To Adequately Plan an Audit, the Auditor Should Obtain Sufficient

question 40

Essay

To adequately plan an audit, the auditor should obtain sufficient knowledge of the client's business to understand events, transactions, and practices that may have a significant effect on the financial statements. The auditor needs knowledge about, for example, the type of business, including products and services, company locations, and marketing methods.
REQUIRED:
1.List at least four additional items about which the auditor should be knowledgeable.
2.List at least four audit procedures that would normally be used in obtaining this understanding.
3.How would the auditor use this information in performing a financial statement audit?

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Definitions:

Total Liabilities

The total amount of financial obligations or debts that a company owes to external parties.

Return On Equity

A financial ratio that measures the profitability of a company in relation to the shareholders' equity, indicating how efficiently a company uses its equity to generate profit.

Expected Rate

An estimated percentage or amount, often used in financial projections and calculations like the return on an investment or growth.

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.