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Audit Planning and
Analytical
Procedures
Chapter 8
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-1
Learning Objective 1
Discuss why adequate audit
planning is essential.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-2
Planning
The work is to be adequately planned, and
assistants, if any, are to be properly supervised.
Acceptable audit risk
Inherent risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-3
Planning an Audit and
Designing an Approach
Accept client and
perform initial
audit planning
Assess client
business risk
Understand the
client’s business
and industry
Perform preliminary
analytical procedures
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-4
Planning an Audit and
Designing an Approach
Set materiality, and
assess acceptable audit
risk and inherent risk
Understand internal
control and assess
control risk
Develop overall
audit plan and
audit program
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-5
Learning Objective 2
Make client acceptance
decisions and perform
initial audit planning.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-6
Initial Audit Planning
Should the auditor accept a new client?
Identify why the client wants or needs an audit.
Obtain an understanding with the client.
Select staff for the engagement.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-7
Learning Objective 3
Gain an understanding of the
client’s business and industry.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-8
Understanding of the Client’s
Business and Industry
Understand Client’s Business and Industry
Industry and External Environment
Business Operations and Processes
Management and Governance
Objectives and Strategies
Measurement and Performance
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-9
Understanding of the Client’s
Business and Industry
What are some factors that have increased
the importance of understanding the
client’s business and industry?
Information
technology
Global
operations
Human
capital
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 10
Industry and External
Environment
What are some reasons for obtaining an
understanding of the client’s industry
and external environment?
Risks associated with specific industries
Inherent risks common to all
clients in certain industries
Unique accounting requirements
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 11
Business Operations
and Processes
Factors the auditor should understand:
– major sources of revenue
– sources of revenue
– key customers and suppliers
– sources of financing
– information about related parties
– ability to obtain financing
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 12
Management and Governance
Management establishes the strategies and
processes followed by the client’s business.
Governance includes the client’s organizational
structure, as well as the activities of the board
of directors and the audit committee.
Corporate charter and bylaws
Minutes of meetings
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 13
Client Objectives
and Strategies
Strategies are approaches followed by the
entity to achieve organizational objectives.
Auditors should understand client objectives.
Financial
reporting
reliability
Effectiveness
and efficiency
of operations
Compliance
with laws and
regulations
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 14
Measurement and Performance
The client’s performance measurement system
includes key performance indicators. Examples:
– market share
– sales per employee
– unit sales growth
– Web site visitors
– same-store sales
– sales/square foot
Performance measurement includes ratio analysis
and benchmarking against key competitors.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 15
Learning Objective 4
Assess client business risk.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 16
Assess Client Business Risk
Client business risk is the risk that the
client will fail to achieve its objectives.
What is the auditor’s primary concern?
– material misstatement of the financial
statements due to client business risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 17
The Client’s Business, Risk, and
Auditor’s Risk Assessment
Industry and External Environment
Understand Client’s
Business and Industry
Business Operations and Processes
Management and Governance
Objectives and Strategies
Assess Client
Business Risk
Measurement and Performance
Assess Risk of
Material Misstatements
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 18
Learning Objective 5
Perform preliminary
analytical procedures.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 19
Preliminary Analytical
Procedures
Comparison of client ratios to industry
or competitor benchmarks provides an
indication of the company’s performance.
