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CHAPTER 3 (1) ICAEW CFAB ASSURANCE, overall audit strategy (detailed audit…

- - - - key contents
        
        understanding the entity's environment
        
        general economic factors and industry conditions
        
        important characteristics of the client
        
        business
        
        principal business strategies
        
        financial performance
        
        reporting requirements
        
        the general level of competence of management
        
        Understanding the entity and its environment
        
        Nature of the entity
        
        Financing: shares or loans?
        
        Financial reporting: accounting principles; accounting issues; FS presentation and disclosure
        
        Business operations: nature of revenue sources; products & markets; operations; facilities; key customers, suppliers; employment; R & D
        
        Objectives and strategies and relating business risks
        
        Effects of implementing a strategy, particularly those that will lead to new accounting requirements
        
        Measurement and review of the entity's financial performance
        
        Key ratio/ operating statistics; KPI; budgets; competitor analysis; period-on-period financing performance
        
        Internal control
        
        Control activities
        
        Monitoring of controls
        
        Internal audit
        
        The control environment
        
        Entitty's risk assessment process
        
        Information system including the related business processes relevant to financial reporting and communication
        
        Industry, regulatory and other external factors
        
        General level of economic activity
        
        The market and competition; cyclical or seasonal activity; technology
        
        Industry specific practices; legislation and regulation; taxation; government policies, environmental requirements
        
        understanding the accounting and internal control systems
        
        accounting policies adopted by the entity and changes in those policies
        
        the effect of new accounting or auditing pronouncements
        
        auditors' accumulative knowledge of the accounting and internal control systems
        
        risk and materiality
        
        expected assessments of risks of fraud or error and identification of significant audit areas
        
        setting of materiality for audit planning purposes
        
        possibility of material misstatements, including the experience of past periods, or fraud
        
        identification of complex accounting areas including those involving estimates
        
        consequent nature, timing and extent of precedures
        
        possible change of emphasis on specific audit areas
        
        the effect of information technology on the audit
        
        coordination, direction, supervision and review
        
        the number of locations
        
        staffing requirements
        
        need to attend client premises for inventory count or other year-end procedures
        
        other matters
    - - identifying the relevant characteristics of the engagement, such as the reporting framework used as this will set the scope for the engagement
      - discovering key dates for reporting and other communications
      - determining materiality, preliminary risk assessment, whether internal controls are to be tested
      - consideration of when work is to be carried out, for example before or after the year end
      - consideration of "team members" available