Chapter 7 Engagement Planning and Management文档格式.docx

Chapter 7 Engagement Planning and Management文档格式.docx

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（b）WorkingwithManagementandOtherPersonnel

（i）ChiefExecutiveOfficer

（ii）ChiefFinancialOfficer

（iii）HeadofInternalAudit

（iv）Staff

（c）WorkingwithAuditCommitteesandBoardsofDirectors

（i）AuditCommittees

（ii）BoardsofDirectors

（iii）StockholderMeetings

7.3USINGTHEWORKOFOTHERS

（a）InternalAuditors

（b）Specialists

（c）OtherAuditors

7.4MANAGINGTHEENGAGEMENT 

（a）EngagementControl

（b）StaffingtheEngagement

（c）SupervisionandReview

7.5WORKINGPAPERS 

（a）FormandContentofWorkingPapers

（b）WorkingPaperOrganization

（c）TypicalWorkingPapers

（i）GroupedAccountsSchedule

（ii）OtherSchedulesandAnalyses

（iii）DocumentationofSignificantIssues

（iv）PermanentWorkingPapers

（d）CommonWorkingPaperDeficiencies

Thefirststandardoffieldworkrequiresthattheauditbeadequatelyplanned.Goodmanagementpracticesrequirethatitbecontrolledtoensurethatitisperformedefficientlyandonatimelybasis,aswellasinaccordancewithprofessionalstandards-thatis,effectively.Engagementplanningandmanagementinvolvenumerousplanningdecisionsandongoingactivitiesforcontrollingallaspectsoftheperformanceoftheaudittoensurethatitiscarriedouteffectivelyandefficiently.

Fromthetimeanengagementisfirstconsidered-evenbeforeitisaccepted-untiltheresultsaresummarizedandevaluatedattheendoftheengagement,theauditormakesnumerousdecisions,whichcollectivelyconstitutetheplanfortheengagement.Planningtakesplacethroughouttheengagementandincludesvariousactivitiesnecessarytoensurethattheauditiscarriedouteffectivelyandefficiently.Intheearlystagesoftheengagement,planningentailsdeterminingwhethertoacceptorcontinuewiththeclientandestablishingengagementtermsandgoals.Understandingtheclient'

sexpectationsandplanningtomeetorexceedthem,withinthecontextoftheauditor'

sprofessionalresponsibilities,andcommunicatingwiththeclientregardingengagementarrangementsandissues,facilitatestheauditprocess.

Formulatingtheengagementplanalsoinvolvesdecidingsuchmattersaswhethertousetheworkoftheentity'

sinternalauditors,whethertheassistanceofaspecialistisneeded,andwhethertousetheworkofotherauditorswhohaveauditedanyoftheentity'

scomponents.Theactivitiesinvolvedinplanningtheauditandtheorderinwhichtheyaredonevarywiththeengagement;

oftenthevariousactivitiesoverlap.

Beforetheauditorcanbegintoplanthedetailsoftheengagement,heorshemustconsiderwhethertoacceptor,forarecurringengagement,retaintheclient.Decidingwhethertoacceptorcontinuewithaclientrequirestheexerciseofprofessionalskepticismandjudgmentaboutavarietyofrisksaffectingboththeentityandtheauditor.

Allentitiesfacebusinessrisk,thatis,theriskthattheywillnotbeprofitableorwillnotremainagoingconcern.Anentitywithincreasedbusinessriskmaybemorelikelytoengageinfraudulentfinancialreportingorbeinvolvedinunwarrantedlitigationthanonenotfacingsignificantrisks.Thosefactorsmayincreasetheauditor'

sbusinessrisk-intheformoftheriskofpotentiallitigationcostsanddamagetohisorherreputation,andthreatstofeerealization-fromassociationwiththeentity.Indecidingwhethertobeassociatedwithaclient,theauditoralsoshouldconsiderfactorsthatmayincreaseauditrisk.Tomanagetherisksinherentinbecomingorremainingassociatedwithaclient,auditfirmsusuallyestablishprocedures,inadditiontothoserequiredbygenerallyacceptedauditingstandards,tobeperformedbeforeanewclientisacceptedorarecurringoneretained.Inthecourseofperformingthoseprocedures,muchinformationabouttheentityisgathered,whichformsthefoundationoftheauditor'

sknowledgeabouttheentity'

sbusiness.

Ininvestigatingaprospectiveclient,aprincipalconcernoftheauditoristheintegrityofmembersoftheentity'

smanagement.Accordingly,auditorstypicallyconsiderthegeneralreputationofhighrankingemployees,suchasexecutivesandotherswithbroadfinancialandoperatinginfluence,andinfluentialdirectorsandshareholders,aswellastheentityitself.Thismayinvolvediscussionswithcommercialandinvestmentbankersandlawyers,andobtainingaDun&

Bradstreetreport.Generally,auditorsalsoobtainandreadthemostrecentfinancialstatementsofaprospectiveclientandcommunicatewiththepredecessorauditor,withemphasisonquestionsofmanagement'

sintegrityandthereasonforthechangeinauditor.Otherconsiderationsinconnectionwithinvestigatingaprospectiveclientincludemanagement'

sresponsetosuggestionsforimprovinginternalcontrolmadebythepredecessorauditorortheinternalauditors,whetherthereareanyindependenceissues,whethertheauditorhaspersonnelwiththeindustryandotherexpertisetoprovidethedesiredservice,andwhethertheentity'

smanagementisableandwillingtopayanacceptablefee.

