What Is Audit Preparation?

Audit preparation refers to the audit matters determined by the audit institution according to the audit project plan, forming an audit team, and shall send an audit notice to the audited unit 3 days before the audit is performed.

Audit preparation

Audit preparation refers to the audit matters determined by the audit institution according to the audit project plan, forming an audit team, and shall send an audit notice to the audited unit 3 days before the audit is performed.

Chinese name

Audit preparation

jobs

Audit notice, signing audit agreement

prepared by

Audit plan

Audit risk

3 days ago

Work content

(I) Clarify audit tasks and determine audit priorities

At this stage, the main tasks that auditors should do are: issuing audit notices and signing audit engagement agreements.

After understanding the basic situation of the audited entity, a private auditing organization can sign the auditing business agreement after considering its own business competence and independence, and reaching a consensus with the client on the nature and scope of the auditing business.

An audit engagement agreement refers to a written document signed by a private audit organization and the audited unit to confirm the entrustment and trusteeship of the audit business, specifying the purpose of the audit, the scope of the audit, and the responsibility of both parties. The audit business agreement has the nature of an economic contract. Once the two parties sign and approve it, it has legal effect, and both parties should implement it together.

(2) Preparation of audit plan

An audit plan refers to a work plan prepared by a certified public accountant in order to complete various audit tasks and achieve the expected audit objectives before implementing audit procedures in detail.

As the audit plan is a kind of pre-planning of the audit work, and the actual situation may be inconsistent with the expected plan when the plan is implemented, it is necessary to revise and supplement the audit plan in a timely manner. The revision and supplement of the audit plan runs through the preparation and implementation stages of the audit.

The audit plan is divided into an overall audit plan and a specific audit plan.

1. The overall audit plan should include the following when preparing: the profile of the audited unit, the purpose and scope of the audit, the determination of the importance level and the evaluation of the audit risk, the important audit areas and accounts, the audit work schedule and time schedule, the audit staff's Assignments and other related content.

2. Specific audit plan contents include: audit objectives, audit procedures, performers and execution time, audit work papers and index numbers, and other relevant content.

3. The following steps should be followed in preparing the audit plan:

Understand the basic situation of the audited unit, analyze the importance, consider audit risks, and prepare an audit plan.

Materiality refers to the severity of misstatements or omissions in the accounting statements of the audited entity, which may affect the judgments or decisions of users of the accounting statements under certain circumstances.

The quantitative index of materiality is called materiality level, and the judgment of materiality level is a professional judgment of certified public accountants. Different certified public accountants may have different judgments on the importance of the same accounting statement.

Audit risk refers to the possibility of significant errors or omissions in the accounting statements, and the CPA to issue inappropriate audit opinions after an audit. Audit risks include: inherent risks, control risks, and inspection risks.

The relationship between audit risks is:

Audit risk = inherent risk × control risk × inspection risk