Chapter 8 Obtaining Information About the Entity文档格式.docx
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Chapter 8 Obtaining Information About the Entity文档格式.docx
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8
ObtainingInformationAbouttheEntity
8.1ObtainingKnowledgeoftheEntity'
sBusinessandIndustry
8.2ReviewingPriorYears'
AuditWork
8.3GatheringandAnalyzingRecentFinancialInformation
8.4UpdatingKnowledgeofApplicableAccounting,Auditing,andRegulatoryStandards
8.5ConsideringtheEntity'
sRiskManagementPolicies
8.6identifyingRelatedPartyTransactions
8.7IdentifyingInherentRisks
8.8makingPreliminaryMaterialityJudgments
8.9ResearchingAuditingIssues
Theauditorneedsanunderstandingofvariousaspectsoftheentityanditsbusinessinordertodeterminetheauditingprocedurestobeperformed,theirtiming,andtheirextent.Muchoftheinformationthatformstheunderstandingisgeneralandrelatestothenatureoftheentity'
sbusiness,theindustryitoperatesin(includinglegalandregulatoryrequirementspeculiartotheindustry),theprocessesmanagementhasimplementedtomeetentityobjectives,thesignificantaccountsintheentity'
sfinancialstatements,theaccountingpoliciesandpracticesusedbymanagement,andinterrelationshipsamongentityfinancialandoperatingdata.Basedonthatunderstanding,theauditoridentifiesinherentrisksassociatedwiththeentity.Thoserisks,inturn,affecttheauditingprocedurestobeperformed.Theauditoralsomakespreliminarydeterminationsastomateriality.
Onanewengagement,gatheringinformationabouttheentitycanbealengthy,detailedprocess,whichmaybeaidedbyreferencetoapredecessorauditor'
sfiles,asdiscussedlaterinthechapter.Forarecurringengagement,muchofthegeneralinformationabouttheentityisavailablefromprioryears'
workingpapersandneedsonlytobeupdated,notgatheredalloveragain.Bothentitypersonnelandtheauditorshouldbecarefulnottotreatchangedcircumstancesperfunctorily.Anentity'
spersonnelcaneasilyforgetchangesthattookplaceduringtheyearbecausetheyhavebecomeroutinebythetimetheauditormakesinquiries;
theauditorcaneasilytreatsignificantchangesastrivialiftheirimplicationsarenotconsideredthoroughly.Anauditorapproachingarecurringengagementshouldrememberthatchangedconditionscanmakelastyear'
sunderstandingoftheentityandtherisksassociatedwithitobsoleteandamisleadingguidetothenatureandextentoftheproceduresrequired.Theauditorshouldreviewchangedcircumstancesandupdatehisorherunderstandingbeforedesigningauditingprocedures.
Informationabouttheentity'
sbusinessandindustry,recentfinancialinformation,familiaritywiththeresultsofprioryears'
work,andaknowledgeofapplicableaccounting,auditing,andregulatorystandardsareusefulforidentifyinginherentrisksandthecontrolsmanagementmayhaveimplementedinresponsetothoserisks.Therelevantinformationisdiverse,obtainedfrommanysources,anddocumentedinanumberofplacesintheauditworkingpapers.Mostoftheinformation-gatheringproceduresareperformedduringtheearlystagesoftheaudit;
however,theauditorislikelytoobtainadditionalinformationabouttheentitythroughouttheengagementandshouldconsiderthatinformationindeterminingthenature,timing,andextentofauditingprocedures.Ingatheringinformationabouttheentity,aswellasatotherstagesintheaudit,mattersmayarisethatrequireresearchinordertoacquireinformationneededforthedecision-makingprocess.
sBusinessandIndustry
Toalargeextent,entities'
operationswillrespondtothestructureanddynamicsoftheindustryorindustriesinwhichtheydobusiness.Theauditorshouldbecomefamiliarwiththoseindustrycharacteristics,withtrendsintheindustry,andwiththeentity'
spositionintheindustry.Industryconditionsthatcanaffectanentityincludeitsmarketshareandrelativesize,industrypracticessuchastheuseofquantitydiscountsandconsignmentsales,andcompetitionfromotherindustries.Iftheentityhassignificantactivitiesinmorethanoneindustry,theauditorshouldobtaininformationabouteachindustry.
