Explain the auditor‘s planning process when planning for an audit of a new client.

1. Consider the background to the clients business and ascertain any problem for that sector of the industry, which may affect his audit work.
2. Consider an outline plan of his audit including the extent to which he may wish to rely upon internal controls and the extent to which work can be allocated to interim or final audit stages.
3. Assess the effect of legislation or accounting practice on the financial statements of the client.
4. Review any management or interim accounts which the client may have preferred as these may indicate areas of concern in his audit.
5. Meet the senior management of the client to identify problem areas e.g. material variances between budgeted and actual results
6. Consider the timing of significant phases in the preparation of the financial statements e.g. dates of stock taking, balancing of personal ledgers, preparation of trial balance and draft accounts
7. Consider the extent to which the clients employees may be able to analyse and summarize the financial data and the relevance to his audit work carried out by the clients internal auditors.
8. Consider the need for expert advise
9. Determine the number and grade of audit staff to be allocated to each stage of the audit.
10. Consult members of the audit team to discuss any foreseeable problems. Often the partners will consult the manager who then becomes responsible for communication with other personnel used on that particular job.
11. A budget should be prepared allocating the time of each member or grade of the audit team. This budget should be used to control the time spent on that audit and any major variation investigated by the manager.
12. The client should be informed of the expected date of attendance by the auditor‘s staff and his agreement obtained.

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Wilfykil answered the question on February 21, 2019 at 05:16