In my last article, I presented an overview of one of the first steps in the preplanning phase of an audit engagement: reviewing prior year audit documentation. In a future article, I'll dig deeper into questions that should be asked when making this review. Meanwhile, following is a table that provides a chronological approach to pre-engagement planning for audits of special purpose and other reporting frameworks. Future articles will discuss the details of each step.
Pre-Engagement Planning Table
|Function||Responsibility||Smaller Audit Documentation|
|Preplanning: 1. Pre-engagement planning conference.||1. Discuss prior year audit results and appropriateness of reporting framework.||1. Advise in-charge of any current developments.||1. In-charge important-issues memo (major to do's).|
|2. Understand client’s business and environment, including internal control system design and operation.||2a. Review prior year’s audit engagement documentation.||2a. Discuss.||2. In-charge important-issues memo (major to do's).|
|2b. Prepare or update engagement acceptance and/or continuance forms.||2b. Review and approve engagement acceptance and/or continuance forms.||2bi. Client acceptance and continuance form.2bii. Fraud risk memorandum (if not in planning document).
2biii. Engagement letter.
|2c. Assess engagement risk at the financial statement level.||2c. Review and approve engagement risk assessment at the financial statement level.||2ci. Planning document.2cii. Fraud risk memorandum.|
|3. Engagement letter and communication with persons charged with governance.||3. Identify the nature of the engagement, financial reporting framework (FRF), and additional services to be performed. Prepare letter.||3. Meet with management, discuss letter, and obtain signature. Communicate with those charged with governance.||3i. Engagement letter.3ii. Planning document.
3iii. Partner participation memorandum.
3iv. Governance communication letter.
For an overview of the entire small audit engagement process, you can register for a free, one-hour webcast with CPE credit that will be presented on March 21, 2014. You can also register for 12, two-hour webcasts in my Small Audit Series by clicking on the applicable box on the left side of my home page.