Analytical procedures are also an important
part of testing throughout the audit.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 20
Examples of Planning Analytical
Procedures
Selected Ratios
Short-Term Debt-Paying Ability
Current ratio
Liquidity Activity Ratio
Inventory turnover
Ability to Meet Long-Term Obligations
Debt to equity
Profitability
Return on assets
Client
Industry
3.86
5.20
3.46
5.20
1.73
2.51
0.09
0.09
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 21
Summary of the Purposes
of Auditing Planning
A major purpose is to gain an understanding
of the client’s business and industry.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 22
Key Parts of Planning
Accept Client and Perform
Initial Planning
New client
acceptance and
continuance
Obtain an
understanding
with client
Identify client’s
reasons for
the audit
Staff the
engagement
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 23
Key Parts of Planning
Understand the Client’s
Business and Industry
Understand
client’s industry
and external
environment
Understand
client’s operations,
strategies, and
performance system
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 24
Key Parts of Planning
Assess Client
Business Risk
Assess client
business risk
Assess risk
of material
misstatements
Evaluate management
business controls
affecting business risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 25
Key Parts of Planning
Perform Preliminary
Analytical Procedures
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 26
Learning Objective 6
State the purposes of analytical
procedures and the timing of
each purpose.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 27
Analytical Procedures
Analytical procedures use comparisons and
relationships to assess whether account
balances or other data appear reasonable.
SAS 56 emphasizes the expectations
developed by the auditor.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 28
Timing and Purpose of
Analytical Procedures
Purpose
Understand client’s
industry and business
Assess going concern
(Required)
Planning Phase
Primary purpose
Secondary purpose
Indicate possible misstatements
Primary purpose
(attention directing)
Reduce detailed tests
Secondary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 29
Timing and Purpose of
Analytical Procedures
Purpose
Testing
Phase
Understand client’s
industry and business
Assess going concern
Indicate possible misstatements
Secondary purpose
(attention directing)
Reduce detailed tests
Primary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 30
Timing and Purpose of
Analytical Procedures
Purpose
Understand client’s
industry and business
Access going concern
Indicate possible misstatements
(attention directing)
Reduce detailed tests
(Required)
Completion Phase
Secondary purpose
Primary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 31
Learning Objective 7
Select the most appropriate
analytical procedure from
among the five major types.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 32
Five Major Types of
Analytical Procedures
1.
2.
3.
4.
5.
Compare client and industry data.
Compare client data with similar
prior-period data.
Compare client data with
client-determined expected results.
Compare client data with
auditor-determined expected results.
Compare client data with expected
results, using nonfinancial data.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 33
Compare Client
and Industry Data
Inventory turnover
Gross margin percent
Client
Industry
2002 2001 2002 2001
3.4
3.5
3.9
3.4
26.3% 26.4% 27.3% 26.2%
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 34
Compare Client Data With
Similar Prior-period Data
2002
(000,000)
% of
Preliminary Net Sales
Net sales
143
100
Cost of goods sold 103
72
Gross profit
40
28
S &A
32
22
Other
4
3
Net income
4
3
2001
(000,000) % of
Audited Net Sales
131
100
95
72
36
28
30
23
3
3
3
2
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 35
Learning Objective 8
Compute common
financial ratios.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 36
Common Financial Ratios
Short-term debt-paying ability
Liquidity activity ratios
Ability to meet long-term debt obligations
Profitability ratios
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 37
Short-term
Debt-paying Ability
Cash ratio:
(Cash + Marketable securities) ÷ Current liabilities
Quick ratio:
(Cash + Marketable securities
+ Net accounts receivable) ÷ Current liabilities
Current ratio:
Current assets ÷ Current liabilities
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 38
Liquidity Activity Ratios
Accounts receivable turnover:
Net sales ÷ Average gross receivables
Days to collect receivables:
365 days ÷ Accounts receivable turnover
Inventory turnover:
Cost of goods sold ÷ Average inventory
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 39
Liquidity Activity Ratios
Days to sell inventory:
365 days ÷ inventory turnover
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 40
Ability to Meet Long-term Debt
Obligation
Debt to equity:
Total liabilities ÷ Total equity
Times interest earned:
Operating income ÷ Interest expense
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 41
Summary of Analytical
Procedures
They involve the computation of ratios and other
comparisons of recorded amounts to auditor expectations.
They are used in planning to understand
the client’s business and industry.
They are used throughout the audit to identify
possible misstatements, reduce detailed tests,
and to assess going-concern issues.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 42
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 43
Analytical
Procedures
Chapter 8
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-1
Learning Objective 1
Discuss why adequate audit
planning is essential.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-2
Planning
The work is to be adequately planned, and
assistants, if any, are to be properly supervised.
