Lecture 7: The
Audit Process, Planning, and
Risk Analysis
by
Professor Helen Brown
The lecture begins with the Professor discussing the three main reasons for planning, which are described as (1) to obtain sufficient competent evidence, (2) to help keep audit costs reasonable, and (3) to avoid misunderstanding with the client.
Planning an audit and designing an audit approach involves several steps, among which include understanding the client's business and industry, assessing the client's business risk, performing preliminary analytical procedures, gathering information to assess fraud risks, and understanding internal control and assessing control risk (there are more of them). Each step is also discussed in detail.
Following that, two case problems are performed. The first (
Flash Technologies) is discussed and after the discussion a risk analysis is performed for the company in the case. The second case discussed is the
Pinnacle case
------QUICK NAVIGATION------
Three
Main Reasons for Planning: 1:50
Planning an Audit and Designing an Audit
Approach: 4:18
STEP 1:
Initial Audit Planning Overview: 9:12
Initial Audit Planning (defined in-depth): 9:30
Identify Reasons for the Audit: 12:33
Obtaining an
Understanding with the
Client: 15:20
Develop an Overall Audit
Strategy: 16:11
STEP 2: Understanding of the Client's
Business and Industry: 18:43
STEP 3 - Assess Client
Business Risk: 19:38
Flash Technologies
Case Problem: 20:35
SILENCE (students discuss case among each other): 21:15
Relevant
Professional Standards (
PCAOB): 43:28
Discusses
General Risks
Identified
in Flash Technologies Case (a risk analysis): 47:41
General Areas of Risk Displayed: 1:04:20
Financial Accounting / Reporting Risks: 1:12:08
Comparing Flash Technologies (the company)
to its Respective
Industry (ratios, profit): 1:14:25
Risk related to Business Strategies: 1:15:17
Positive Aspects of Flash Technologies: 1:16:34
Red
Flags (indicators of negative aspects): 1:17:36
Financial Accounting & Reporting Risks (chart): 1:25:46
SILENCE (class break): 1:32:00
Performing Preliminary
Analytical Procedures:1:37:38
Timing and Purposes of Analytical Procedures: 1:47:46
Five Types of Analytical Procedures: 1:53:39
Common Financial Ratios: 1:56:10
Pinnacle
Manufacturing (Case Problem) Discussion: 1:56:55
Account Balances (for trend analysis): 1:59:06
Financial Ratios: 2:03:17
Financial
Statement Analysis: 2:07:56
Potential Misstatements: 2:12:20
Further Financial
Information (displays ratios
such as
Accounts Receivable turnover): 2:24:50
Analysis of
Inventory Balance:
2:32:54
Analysis of Short-term and Long-term
Debt: 2:35:08
Is Pinnacle like to fail or not? (discussion) : 2:36:22
Materiality: 2:42:05
Materiality
Concept: 2:43:22
What is Materiality? 2:46:15
When is it
Material? 2:47:11
- published: 27 Jul 2012
- views: 51060