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Auditor's steps necessary to Plan/Start the Audit
Engagement
[Submitted by CA. Sachin Gupta,
Delhi]
November 15, 2007
- Obtaining an understanding of the entity's business and the industry
in which it operates.
- Inquiries concerning the entity's accounting principles, policies
and practices.
- Inquiries concerning the entity's procedures for recording,
classifying and summarising transactions, accumulating information for
disclosure in the financial statements and preparing financial
statements.
- Inquiries concerning all material assertions in the financial
statements.
- Analytical procedures designed to identify relationships and
individual items that appear unusual. Such procedures would include:
- Comparison of the financial statements with statements for prior
periods.
- Comparison of the financial statements with anticipated results
and financial position.
- Study of the relationships of the elements of the financial
statements that would be expected to conform to a predictable pattern
based on the entity's experience or industry norm.
In applying these procedures, the auditor would consider the types of
matters that required accounting adjustments in prior periods.
- Inquiries concerning actions taken at meetings of shareholders, the
board of directors, committees of the board of directors and other
meetings that may affect the financial statements.
- Reading the financial statements to consider, on the basis of
information coming to the auditor's attention, whether the financial
statements appear to conform to the basis of accounting indicated.
- Obtaining reports from other auditors, if any and if considered
necessary, who have been engaged to audit or review the financial
statements of components of the entity.
- Inquiries of persons having responsibility for financial and
accounting matters concerning, for example:
- Whether all transactions have been recorded.
- Whether the financial statements have been prepared in accordance
with the basis of accounting policies indicated.
- Changes in the entity's business activities and accounting
principles, policies and practices.
- Matters as to which questions have arisen in the course of
applying the foregoing procedures.
- Obtaining written representations from management when considered
appropriate.
The list is not exhaustive, nor is it intended that all the
procedures suggested apply to every engagement.
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