An audit arrangement along with planning provide specific guidelines and rules that the auditors must follow when conducting and directing the external audit. The external firms is responsible for ensuring that the company’s financial statements are prepared in accordance with the GAAP (Generally Accepted Accounting Principles) or IFRS (International Financing Reporting Standards); which in turn gives stakeholders piece of mind into the company’s business practices.
1. Outline the critical steps inherent in planning an audit and designing an effective audit program. Based upon the type of company selected, provide specific details of the actions that the company should undertake during planning and designing the audit program.
There are critical steps that have to be followed according to Arens, Elder, Beasely, and Hogan, authors of Auditing and Assurance Services. The below seven steps ensure that the
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numbers show solid margins and improving sales, which gives them a solid and growing foothold in the industry. “Analytical procedures consist of ‘evaluations of financial information through analysis of plausible relationships among both financial and non-financial data’ (ISA/HKSA 520(4)).” In simple terms, the analytical procedures is not only used to understand the financial data but for flagging and researching any inconsistences with-in the financials and/or the business unity. These procedures are planned and carried out close to the end of the audit; and in turn helps the auditor to come to a general conclusion about the financials.
3. Analyze the balance sheet and income statement of the company that you have selected, and outline your method for evidence collection which should include, but not be limited to, the type of evidence to collect and the manner in which you would determine the sufficiency of the