ACCEPTING AUDIT APPOINTMENT AND AUDIT PLANNING by 9c3iWdTt

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									ACCEPTING AUDIT APPOINTMENT
    AND AUDIT PLANNING
  Phases of Audit Engagement
1. Accepting the audit
   appointment
2. Planning the audit
3. Performing audit tests, consist
   of test of controls and
   substantive tests
4. Reporting the findings
 Things Need to Be Considered
1. Accept or decline the appointment
2. Continue or withdraw as an auditor
   appointed (for the recurring
   appointment).
3. Ability to comply with auditing
   standard.

The decision usually is made
between 6-9 month before the end of
accounting period.
 Steps in Accepting Audit Appointment

From Auditor Point of Views
1. Access competence to perform
   the audit.
2. Evaluate independence
3. Make the decision to accept or
   decline the appointment.
4. Prepare the engagement letter.
 Steps in Accepting Audit Appointment

From Client Point of Views:
1. Evaluate the integrity of
   management
2. Evaluate audit-ability of the
   financial statements
3. Identify special circumstances
   and unusual risk.
Evaluating the Integrity of Management
 1. Communicate with the predecessor auditor,
    predecessor auditor is considered essential
    information for the successor auditor, the
    communication involve:
    (a) the integrity of management,
    (b) disagreements with management about
         accounting principles and auditing
         procedures,
Evaluating the Integrity of Management
    (c) the predecessor’s understanding
        concerning the reasons for a change in
        auditors.

 2. Make inquiries of other third parties such as
    attorneys, bankers, and others in the financial
    and business community who had business
    relationships with the prospective client.
 3. Review previous experience with existing
    clients.
Identifying Special Circumstances and Unusual Risks

 1.   Identify intended users of audited
      statements. The auditor should consider
      whether a common set of audited
      statements will meet the needs of intended
      users or whether any special reports will be
      required. Added reporting requirements
      may mean additional competency
      requirements, add to audit costs, and
      broaden the auditor’s legal liability
      exposure.
 2.   Assess prospective client’s legal and
      financial stability.
 3.   Evaluate entity’s auditability.
Assessing Competence to Perform the Audit

 1. Identify the audit team, the
    objective is to see whether the
    technical expertise and
    experience levels of the audit
    team match with the professional
    staffing needs of the engagement.
 2. Consider need for consultation
    and the use of specialists.
   Evaluating Independence

Before deciding to accept the
audit engagement, must be
evaluated on a situation that
could impair the independence of
auditors.
Determine Ability to Use Due Care
1. Assess timing of appointment
2. Consider the scheduling of field
   work
3. Consider the availability of audit
   team.
Preparing the Engagement Letter

Engagement letter is a legal contract
between the auditor and the client, it
is clearly stating the nature of
services to be performed and the
responsibilities of the auditor. Such
letters may help the auditor to avoid
becoming involved in litigation.
Preparing the Engagement Letter
1. Engagement letter is a legal contract
   between the auditor and the client,
   it is clearly stating the nature of
   services to be performed and the
   responsibilities of the auditor. Such
   letters may help the auditor to avoid
   becoming involved in litigation.
2. Engagement letter should be prepared
   by auditor, and then asking approval
   signature to the client.
  Example of Engagement Letter
TONNY & ASS. CERTIFIED PUBLIC ACCOUNTANTS
Mr. Tonny Indra, President          March 15, 2002
Bungaran Jaya, Tbk.
Jln. Kenanga 12
Yogyakarta

Dear Mr. Tonny,

This will confirm our understanding of the arrangements
for our audit of the financial statements of Bungaran Jaya,
Tbk., for the year ending December 31, 2002.
 Example of Engagement Letter
We will audit the company’s balance sheet at
December 31, 2002, and the related
statements of income, retained earnings, and
cash flows for the year then ended, for the
purpose of expressing an opinion on them. Our
audit will be in accordance with generally
accepted auditing standards, which require
that we plan and perform the audit to obtain
reasonable assurance that the financial
statements are not materially misstated.
 Example of Engagement Letter
Our audit will include examining, on a test basis,
evidence supporting the amounts and disclosures in
the financial statements. We will also assess the
accounting principles used and significant estimates
made by management, and evaluate the overall
financial statement presentation.

Because of the characteristics irregularities, a
properly designed and executed audit may not detect
all material irregularities. We will, of course, report to
you anything that appears to us during our audit to be
unusual or abnormal.
 Example of Engagement Letter
We remind you that the preparation of the
Company’s financial statements, including adequate
disclosure, is the responsibility of the company’s
management. This include the selection and
application of accounting policies, and the
maintenance of an internal control structure that
provides reasonable assurance of achieving Company
objectives regarding the effectiveness and efficiency
of operations, the safeguarding of assets, the
reliability of financial reporting, and compliance with
applicable laws and regulations. As part of our audit
process, we will request from management certain
written representations concerning information
provided to us in connection with the audit.
 Example of Engagement Letter
Our fee for this audit will be at our regular per
diem rates, plus travel and other costs. Invoices
will be rendered every two weeks and are
payable on presentation. We are pleased to
have this opportunity to serve you. If this letter
correctly expresses your understanding, please
sign the enclosed copy and return it to us.
 Example of Engagement Letter
Very truly yours,
Rudi Darmawan
Rudi Darmawan
Partner

APPROVED:

By: _______________________

Date: _____________________
          Planning the Audit
1. The first standard field work states: The work is
   to be adequately planned, and assistants, if
   any, are to be properly supervised
2. Audit planning involves the development of an
   overall strategy or game plan for the expected
   conduct and scope of the audit.
3. The auditor should plan the audit with an
   attitude of professional skepticism about such
   matters as the integrity of management, errors
   and irregularities, and illegal act.
4. The extent of planning required will vary with
   the size and complexity of the client, and the
   auditor’s knowledge of and experience with
   the client.
        Planning the Audit

• Supervision involves directing the
  assistants on the audit team.
• The extent of supervision required
  depends on the qualifications of the
  assistants performing the work, thus,
  more supervision should be made when
  several members of the audit team are
  inexperienced than when they are all
  experienced.
         Audit Planning Steps

1. Understanding client industry and business
2. Perform analytical procedures
3. Make preliminary judgment about
   materiality level
4. Consider audit risk
5. Develop preliminary audit strategies for
   significant assertion
6. Obtain understanding of client’s ICS
Thank You

								
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