This document discusses statutory audit requirements and the audit planning process. It begins by outlining the purpose of statutory audits based on company law, which requires all companies to prepare audited financial reports and appoint an external auditor.
It then discusses the auditor's responsibilities with respect to changes in the audit engagement. The auditor should not agree to changes without reasonable justification and must document any changes in an engagement letter.
The document also explains the purpose and contents of the engagement letter, which makes the agreement between the auditor and client clear and avoids misunderstandings.
Finally, it covers audit planning, which involves considering factors like the client's business, accounting systems, risks, materiality, procedures, and coordination to perform
3. 3.1.1 Determine the purpose of statutory
engagement
3.1.2 Explain the nature of acceptance
of engagement
3.1.3 Discuss the changes in the
engagement
4. Based on campany act 1965 :
- all company must prepared an audited
report
- Every company must appointed an
external auditor
- the company must appointed a
qualified external auditor for their
company.
5. Accept client and perform
initial audit planning
Understand the client’s
business and industry
Assess client business risk
Perform preliminary
analytical procedures
6. Set materiality and assess
acceptable audit risk and
inherent risk
Understanding internal control
and assess control risk
Gather information to assess
fraud risks
Develop overall audit plan and
audit program
7.
The auditor should not agree to a change
in the terms of the audit engagement when
no reasonable justification for doing so
exists.
If, prior to completing the audit
engagement, the auditor is requested to
change the audit engagement to an
engagement for which the auditor obtains
a lower level of assurance, the auditor
should determine whether reasonable
justification for doing so exists.
8.
If the terms of the audit engagement are
changed, the auditor and management
should agree on and document the new
terms of the engagement in an
engagement letter or other suitable form
of written agreement.
If the auditor concludes that no
reasonable justification for a change of
the terms of the audit engagement exists
and is not permitted by management to
continue the original audit engagement,
the auditor should ;
9.
a. withdraw from the audit engagement
when possible under applicable law or
regulation,
b. communicate the circumstances to
those charged with governance,
c. determine whether any obligation,
either legal, contractual, or otherwise,
exists to report the circumstances to
other parties, such as owners, or
regulators.
10.
3.2.1 Describe the purpose of the
engagement letter
3.2.2 Discuss the content of the letter
11. To make agreement between the CA
firm & the client for the conduct of the
audit & related services
To avoid misunderstanding
To informing the responsibility for both
side
To informing that the auditor cannot
guarantee that all acts of fraud will be
discovered
12. Objective of the engagement
Responsibilities of the auditor and
management
Limitations and scope of engagement
Timing of the engagement
Agreement of fees
13. 3.3.1 Define the meaning of audit
planning
3.3.2 Describe the audit planning
objectives
3.3.3 Justify the factors to be considered
when planning the audit
14.
ISA 300 states that the auditor should
plan the audit work so that the audit will
performed in an effective manner.
Reason;
› To obtain sufficient competent evidence
› To help keep audit costs reasonable
› To avoid misunderstanding
15. Appropriate
attention is devoted to the
different areas of the audit.
Potential problems are identified.
Work is completed expeditiously.
The proper tasks are assigned to the
members of the audit team and, if
outside experts are engaged, that their
work is properly coordinated.
16. Knowing of the business
Understanding the accounting and
internal control systems
Risk and materiality
Nature, timing and extent of procedures
Coordination, direction, supervision and
review
Other related matters such as ‘going
concern assumption, existence of related
parties and other statutory responsibilities.