Chapter 8 – Audit Planning and Analytical Procedures

Audit Planning andAnalytical ProceduresChapter 8©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 1Learning Objective 1Discuss why adequate auditplanning is essential.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 2Three Main Reasons for Planning1. To obtain sufficient competent evidencefor the circumstances2. To help keep audit costs reasonable3. To avoid misunderstanding with the client©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 3Risk Terms Acceptable audit risk Inherent risk©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 4Planning an Audit and Designing an Audit ApproachAccept client and perform initial audit planning.Understand the client’s business and industry.Assess client business risk.Perform preliminary analytical procedures.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 5Planning an Audit and Designing an Audit ApproachSet materiality and assess acceptable audit riskand inherent risk.Understand internal control and assess control risk.Gather information to assess fraud risks.Develop overall audit plan and audit program.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 - 6Learning Objective 2Make client acceptance decisionsand perform initial audit planning.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 8 ...