Chapter 6 Planning, Knowledge of the Business and Evaluating Business Risk
Client Acceptance
Acceptance and continuance evaluation procedures
Communication with previous auditor
Engagement Letters
Audit Planning
Major steps in the audit process
Developing an Overall Audit Strategy
Range of audit strategies
Lower assessed level of control risk approach
Predominantly substantive approach
Impact of business risk assessment on audit strategy
Preparing detailed audit programs
Purpose of detailed audit programs
Contents of audit program
Assigning and Scheduling Audit Staff
Knowledge of the Client’s Business
Procedures for obtaining an understanding of a client’s business
Steps in planning the audit
Knowledge obtained by the auditor
Business Risk
The relationship between client business risk and the global, local and internal environments
Assessing business risk
Assessing business risk (cont.)
Overview of the audit risk standards
Techniques for assessing business risk – SWOT analysis
Techniques for assessing business risk (cont.) – PEST analysis
Techniques for assessing business risk (cont.) – Value-chain approach
Response to assessed risks
Performing further audit procedures at the assertion level
Analytical Procedures
Analytical procedures at the planning stage
Analytical procedures used in planning the audit
Analytical procedures most commonly used in planning
Ratios commonly used at the planning stage
Common-size statements
Trend statements
Reliability of data used in analytical procedures
Plausibility, predictability and precision of analytical relationships
Plausibility, predictability and precision of analytical relationships (cont.)
Examination of significant fluctuations of analytical procedures