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Audit Planning Process

ABC firm is auditing XYZ for three years. two years ago, XYZ received a letter from the provincial government informing the company that it needed to reduce the level of contaminants that it was releasing into the air and local waterways. The deadline for this reduction is three months from today. The letter indicates significant fines (several hundred thousand dollars) will be levied if the targets are not met. Alternatively the company will need to shut down operations until the targets are met. During ABC audit planning process, management informed ABC that the company has not taken any action but plan to start construction of the new pollution devices next month.

Explain the impact the above situation has upon ABC audit planning process.

Solution Preview

The given situation significantly impacts on the ABC's audit planning process. It is identified that the construction takes several month to establish new pollution device that impacts on the audit process of the company. Through the construction of new device, the new cost and expenditure will be incurred that impact on the planning process of the audit by ABC company. As per the given situation, the deadline for the company to reduce the level of contaminates is only three month that will also impact on the audit planning process of ABC company (Gramling, Johnstone & Rittenberg, ...

Solution Summary

Audit planning processes are examined. The expert explains the impact of the situation upon ABC audit planning process.