Management and Organizational Studies 3363A/B Chapter Notes - Chapter 6: Audit Risk, Engagement Letter, Financial Statement

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3363A/B
• Professor: Michelle Loveland

Document Summary

Three reasons why the auditor should plan engagements properly (audit planning): to enable the auditor to obtain sufficient appropriate evidence, to help keep audit cost reasonable, to avoid misunderstandings with the client. Assess clients integrity: consider, clients reasons for audit, clients attitudes to risk exposure, clients compliance with principles of professional ethics. Perform independence threat analysis: related to independence of auditor, threats include, self-interest, advocacy, self-review, familiarity, intimidation. Prepare and obtain engagement letter (terms of engagement: engagement letter a written agreement between the public accounting firm and the client as to the terms of the engagement for the conduct of the audit. Includes terms of cost, deadlines, assistance to be provided by client. Develop overall audit strategy: must have competent staff available and having access to specialists (quality control) Note should also communicate with predecessor auditor to help determine whether or not to accept the engagement (are there any reasons for not continuing the audit?)