Question

suppose your firm has assigned a task to conduct audit of M/S & co. a public limited company for the year 2018-2019 draft a qualified report based on assumptions

Answer 1

Answer:

Possible sources of obtaining information in respect of client’s business include:

Prior year’s working papers.

Predecessor auditor’s working papers.

Articles and memorandum of association.

Minutes of directors and shareholders.

Significant contracts such as loan agreements, leases and labor agreements.

Trade and industry journals relating to client’s industry.

Tour the factory and offices of client.

Discussion of audit matters with internal auditor.

Inquires from management.

Management accounts.

Cash flows, budgets, and other management reports.

Discussions with client’s lawyers.

What is planning memorandum and what information it should contain?

Audit planning memorandum sets out general strategy. It is necessary that not only audit be properly planned, but evidence should also be placed on the file that adequate planning has been carried out.

The form and contents of audit planing memorandum will vary for each client but they would generally include the following matters:

Problems experienced in previous years’ audit.

Client’s use of computer system.

Staffing requirements.

Consideration of use of the work of another auditor

Identification of locations to be examined

Intended audit approach

Agreement on dates to perform test of control.

Assistance to be obtained by the client.

Certificates and letter of representation to be obtained from the client.

Time budgets

Analytical reviews

Knowledge of the business

Accounting and internal control systems

Audit risk

Immateriality level

Possibility that the going concern assumption may not be appropriate

Existence of related parties

Involvement of other auditor

Involvement of experts

Number of locations

Effect of new accounting and auditing pronouncements

Accounting policies adopted by the entity

Time tables and dead lines for audit completion

Major systems and organizational changes during the year

Timings for attendance of physical count.

Timings for confirmations of receivable and payable

Arrangements with joint auditors.

List down schedules that you would require the client to repair before starting final audit.