Acceptable audit risk
Inherent risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-3
Planning an Audit and
Designing an Approach
Accept client and
perform initial
audit planning
Assess client
business risk
Understand the
client’s business
and industry
Perform preliminary
analytical procedures
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-4
Planning an Audit and
Designing an Approach
Set materiality, and
assess acceptable audit
risk and inherent risk
Understand internal
control and assess
control risk
Develop overall
audit plan and
audit program
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-5
Learning Objective 2
Make client acceptance
decisions and perform
initial audit planning.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-6
Initial Audit Planning
Should the auditor accept a new client?
Identify why the client wants or needs an audit.
Obtain an understanding with the client.
Select staff for the engagement.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-7
Learning Objective 3
Gain an understanding of the
client’s business and industry.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-8
Understanding of the Client’s
Business and Industry
Understand Client’s Business and Industry
Industry and External Environment
Business Operations and Processes
Management and Governance
Objectives and Strategies
Measurement and Performance
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8-9
Understanding of the Client’s
Business and Industry
What are some factors that have increased
the importance of understanding the
client’s business and industry?
Information
technology
Global
operations
Human
capital
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 10
Industry and External
Environment
What are some reasons for obtaining an
understanding of the client’s industry
and external environment?
Risks associated with specific industries
Inherent risks common to all
clients in certain industries
Unique accounting requirements
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 11
Business Operations
and Processes
Factors the auditor should understand:
– major sources of revenue
– sources of revenue
– key customers and suppliers
– sources of financing
– information about related parties
– ability to obtain financing
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 12
Management and Governance
Management establishes the strategies and
processes followed by the client’s business.
Governance includes the client’s organizational
structure, as well as the activities of the board
of directors and the audit committee.
Corporate charter and bylaws
Minutes of meetings
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 13
Client Objectives
and Strategies
Strategies are approaches followed by the
entity to achieve organizational objectives.
Auditors should understand client objectives.
Financial
reporting
reliability
Effectiveness
and efficiency
of operations
Compliance
with laws and
regulations
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 14
Measurement and Performance
The client’s performance measurement system
includes key performance indicators. Examples:
– market share
– sales per employee
– unit sales growth
– Web site visitors
– same-store sales
– sales/square foot
Performance measurement includes ratio analysis
and benchmarking against key competitors.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 15
Learning Objective 4
Assess client business risk.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 16
Assess Client Business Risk
Client business risk is the risk that the
client will fail to achieve its objectives.
What is the auditor’s primary concern?
– material misstatement of the financial
statements due to client business risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 17
The Client’s Business, Risk, and
Auditor’s Risk Assessment
Industry and External Environment
Understand Client’s
Business and Industry
Business Operations and Processes
Management and Governance
Objectives and Strategies
Assess Client
Business Risk
Measurement and Performance
Assess Risk of
Material Misstatements
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 18
Learning Objective 5
Perform preliminary
analytical procedures.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 19
Preliminary Analytical
Procedures
Comparison of client ratios to industry
or competitor benchmarks provides an
indication of the company’s performance.
Analytical procedures are also an important
part of testing throughout the audit.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 20
Examples of Planning Analytical
Procedures
Selected Ratios
Short-Term Debt-Paying Ability
Current ratio
Liquidity Activity Ratio
Inventory turnover
Ability to Meet Long-Term Obligations
Debt to equity
Profitability
Return on assets
Client
Industry
3.86
5.20
3.46
5.20
1.73
2.51
0.09
0.09
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 21
Summary of the Purposes
of Auditing Planning
A major purpose is to gain an understanding
of the client’s business and industry.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 22
Key Parts of Planning
Accept Client and Perform
Initial Planning
New client
acceptance and
continuance
Obtain an
understanding
with client
Identify client’s
reasons for
the audit
Staff the
engagement
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 23
Key Parts of Planning
Understand the Client’s
Business and Industry
Understand
client’s industry
and external
environment
Understand
client’s operations,
strategies, and
performance system
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 24
Key Parts of Planning
Assess Client
Business Risk
Assess client
business risk
Assess risk
of material
misstatements
Evaluate management
business controls
affecting business risk
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 25
Key Parts of Planning
Perform Preliminary
Analytical Procedures
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 26
Learning Objective 6
State the purposes of analytical
procedures and the timing of
each purpose.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 27
Analytical Procedures
Analytical procedures use comparisons and
relationships to assess whether account
balances or other data appear reasonable.
