Audit planning,procedures and evidence

Audit engagements
•The engagement letter documents and confirms the auditor’s acceptance of the appointment, the objective and scope of the audit, the extent of the auditor’s responsibilities to the client and the form of any report.

Terms of audit engagements
•Principal contents
-Objective of the audit
-Management’s responsibility for the financial statements
-Scope of audit
-Form of report
-The fact that because of the test nature, and other inherent limitation of any accounting and internal control system, there is an unavoidable risk that even some material misstatement may remain undiscovered.
-Unrestricted access to whatever records

Audit Objective
•Is to enable the auditors to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.
Financial Reporting Framework
•The financial statements need to be prepared in accordance with one, or a combination of:

- International Accounting Standards;
-National Accounting Standards; and
-Another authoritative and comprehensive financial reporting framework which has been designed for use in financial reporting and is identified in the financial statements.

General Principles
•Code of Ethics –Independence, integrity, objectivity, professional competence and due care, confidentiality, professional behavior, technical standards
•An audit in accordance with ISAs
•Attitude of professional skepticism, recognising that circumstance may exist that cause the financial statements to be materially misstated.

Essential Audit Objectives
•Completeness-no unrecorded assets, liabilities, transactions or events, or undisclosed items.

•Occurence- a transaction or event took place which pertains to the entity during the period.

•Existence-an asset or liability exists at a given date

•Cut-off-recorded at the proper amount and proper period.

•Valuation-recorded at an appropriate carrying value

•Right and obligations-represents asset or liability to the entity

•Presentation and disclosure-disclosed, classified and described in accordance with applicable financial reporting framework.

Audit Procedures

-Test of control
-Substantive test
-Test of details of transactions and balance; and
-analytical procedures
- Method:
-Inspection-e.g vouching
-Observation-e.g stock take
-Inquiry and confirmation
-Computation
-Analytical review –significant variant/ratio

Audit EVIDENCE

•Definition
-is the information obtained by the auditor in arriving at the conclusions on which the audit opinion is based. So, it should be properly documented.

•Obtaining evidence
The auditor should use professional judgment to assess audit risk and design audit procedures to ensure the risk is reduced to an acceptably low level.