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Auditing Special Purpose Frameworks - Part 11: Overview of the Pre-Engagement Planning Process

Mar 5th 2014
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Read more from Larry Perry here and in the Today’s World of Audits archive.

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
In-charge Leader
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.


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