Audit Planning and Analytical Procedures(英文版)(ppt 57頁)

1、8 - 1Audit Planning andAnalytical ProceduresChapter 88 - 2PlanningThe work is to be adequately planned, andassistants, if any, are to be properly supervised.Acceptable audit risk the acceptability of giving the wrong audit opinion.Inherent risk the risk of material mistatements making it into the fi

2、nancial statements.8 - 3Planning an Audit and Designing an ApproachAccept client andperform initialaudit planningUnderstand theclients businessand industryAssess clientbusiness riskPerform preliminaryanalytical procedures8 - 4Planning an Audit and Designing an ApproachSet materiality, andassess acce

3、ptable auditrisk and inherent riskUnderstand internalcontrol and assesscontrol riskDevelop overallaudit plan andaudit program8 - 5Initial Audit PlanningShould the auditor accept a new client?Identify why the client wants or needs an audit.Obtain an understanding with the client.Select staff for the

4、engagement.8 - 6The Pre Engagement Arrangements:nClient acceptance and retentionnTalking with predecessornEngagement lettersnEngagement teamnTime budget8 - 7Evaluate the Acceptance or Retention of a Client.nObtain financial information- prepared by client, annual reports, SEC reports, reports to reg

5、ulatory agencies, and interim reports.nInquire to clients banker, legal council, underwriter and others.nContact predecessor auditor for disagreements with client, client integrity.nDetermine need for special skills or unusual risk related to client.nReview independence relationship to client.8 - 8T

6、alking with PredecessornThe successor auditor needs permission from the client to contact the predecessor to protect client confidentiality.nPredecessor can give valuable information about client integrity, significant issues, disagreements and reasons for auditor change (8K). nThe successor auditor

7、 will issue a report on the current year only. The prior years will be covered by reissuing the predecessors report.8 - 9Engagement lettersnHelp establish an understanding of the terms of the engagement, contract nAre not required but recommended.nHelps to avoid misunderstandings related to what the

8、 services include and feesnHelps avoid legal liability assertions based on failure to do work that the CPA may not have contemplated.8 - 10Engagement Letter ContentnThe objectives of the engagementnManagements responsibilitiesnThe auditors responsibilitiesnAny limitations of the engagementnSAS 83 re

9、quires these understandings to be documented in the working papers.8 - 11Full service audit team includesnEngagement partnernSecond audit partnernAudit managernSenior in chargenSpecialists as needed - statistical, computer, industrynTax partnernConsulting service partner8 - 12Second Audit PartnernTo

10、 have a review by a partner that is not directly responsible for keeping the client happy and therefor more objective.nThe second audit partner is required by the SEC for publicly traded companies8 - 13Time BudgetnEstimates time for audit activitiesnBasis for fee structurenBudget control for time sp

11、ent on audit8 - 14Audit program nLists the audit procedures believed necessary to obtain sufficient, competent audit evidence.n A written audit program is required by the standards.nTo prepare an audit program, the auditor needs an understanding of the clients business.8 - 15Understanding the client

12、s business includes:n Economic environment the business operates in.n Effect of national economic policies - deregulation.n The geographic location and its economy.n Tax and regulatory developments.n Industry characteristics.n Significant computer applications involving the accounting system.8 - 16

13、Ways to get an understanding of the clients business:nInquiry of companys management, internal auditors, directors and audit committee nReview of prior years audit working papers and inquiry of prior staff on audit to convey their understanding.nObservation of physical plant looking for possible ite

14、ms that may affect the financial statements such as obsolete inventory.nStudy of AICPA industry guides and periodicals for the industry like the Wall Street Journal.nAnalytical procedures on F/S8 - 17Understanding of the Clients Business and IndustryUnderstand Clients Business and Industry Industry

15、and External EnvironmentBusiness Operations and ProcessesManagement and GovernanceObjectives and StrategiesMeasurement and Performance8 - 18Industry and External EnvironmentWhat are some reasons for obtaining an understanding of the clients industry and external environment?Risks associated with spe

16、cific industriesInherent risks common to all clients in certain industriesUnique accounting requirements8 - 19Business Operationsand ProcessesFactors the auditor should understand: major sources of revenue sources of revenue key customers and suppliers sources of financing information about related

17、parties ability to obtain financing8 - 20Management and GovernanceManagement establishes the strategies andprocesses followed by the clients business.Governance includes the clients organizationalstructure, as well as the activities of the boardof directors and the audit committee.Corporate charter

18、and bylawsMinutes of meetings8 - 21Client Objectivesand StrategiesStrategies are approaches followed by theentity to achieve organizational objectives.Auditors should understand client objectives.FinancialreportingreliabilityEffectivenessand efficiencyof operationsCompliancewith laws andregulations8

19、 - 22Obtaining the financial statements.n The financial statements are managements responsibility and are considered managements assertions about the economic actions and events.nProduced from clients accounting records and trial balance. 8 - 23Trial BalancenTies to financial statementsnRepresents m

20、anagements assertionsnUsed to perform analyticsnUsed to organize the audit procedures8 - 24Summary of Planning the AuditnBackground and understanding of ClientnRetain copies of financial statementsnAnalyze financial statements (analytical procedures)nTie trial balance to F/SnOrganize trial balance i

21、nto cycles for audit procedures8 - 25Assess Client Business RiskClient business risk is the risk that theclient will fail to achieve its objectives.What is the auditors primary concern? material misstatement of the financialstatements due to client business risk8 - 26Other Planning IssuesnMaterialit

