AUDITING

AUDITING

TYPES OF ANALYTICAL PROCEDURES AND THE POTENTIAL MISSTATEMENTS THEY MAY REVEAL

There are different types of analytical procedures that are dealt with which includes consolidated financial statements , subsidiaries segments , divisions and account balances . These procedures have various purposes which help in planning the nature , used as substantive procedures and also as an overall review to conclude whether financial statements are consistent with the auditors (Hayes , et al , 2004

Financial audits are always performed by firms of practicing accountants due to the specialist financial reporting knowledge they require . The

financial audit is one of the most assurances provided by the accounting and the audit firms available , whereby the firm provides an independent opinion on published information . There are various stages of a typical audit which include planning and risk assessment which involve the understanding of the business of a particular company and the environment in which it usually operates with . Internal control testing is the other second stage whereby it assesses the internal control procedures . The third stage is the substantive procedures which helps to collect audit evidence that the management assertions made in the financial statements are reliable and in agreement with required standards and legislation (Hayes , et al , 2004 . The last stage is the finalization stage whereby its purpose is to compile a report to management regarding any important matters that came to the auditor 's attention during the presentation of the audit and also to consider the type of audit opinion that should be reported based on the audit verification obtained

All these firms are the big multinational accountancy firms which audit the majority of large listed companies and also providing other services including tax advice and the information technology consultancy

WHY AN AUDIT FIRM SEEK INFORMATION IN ITS INVESTIGATION OF A PROSPECTIVE CLIENT

Usually , when an audit firm is looking for a prospective client , they look at various things . First of all they have to find out why the client needs an audit , also they consider about the size of the client and the industry they are in to get an understanding of how much time it will take to complete the audit that they have got . Normally , they try to gain some understanding as to how the client feels about the internal reins and also how their accounting is set up whereby they check whether it is done by the secretary or an accountant , one person or a particular department . The factors that the audit firm seeks should be looked into before they sign up for a client whereby the firms should evaluate possible clients ' financial statement , their reputation in the business communities and the information provided by their previous auditors Unusual risks inherent in a potential audit engagement should also be addressed . The most important that the firm should do is to assess the prospective clients ' organization and attitude . Those with dubious reputations should be refused to protect the accounting firm 's own status (Hayes , et al , 2004

REASONS AS TO WHY AUDIT WORK...