Auditing Stages

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The aim of this discussion is to explain how an auditor goes about the process of auditing financial statements and presents the five basic stages that the auditor performed during the financial statement audit at Maryward Primary School in Kwekwe for the year ending 31 December 2012. In order to be in a position to fulfil auditing responsibility to report on the client’s annual financial statements, the auditor followed a series of procedures and activities as required by the auditing profession. The auditor applied the following audit stages: pre-engagement activities, planning, test of controls, substantive procedures, completion and reporting.
Puttick et al (2012:102) defines an audit according to Section 1 of APA as …the examination
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“Inherent risk” as per ISA 400 is “ the susceptibility of an account balance or class of transactions to misstatements that could be material, individually or when aggregated with misstatements in other balances or classes, assuming that there are no related internal controls”. The auditor assessed audit risk and inherent risk as it is an essential part of audit planning to help in determining the quality and quantity of evidence gathered and the staff that needed to be assigned to the particular audit. The auditor also obtained an understanding of the business and its environment in order to assess the risk of material misstatement. ISA 310 requires a reasonable understanding of the client’s business and industry. The nature of the client’s business and industry affects the client business risk and the risk of material misstatements in the financial statements. The auditor used the knowledge of these risks to determine the appropriate amount of audit evidence gathered. The auditor through experience is aware of the exposure to problems resulting from the auditor’s failure to understand comprehensively the nature of transactions in the client’s business. The understanding helped the auditor to evaluate the design and implementation of specific controls that could stop or discover and rectify material
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