22、y- effectiveness and efficiencynFirst Time Audits beginning balancesnInternal AuditorsnInternal control evaluationnPerformance of procedures nAuditor still responsible for all work8 - 27Planning Issues cont.nRelated party evidencenPotentially biased and self-serving nShould raise the auditors level

23、of professional skepticismnSpecialistsnShould be independent of clientnAuditor should understand assumptions8 - 28Planning MemonSummarizes planning materiality and risk analysis inherent and control risknReview notes from analytical proceduresnReview of client acceptance/retentionnSpecialist needsnS

24、taff assignments and schedulesnComputer system controlsnUse of internal auditornIdentification of unusual accounting issuesnSchedule of information client is providing8 - 29Planning the audit with computers nExtent to which computers are used nComplexity of computer operations complex integrated or

25、simple applicationsnOrganizational structure of computer processing -central vs. decentralized or servicenAvailability of datanUse of CAATsnNeed for specialized skills8 - 30Analytical ProceduresAnalytical procedures use comparisons andrelationships to assess whether accountbalances or other data app

26、ear reasonable.SAS 56 emphasizes the expectationsdeveloped by the auditor.8 - 31Preliminary Analytical ProceduresComparison of client ratios to industryor competitor benchmarks provides anindication of the companys performance.Analytical procedures are also an importantpart of testing throughout the

27、 audit.8 - 32Examples of Planning Analytical ProceduresClientIndustryShort-Term Debt-Paying AbilityCurrent ratioLiquidity Activity RatioInventory turnoverAbility to Meet Long-Term ObligationsDebt to equityProfitabilityReturn on assets3.865.203.465.201.732.510.090.09Selected Ratios8 - 33Analytical Pr

28、ocedures UsesnCornerstone of error detection nRequired in the planning stage and at final review.nOptional for evidence gathering stage.nDiscovers errors because most financial data has some relationship to other data and the review will detect unusual occurrences.8 - 34 The patterns for overstateme

29、nts and understatements nLiabilities and expenses are areas for understatementnAssets and revenues are areas for overstatementnAudits should be planned to take these patterns into consideration8 - 35Timing and Purpose of Analytical Procedures(Required)Planning PhasePurposeUnderstand clientsindustry

30、and businessAssess going concernIndicate possible misstatements(attention directing)Reduce detailed testsPrimary purposeSecondary purposePrimary purposeSecondary purpose8 - 36Timing and Purpose of Analytical ProceduresTestingPhasePurposeUnderstand clientsindustry and businessAssess going concernIndi

31、cate possible misstatements(attention directing)Reduce detailed testsSecondary purposePrimary purpose8 - 37Timing and Purpose of Analytical Procedures(Required)Completion PhasePurposeUnderstand clientsindustry and businessAccess going concernIndicate possible misstatements(attention directing)Reduce

32、 detailed testsSecondary purposePrimary purpose8 - 38Five Major Types ofAnalytical Procedures1.Compare client and industry data.2.Compare client data with similar prior-period data.3.Compare client data with client-determined expected results.4.Compare client data with auditor-determined expected re

33、sults.5.Compare client data with expected results, using nonfinancial data.8 - 39Compare Clientand Industry Data Client Industry2002200120022001Inventory turnover 3.4 3.5 3.9 3.4Gross margin percent26.3%26.4%27.3%26.2%8 - 40Compare Client Data With Similar Prior-period Data2002 2001 (000,000) % of (

34、000,000) % of Preliminary Net Sales Audited Net SalesNet sales143100131100Cost of goods sold 103 72 95 72Gross profit 40 28 36 28S & A 32 22 30 23Other 4 3 3 3Net income 4 3 3 28 - 41Common Financial RatiosShort-term debt-paying abilityLiquidity activity ratiosAbility to meet long-term debt obli

35、gationsProfitability ratios8 - 42Short-termDebt-paying AbilityCash ratio:(Cash + Marketable securities) Current liabilitiesQuick ratio:(Cash + Marketable securities+ Net accounts receivable) Current liabilitiesCurrent ratio:Current assets Current liabilities8 - 43Liquidity Activity RatiosAccounts re

36、ceivable turnover:Net sales Average gross receivables Days to collect receivables:365 days Accounts receivable turnoverInventory turnover:Cost of goods sold Average inventory8 - 44Liquidity Activity RatiosDays to sell inventory:365 days inventory turnover8 - 45Ability to Meet Long-term Debt Obligati

37、onDebt to equity:Total liabilities Total equityTimes interest earned:Operating income Interest expense8 - 46Additional Analytical ProceduresReview the following documents:1. Corporate charter2. Corporate bylaws3. Partnership agreements4. Minutes of meeting with Board of Directors and executive commi

38、ttees - Finance and Audit.5. New contracts and leases.8 - 47Board of Directors minutes include:n Authorization of salaries for officers as well as other perks. nBusiness operations - approval of contracts, declaration of dividends, approval of property acquisitions and sales, discussions of mergers

39、etc. 8 - 48Steps to apply comparisons:1. Obtain unaudited financial statements and prepare common size statements and ratios.2. Study the data and evaluate relationships.3. Ask relevant questions about questionable relationships.4. Obtain or prepare a cash flow to evaluate going concern issues.8 - 49Horizontal and Vertical AnalysisnHorizontal analysis compare other years to the current for changesnVertical analysis compares prior year to cur