which is of auditors. This includes looking at between auditor & potential client & determining whether & requirements (independence & competence) can be

Second stage of client acceptance process is examining auditor’s & . This involves determining whether & criteria can be met for , for , assess auditors’ & using work of an

Third stage of client acceptance process is with . This is because they have to do this. When communicating must be followed. Also, they need to evaluate their to have an that audit process happened before was done

Fourth stage of client acceptance process is evaluating . This involves of individuals () to make sure auditors can confirm their & demonstrate . Also, can be such as Companies House records to see whether they are

Final stage of client acceptance process is submitting terms of in form of an audit . is very important piece of because it is that is agreed with & sent to which sets out specific between auditors & client

Contents of engagement letter include & of audit (highlight what auditors are ), responsibilities of , responsibilities of & those charged with (so they know & are clear about what they must do), (so what will happen i.e. interim report), (so how much are ) & (potentially have rolling arrangement so audit is done each year)

Two reasons why audits should be planned are it helps direct to areas & helps potential

Another two reasons why audits should be planned are & audit & assists in of audit team

Another three reasons why audits should be planned are facilitates & of staff, assists of work of & & establishes

One planning procedure is performing to understand & its , including control (so looking at way works)

Another planning procedure is assessing of of financial statements (so likelihood of there being - look at of this happening)

Third planning procedure is determining (so calculating so we can apply that to )

Fourth planning procedure is preparing & program containing response to identified

Objective of auditors is to show that show & view (without & not going to users). To come to this view, auditor is required to look in two directions which are as information is but to confirm that company is

One limitation of audit is . It is not practical test of transactions. Maybe an in an item not for testing by auditor

Another limitation of audit is . Financial statements include / areas. Auditor required to use in assessing whether financial statements are &

Third limitation of audit is inherent of systems. An system is likely to . Possibility of controls override by management - collusion & fraud. Impossible to remove all of these inherent . As auditor relies on systems, this can reduce usefulness of audit

Fourth limitation of audit is evidence is not . Opinion is based on audit gathered. involves & & therefore does not give definite

Fifth limitation of audit is . of opinion is determined by International Standards on Auditing (UK & Ireland). However, used is not usually understood by . This means that users may not actually understand audit opinion given ()

Final limitation of audit is . Audit report often issued some time year end. can be quite different to current position. In marketplace where companies’ financial positions can change quite quickly, may no longer be relevant as it is

Material misstatement at financial statement level is at of i.e. something big in income statement where has issue. At assertion level it is at , &

Business risk- Risk that business does not its . maybe or i.e. profitability, market share & customer satisfaction

Audit risk- Risk of an expressing an audit opinion when financial statements are . It is linked to fact that financial statements are prior to audit

In business risk approach to audit, auditor understands to . By identifying those it allows them to direct efforts towards from an operational perspective.
Auditor can offer to identify & mitigate risk areas

One type of audit risk is . This is within business. In relation to , once auditor accepts engagement, they cannot this risk. Examples include management , management & , on management, of entity’s business &

Another type of audit risk is . This is risk that intended to or identify in an assertion to do so. In relation to this risk, once is accepted, it cannot be . Examples include failure of (there isn’t one or it doesn’t do what was intended) & failure of ( has not operated or not operated as intended)

Final type of audit risk is . This is failure to in an assertion that could be . It depends on of audit procedure & of an audit procedure. This risk can be by auditors