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    Overview of The Audit Process

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    Overview of The Audit Process

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    Overview of the Audit Process

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    6 views2 pages

    Overview of The Audit Process

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    Overview of the Audit Process and Pre-Engagement

    Activities
    Overview of the Audit Process

    The audit process is a systematic approach to objectively obtaining and evaluating evidence regarding
    assertions about economic actions and events. The primary purpose is to ascertain the degree of
    correspondence between these assertions and established criteria, ultimately communicating the results
    to stakeholders. The audit process typically consists of several key phases:

    1. Planning: Establishing the overall audit strategy, including the audit plan and program. This
    involves understanding the client's business and industry to ensure the auditor's competence.

    2. Fieldwork: Gathering evidence through various methods such as interviews, observations, and
    document reviews. This phase focuses on assessing internal controls and identifying risks.

    3. Reporting: Compiling findings into a formal report that communicates the results of the audit,
    including any identified issues and recommendations for improvement.

    4. Follow-Up: Ensuring that the client addresses the issues raised in the audit report and
    implements recommended changes.

    Pre-Engagement Activities

    Pre-engagement activities are crucial for auditors to evaluate whether to accept a new client or continue
    with an existing one. These activities help minimize the risk of being associated with clients whose
    management may lack integrity. Key components of pre-engagement activities include:

    1. Acceptance of Engagement:

     Competence: Assessing whether the auditor has the necessary skills and knowledge to
    perform the audit.

     Independence: Evaluating any potential threats to the auditor's independence and


    objectivity, ensuring that adequate safeguards can be established.

     Client Integrity: Investigating the integrity of the prospective client’s management


    through inquiries with appropriate parties or communication with the predecessor
    auditor.

    2. Preliminary Knowledge:

     Gaining an understanding of the client's business and industry to determine if the


    auditor possesses the required competence for the engagement.

     Evaluating the auditability of the client's financial statements.

    3. Communication with Predecessor Auditor:

     Discussing reasons for the change in auditors, if applicable.


     Gathering information that may impact the integrity of management.

     Identifying any disagreements between the predecessor auditor and management


    regarding accounting principles or auditing procedures.

    4. Engagement Terms:

     Agreeing on the terms of the audit engagement, which should be documented in an


    engagement letter. This letter typically includes:

     Auditor’s acceptance of the engagement.

     Objectives and scope of the audit.

     Responsibilities of both the auditor and management.

     The financial reporting framework used.

     Arrangements concerning fees and billing.

    Citations:

    [1] https://www.studocu.com/ph/document/assumption-college/accountancy/overview-of-audit-
    process/14452879

    [2] https://internalaudit.rutgers.edu/audit-process

    [3] https://www.techtarget.com/searchcio/definition/strategic-management

    [4] https://www.studocu.com/ph/document/mary-the-queen-college/government-accounting/chapter-
    02-budget-process/10875130

    [5] https://pdfcoffee.com/chapter-2-the-budget-process-4-pdf-free.html

    [6] https://www.investopedia.com/financial-edge/0612/the-importance-of-strategic-planning.aspx

    [7] https://pdfcoffee.com/chapter-2-budget-process-pdf-free.html

    [8] https://en.wikipedia.org/wiki/Strategy

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