SAS 56 emphasizes the expectations
developed by the auditor.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 28
Timing and Purpose of
Analytical Procedures
Purpose
Understand client’s
industry and business
Assess going concern
(Required)
Planning Phase
Primary purpose
Secondary purpose
Indicate possible misstatements
Primary purpose
(attention directing)
Reduce detailed tests
Secondary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 29
Timing and Purpose of
Analytical Procedures
Purpose
Testing
Phase
Understand client’s
industry and business
Assess going concern
Indicate possible misstatements
Secondary purpose
(attention directing)
Reduce detailed tests
Primary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 30
Timing and Purpose of
Analytical Procedures
Purpose
Understand client’s
industry and business
Access going concern
Indicate possible misstatements
(attention directing)
Reduce detailed tests
(Required)
Completion Phase
Secondary purpose
Primary purpose
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 31
Learning Objective 7
Select the most appropriate
analytical procedure from
among the five major types.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 32
Five Major Types of
Analytical Procedures
1.
2.
3.
4.
5.
Compare client and industry data.
Compare client data with similar
prior-period data.
Compare client data with
client-determined expected results.
Compare client data with
auditor-determined expected results.
Compare client data with expected
results, using nonfinancial data.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 33
Compare Client
and Industry Data
Inventory turnover
Gross margin percent
Client
Industry
2002 2001 2002 2001
3.4
3.5
3.9
3.4
26.3% 26.4% 27.3% 26.2%
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 34
Compare Client Data With
Similar Prior-period Data
2002
(000,000)
% of
Preliminary Net Sales
Net sales
143
100
Cost of goods sold 103
72
Gross profit
40
28
S &A
32
22
Other
4
3
Net income
4
3
2001
(000,000) % of
Audited Net Sales
131
100
95
72
36
28
30
23
3
3
3
2
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 35
Learning Objective 8
Compute common
financial ratios.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 36
Common Financial Ratios
Short-term debt-paying ability
Liquidity activity ratios
Ability to meet long-term debt obligations
Profitability ratios
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 37
Short-term
Debt-paying Ability
Cash ratio:
(Cash + Marketable securities) ÷ Current liabilities
Quick ratio:
(Cash + Marketable securities
+ Net accounts receivable) ÷ Current liabilities
Current ratio:
Current assets ÷ Current liabilities
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 38
Liquidity Activity Ratios
Accounts receivable turnover:
Net sales ÷ Average gross receivables
Days to collect receivables:
365 days ÷ Accounts receivable turnover
Inventory turnover:
Cost of goods sold ÷ Average inventory
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 39
Liquidity Activity Ratios
Days to sell inventory:
365 days ÷ inventory turnover
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 40
Ability to Meet Long-term Debt
Obligation
Debt to equity:
Total liabilities ÷ Total equity
Times interest earned:
Operating income ÷ Interest expense
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 41
Summary of Analytical
Procedures
They involve the computation of ratios and other
comparisons of recorded amounts to auditor expectations.
They are used in planning to understand
the client’s business and industry.
They are used throughout the audit to identify
possible misstatements, reduce detailed tests,
and to assess going-concern issues.
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 42
©2003 Prentice Hall Business Publishing, Auditing and Assurance Services 9/e, Arens/Elder/Beasley
8 - 43