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Chapter 6

BUS 426 Chapter Notes - Chapter 6: Strategos, Internal Audit, Audit Risk


Department
Business Administration
Course Code
BUS 426
Professor
Craig Emby
Chapter
6

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Chapter 6
Client Acceptance and Planning the Audit
Planning the Audit
- According to CAS 300, the purpose of planning is to provide for the effective and efficient
conduct of an audit
o To minimize audit risk while performing an efficient audit
- Helps to keep costs reasonable
- Avoid misunderstandings with the client
- Enable the auditor to obtain sufficient appropriate audit evidence
Risk Concepts
- Risk of material misstatement
o The risk that the financial statements are materially misstated prior to audit
o This is a given that the auditor must assess (risk assessment phase)
- Acceptable audit risk
o A measure of how willing the auditor is to accept that the financial statements may be
materially misstated after the audit is completed and an unqualified opinion has been
issued (risk response phase)
Client Acceptance and Continuance
- Before accepting an engagement, the auditor should perform a thorough client investigation
o Business environment, the organization, and the people
- A successor auditor is required to communicate with the predecessor auditor to evaluate if any
reasons not to accept the engagement (RPC 302)
o Permission must be obtained from the client to communicate with the predecessor
auditor
- The predecessor auditor is required to respond to successor auditor (RPC 303)
Continuing Clients
- Existing clients should be evaluated annually to determine if there are any reasons to not
continue doing the audit
Accept client
and perform
initial audit
planning
Understand the
client's
business and
industry
Assess client
business risk
Perform
preliminary
analytical
procedures
Gather
information to
assess fraud
risks
Set materiality
and assess
acceptable
audit risk and
inherent risk
Understand
internal control
and assess
control risk
Develop overall
audit strategy
and audit
program
find more resources at oneclass.com
find more resources at oneclass.com
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