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Audit Findings

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Determine both the relationship of risks in the planning of the audit and factors that influence those risks. Speculate on which type of risk creates the most uncertainty for the auditor, and recommend at least two ways to plan the audit to mitigate those risks. Provide specific examples and give references.

Imagine that you are a senior auditor, and your firm has been selected to audit a medium-sized sporting goods company with one single location. Describe the four phases of an audit and discuss the key factors that would help you determine how to plan the audit for this company. Provide specific examples and give references.

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Determine both the relationship of risks in the planning of the audit and factors that influence those risks. Speculate on which type of risk creates the most uncertainty for the auditor, and recommend at least two ways to plan the audit to mitigate those risks. Provide specific examples and give references.

- Auditors need to analyze risk areas and then plan the audit based on those risks. If I have identified a high risk area, I would want to plan a higher number of tests in those areas, as compared to low risk areas. If accounts receivable is higher than what is the normal range when looking at a cross sectional analysis or other comparative information, I would plan additional tests on A/R to determine if the balance is accurate. Risks are directly related to the audit plan - the level of risk guides the audit plan. As required by the PCAOB, due to SOX, auditors must obtain a sufficient understanding of internal control in the company, to identify the main types of misstatements that must be present. This is based upon types of controls used (or lack of controls) by management, type of industry, and size of the company based on gross receipts.

In my opinion, the A/R account creates the biggest risk, which would be the risk of overstatement. In large companies, A/R can be extremely difficult to verify, even with sufficient testing procedures. With A/P, the account balances on ...

Solution Summary

This solution discusses the relationship between risk and audit findings, the phases of an audit and key factors that would determine the audit plan. A comprehensive discussion is provided.

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