Today'

srapidlychangingbusinessenvironmentmakesitnecessarytoreevaluateperiodically,perhapsasoftenasannually,whethertocontinuetobeassociatedwithaclient.Theevaluationcanpointtorisksstemmingfromchangesaffectingmanagement'

sintegrity,managementpractices,theentity'

sfinancialcondition,oroperationalmatters.

TheDetectionandPreventionofFraudTaskForceoftheSECPracticeSectionoftheAICPADivisionforCPAFirmshasidentifiedanumberoffactorsthatmayindicateincreasedriskassociatedwithanengagementandthatauditorsmaywanttoconsiderintheirdecisionsaboutclientacceptanceorcontinuance.Therisksarecategorizedaseitherbusinessrisksoftheentity,businessrisksoftheauditor,orauditrisks,andareshowninFigure7.1.

Figure7.1RiskFactorsAssociatedwithanEngagement

1.Entity'

sBusinessRisk

∙Management:

-Engagesinactivitiesindicativeofalackofintegrity.

-Ispronetoengageinspeculativeventuresoracceptunusuallyhighbusinessrisks.

-Displaysapoorattitudetowardcompliancewithoutsideregulatoryorlegislativeobligations.

-Engagesincomplextransactionsorinnovativedealsthatmakethedeterminationoftheeffectsonthefinancialstatementsdifficulttoassessorhighlysubjective.

-Lacksaproventrackrecord.

-Isevasive,uncooperativeorabusivetotheauditteam.

∙TheEntity:

-Hasproductsthatarenewandunproven.

-Dependsonalimitednumberofcustomersorsuppliers.

-Isexperiencingadeterioratingfinancialconditionorliquiditycrisis.

-Issubjecttouncertaintiesthatraisesubstantialdoubtaboutitsabilitytocontinueasagoingconcern.

-Operatesincountrieswherebusinesspracticesarequestionable.

-Hasaninadequatecapitalbaseorishighlyleveraged.

-Isexperiencingdifficultyinmeetingrestrictivedebtcovenants.

-Generatesnegativecashflowsfromoperationsbutreportsoperatingprofits.

-Haspubliclytradeddebtoutstandingthatisbelowinvestmentgrade.

-Isalowtierfirminanemergingormaturingindustrywhereweakcompetitorsareexitingthemarket.

-Issubjecttounpredictablechangesinpriceandavailabilityofproductinputsthatcausesignificantvarianceinprofitability.

-Isvulnerabletorapidlychangingtechnology.

-Isinvestingcashfromshort-termborrowingsinlong-termassets.

∙TheIndustry:

-Isundergoingrapidchange.

-Issubjecttohighcompetition,marketsaturation,productobsolescence,ordecliningdemand.

-Hashighoperatingleveragedemonstratedbyhighfixedcostsandlowvariablecosts.

-Ishighlycyclicalorcountercyclical.

-Hasalowentrybarrier.

-Isfacingregulationsthatwilladverselyimpactprofitabilitythroughouttheindustry.

2.Auditor'

-Theentityispronetoahighnumberoflawsuitsorcontroversies.

-Therearefrequentchangesintheentity'

sauditors.

-Theentityplanstoengageinaninitialpublicofferingorusethefinancialstatementstoengageinadebtorequityoffering.

-Thefinancialstatementswillbeusedinconnectionwithanacquisitionordisposalofabusinessorsegment.

3.Auditor'

sAuditRisk

TheauditorshouldfollowSASNo.47,AuditRiskandMaterialityinConductinganAudit,whichprovidesguidanceontheauditor'

sconsiderationofauditriskwhenplanningandperforminganauditoffinancialstatements.Examplesoffactorsthatmayincreaseauditriskinclude:

-Operationsthataredominatedbyasingleindividual.

-Undueemphasisonachievingearningspershare;

maintainingthemarketpriceofthecompany'

sstock;

ormeetingearningsprojections.

-Unreliableprocessesformakingaccountingestimatesorquestionableestimatesbyexecutives.

-Unrealisticbudgetlevelsthatencourageunrealisticobjectives.

-Ahighvolumeofsignificantyear-endtransactions.

-Compensationbasedtoasignificantdegreeonreportedearnings.

-Anunnecessarilycomplexcorporatestructure.

-Prior-yearfinancialstatementsthatwererestatedforcorrectionofanerrororirregularity.

-Attemptsbymanagementtoreducethescopeoftheaudit.

-Substantiallitigationinvolvingtheentity'

sbusinesspractices.

-Materialweaknessesorotherreportableconditionsintheinternalcontrolstructure.

-Significantandunusuallycomplexrelatedpartytransactions.

-Affiliatesthatareunauditedorauditedbyothers.

-Managementespousesaggressiveaccountingprinc