Audit planning Essay Example | Topics and Well Written Essays - 1250 words

Audit planning - Essay Example Audit Planning always required smooth and successful transition schedule and it must be carefully analysed.We will complete this audit in several simple stages; buy using these stages our aim will be to better monitor the audit process and provide recommendations for its improvement. Our key steps will be: 1. Establishing priority areas: Here we will identify the critical business processes that need to be audited, such as; bad debts, issue of pre paid expenses and payments owes by other businesses, and expenses that are occurred due to cancelling the balance of invoices not received in previous years. Here we will collect all the data required for audit and the costs involved doing this audit in such areas. Here our objective is to find how we can better control the costs and minimize the debts. 2. Monitoring and Continuous Audit Rules Here we will consider all the accounting and internal rules adapted by the company and how these rules applied to each area and are company following these rules and making sure none of them are being violated. Like which ISA is applied to the auditing area. 3. Configuring Audit Parameters Here auditor will consider several parameters like the cost benefits of error detection and these parameters can be audit and management follow-up activities, etc. Here auditors can perform stratification of audited data and divide them into sub-groups; this will allow them to monitor the activity far better. 4. Following Up Follow up is another parameter but its more focused it will allow us to look into errors and risks more deeply and will set the alarms and the data which is purely educational where no other source present than it will benefit the auditor to establish grounds and there is no source available for evaluation. 5. Communicating Results Now, it is time to discuss the results and outcomes with the concern persons or person. Make sure you present your data in easy to understand and friendly manner, support it with pictures and ch arts. Like in our scenario we will present the data to senior auditor and help them in the whole process. Requirement: Determine both areas of risk and areas of control (justify and explain. Identify weakness and potential risks) In modern world risks and weaknesses study is very essential for businesses and in almost every area of business. (Weiss, 2010) The one of the major weakness is that company has not owned any place they are working at a place which is taken from council and they are on lease. This can be a great threat as well if council asked them to release the place on short notice. Company’s expenses are very high and increased significantly as compare to last year. One other weakness is that company balance is very high and company work on credit and their bad debts are very high. Many receivables are cancelled too. The one of the major issues are that health department fines are also high. One of the major threats is that council can cancel the lease since high amounts of lease are not paid and due, health department fines are very high and mat be one reason council can cancel their permit. Requirement: Apply analytical procedures in order to compare accounts with most significant variations between periods (justify and explain why you consider having potential inherent risk) Analytical technique is always needed when auditor is measuring significant variations (Rittenberg, Johnstone and Gramling, 2009). In the year 2009 the balance for current assets were 6,819,248.36 where this were reduced to 6,135,435.45 almost the variance of -683,812.91 or almost decreased to -10.03. The assets decreased almost 10% which is very risky for the4 production and output of the company may affect, if it will continue in future too. In current assets similarly the raw material’s balance as compare to last year reduced and most affected area was receivables which is most risky because it will directly affect the liquidity and