Reference no: EM132464705

With the listed information below please create three questions, client perspective in planning for and preparing for the audit. List your questions below?

This chapter explained the manner in which auditors plan an audit, obtain an understand ing of the client, assess risks of misstatements, and respond to those risks. To summarize:

Question 1. The audit process may be viewed as including the following six stages:

(a) Plan the audit;

(b) obtain an understanding of the client and its environment, including internal control;

(c) assess the risks of misstatement and design further audit procedures;

(d) perform further audit procedures;

(e) complete the audit; and

(f) form an opinion and issue the audit report.

Question 2. Investigating a potential audit client is essential because auditors want to avoid accepting clients that have unscrupulous management. As part of their investigation, the auditors are required to attempt communication with the predecessor auditors.

Question 3. In planning the audit, the auditors establish an understanding with the client, ordi narily in writing through use of an engagement letter that makes clear the nature of the engagement, any limitations on the work, and the responsibilities of the client. During planning, auditors develop an overall audit strategy, which includes an audit plan. The audit procedures that are contained in the audit plan are designed around the assertions of management, which are embodied in the financial statements and the auditors' assessments of risks and controls.

Question 4. The auditors perform risk assessment procedures (including inquiries, analytical procedures, observation and inspection, and other procedures) to obtain an understanding of the client and its environment. They plan their audit to provide reasonable assurance that the financial statements are free from material misstatement, whether caused by error or fraud.

Question 5. Auditors are particularly concerned about fraud-both fraudulent financial reporting and misappropriation of assets. To identify fraud risks, the auditors have anaudit team discussion of potential fraud (as well as errors), make inquiries, perform analytical procedures, and consider the presence of fraud risk factors. The auditors react to fraud risks as they do to other risks of material misstatements, with an over all response or a modification of the nature, timing, and extent of audit procedures. Additionally, the auditors are required in all audits to perform procedures to address the risk of management override of internal control.

Question 6. The auditors should apply the materiality concept, which recognizes that some matters are important to the fair presentation of financial statements, while others arenot. Auditors arrive at a measure of materiality for planning purposes and disaggre gate it into tolerable misstatements for the various accounts. In evaluating findings, auditors also use materiality. While the materiality measures for both planning and evaluation include quantitative and qualitative considerations, the planning measure emphasizes quantitative considerations, while the evaluation measure emphasizes both quantitative and qualitative considerations.

Question 7. Auditors assess the risks of misstatement they have identified to design further audit procedures. Further audit procedures include both tests of controls and substantive procedures.