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Galleria mappe mentale Chapter 2 Audit Plan
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Chapter 2 Audit Plan
CPA Audit, Chapter 2 Audit Plan Mind Map, aims to ensure that the audit work is carried out in an orderly and efficient manner while reducing audit risks.
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Chapter 2 Audit Plan
Audit business
Preliminary audit plan→Audit plan→Risk assessment→Risk response→Issue report
Audit plans, risk assessments, and risk responses are dynamically adjusted throughout
Preliminary business activities
content
Consider the other person
quality management procedures
Look at yourself
independence
Competence
reach agreement
Sign an audit engagement letter
A series of work before signing the contract are preliminary business activities, ending with the signing of the audit engagement letter.
Audit prerequisites
Basics of Financial Statement Preparation
Management recognizes and understands the three responsibilities
Responsibility for preparation
Responsibility for internal control
Responsibility for conditions
"All"√
Audit engagement letter
Basic content (should)
Prerequisites for auditing
Responsibility of the parties
delivery of results
Intrinsic Outcomes: Objectives and Scope of Financial Report Auditing
External outcomes: expected form and content of audit reports
Delivery request
component
Need to decide/can
Continuous audit
Need to decide/can
Audit business changes
Reasonable
environmental change
There is a misunderstanding
change
Audit→Review
Should not be mentioned (to avoid misunderstandings)
Audit → Agreed Procedure
can be mentioned
Audit→Other related services
Should not be mentioned (not relevant)
overall audit strategy (importance)
Determine the audit scope (scope)
Guidelines and reporting requirements
Basics of Financial Reporting Preparation
Industry-specific reporting requirements
Individual and group audit requirements
Number and location of components
The nature of the group’s composition determines the preparation of consolidated financial statements
Component audit scope
The nature of the operating segments to be audited, including whether specialized knowledge is required
Statutory audit requirements for personal reports
Audit evidence requirements
Foreign currency conversion
Availability and trustworthiness of internal audit work
Service agencies used by the audited unit
information Technology
Review of interim financial information
Evidence obtained from previous audit work
Coordination of auditee personnel and availability of relevant data
Planned reporting objectives, timing, and nature of communications required (plan)
Timetable for external reporting, including intermediate and final stages
Communication with management and those charged with governance
Discuss the nature, timing and scope of the audit work
The type and timing of the proposed report, and other communication matters
Communicate with management
Development of audit work in audit business
Communication with component committees
Communication among project team members
Anticipate the need to communicate with third parties
Determine the direction of the audit (direction)
Impact of preliminary risk identification
importance
Audit areas with higher risk of material misstatement
The impact of significant risks at the financial reporting level
Project team personnel selection and division of labor
project budget
The need for professional skepticism
Impact of internal controls
Evaluation results of internal controls in previous audits
Evidence that management designed and implemented internal controls
Determine whether to rely on internal controls based on transaction size and audit efficiency
The importance of internal control
Disclosure process required by the basis of financial reporting preparation
Impact of major changes
Major impacts on the operations of the audited unit: information technology, business processes, changes in key management personnel, acquisitions, mergers and divisions, etc.
Major industry developments
Changes in accounting standards and accounting systems
Other major changes
Plan and allocate audit resources (people)
Resources allocated to specific audit areas
How much resources to allocate to specific areas
When to deploy these resources
How to manage, direct, and supervise these resources
Specific audit plan
risk assessment process
Further audit procedures
overall plan
Comprehensive program
substantive plan
Specific procedures
Control testing
Substantive proceedings
Detailed testing
substantive analysis
Other audit procedures
importance
concept
Misstatements, individually or in aggregate, may affect the economic decisions of users of financial statements → Material misstatements
Materiality is affected by both the amount and nature of the misstatement
Consider the whole, not individual users of financial statements
Overall financial statement materiality
Influence economic decisions individually or in aggregate Publication of audit opinion
Overall importance of financial report = Baseline * Percentage
benchmark
Considerations
financial statement elements
Are there any items that financial report users are particularly concerned about?
The nature, life cycle, industry and economic environment of the audited entity
The audit unit’s ownership structure and financing methods
Relative Volatility of the Benchmark
smooth/replace
Percentage 1%-5%
Considerations
Whether it is a listed company or public interest entity
Scope of financial report users
The audit unit’s financing structure or whether it has large external investments
Are financial report users particularly sensitive to benchmark data?
quantitative and qualitative
Amount and impact
Does not take into account the inherent uncertainties associated with specific projects
one
The materiality of specific transaction categories, account balances, or disclosures
Considerations
Whether laws, regulations or the applicable basis for preparing financial statements affect financial statement users’ expectations regarding the measurement or disclosure of specific items
Key disclosures related to the industry in which the audited entity operates
Whether users of financial statements are particularly concerned about specific aspects of the business that are separately disclosed in the financial statements
Less than overall importance
one or more
The importance of practical implementation
Overall Importance* (50%-75%)
Considerations
Understanding of the audited unit
The nature and scope of misstatements identified in previous audit work
Expectations for misstatements in the current period based on misstatements identified in previous periods
Practical operation
higher (loose)
Continuous audit projects, with fewer audit adjustments in previous years
Overall risk is low to moderate
Audit experience from previous periods indicates that internal controls are operating effectively
lower (strict)
Accepting a commission for the first time
Continuous audit projects, with many audit adjustments in previous years
Overall risk is higher
The existence or expected existence of internal control deficiencies worthy of attention
Practical application
Usually select financial statement items that exceed actual implementation significance
It does not mean that all financial statement items below will not be subject to further audit procedures
Consider aggregation
Underestimating risk
Fraud risk
one or more
The critical value of an obviously small misstatement
Not cumulative
Obviously minor does not mean not significant
If you are not sure, you cannot consider it to be obviously small.
Overall importance* (3%-5%), usually no more than 10%
Reclassification misstatements may have higher thresholds
The misstatement caused by fraud is below the threshold of obviously minor misstatement
Not cumulative Implement further audit procedures
Considerations
Misstatements identified in previous years
Assessment results of risks of material misstatement
Management and Governance Expectations
Regulator or investor expectations
Modify importance
What's New - Significant changes in circumstances during the audit
New Information - Get new information
New circumstances - changes in the understanding of the audited entity through the implementation of further audit procedures
Misstatement
Source: Fraud or error
type
misstatement of fact
Judgment misstatement
Differences in Judgment in Accounting Estimates
Differences in Judgment in Selection and Application of Accounting Policies
inferred misstatement
The overall strategy guides the development of specific plans The two influence each other