Planning an engagement
Area 2: Assessing Risk and Developing a Planned Response (25-35%)
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Topics
- Overall audit strategy
- Audit plan development
- Materiality determination
Lessons
Study Frameworks
The Audit Process
Audit Engagement
Pre-Engagement
Client acceptance/continuance
Engagement letter
Independence assessment
Planning
Understand entity & environment
Assess risks of material misstatement
Determine materiality
Develop audit strategy
Fieldwork
Test controls (if relying)
Substantive procedures
Audit sampling
Evaluate evidence
Completion & Reporting
Evaluate misstatements
Subsequent events review
Management representations
Issue audit report
Overall Materiality
Benchmark × Percentage
Common benchmarks: 5% of pre-tax income, 0.5–1% of total revenue, 1–2% of total assets