Tobeeffective,thevariousday-to-dayoperationalprocessesmustberesponsivetothedynamicsoftheindustryinwhichtheentityoperates.Broadly,businessprocessesconsistofacombinationofinterrelatedactivities,decisions,information,andresourcesdesignedtoaccomplishtheentity'
sobjectives.Businessprocessescutacrossfunctional,unit,andgeographicalboundaries.Identifyinganentity'
sbusinessprocessescanbeconsideredintermsofthefollowingquestions:
Whatdoestheentitydoandhowdoesitdoit?
Anentity'
sbusinessprocessesincludethemeansbywhichitsetsguidelinesanddirectivesformanagingthebusinessasawhole,themethodsitusesfordeliveringproductsandservicesandmanagingcustomerrelationships,andthevariousfunctions,suchasfinancingandinvestingactivities,thatsupportandfacilitatetheoperationofthebusiness.Examplesarenewproductdevelopment,whichmay,dependingontheentityanditsindustry,includeresearchactivities;
productionplanning,whichmaybecomplexandinvolveconstructingnewfacilities;
analyzingmarketneeds,projectingdemand,andconsideringcompetitors;
arrangingfinancingforoperations;
purchasingmaterials,includingestablishingrelationshipswithsuppliers;
manufacturingproducts;
anddistributingandmarketingproductsorservices.
Informationaboutthebusinessanditsprocessesthatisparticularlyrelevanttotheauditorincludesproductlines,sourcesandmethodsofsupply,marketinganddistributionmethods(includingmajorcustomers),sourcesoffinancing,andproductionmethods.Theauditoralsoshouldobtaininformationaboutthelocationsandrelativesizeofoperatingplants,divisions,andsubsidiaries,andtheextenttowhichmanagementisdecentralized.Theauditor'
sunderstandingoftheentity'
sbusinessprocesseshelpsinidentifyingrisksassociatedwiththeentity'
soperationsandmethodsofdoingbusinessandmayfacilitatethedesignofappropriateauditingprocedures.
Theauditoralsoshouldlearnabouteconomicconditionsthataffecttheentity'
sbusinessandindustry.Economicconditionsaffectthecontinuingabilitytogenerateandcollectrevenues,operateprofitably,andprovideareturntoinvestors.Unfavorableeconomicconditionsmayraisequestionsaboutwhethertheentity'
sassetsarerecoverable,howitsliabilitiesshouldbemeasured,and,ultimately,whetheritcanremaininbusiness.Unfavorableeconomicconditionsalsomayincreasethelikelihoodofintentionalfinancialstatementmisrepresentations.
Theauditorcanobtainentityandindustryinformationfromavarietyofsources,includinggovernmentstatistics;
economic,financial,industry,andtradejournals;
publicationsandbrochureswrittenbytheentity;
internalauditreports,whereapplicable;
andreportspreparedontheentity,itscompetitors,oritsindustrybyunderwriters,merchantbankers,andsecuritiesdealersandanalysts.Increasingly,on-linecomputerservicesandproprietarydatabasesarebecomingasourceforsuchinformation.Insomeinstances,relevantinformationmaybeavailableinregulatoryorexaminationreports,supervisorycorrespondence,andsimilarmaterialsfromapplicableregulatoryagencies.Ifregulatoryexaminationsareinprocess,theauditormayattend(asanobserver)closingconferencesbetweentheexaminerandtheentity.Finally,theauditorlearnsabouttheentityanditsindustrythroughdiscussionswithmanagement.
AuditWork
Theknowledgetheauditorobtainsfromreviewingprioryears'
auditworkassistsindeterminingthelikelihoodofmaterialmisstatementswithrespecttoindividualaccountbalancesorclassesoftransactions,therebyaffectingthecurrentyear'
sriskassessmentandthelevelofassurancerequiredfromsubstantivetests.Forexample,ifnonewinherentriskshavebeenidentifiedandtheentity'
sinternalcontrolhasnotchanged,andfewdeviationsfromprescribedpoliciesandprocedureswerefoundinprioryears,theauditormaynotneedtomakesignificantchangesintheauditstrategyandauditprogram.Whilegenerallyitisnecessarytoreviewonlytheworkingpapersfromtheimmediateprioryear,informationrelatingtoseveralprioryearsmaybeusefulindesigningthecurrentyear'
stests,particularlywithrespecttothedegreeofchangeinandoperatingeffectivenessofinternalcontrol.
Workingpapersfromprioryearsthatareusefultoreviewcontainfinancialinformation,theunderstandingoftheentity'
sbusinessandindustry,controlriskassessments,documentationofsignificantaccountingandauditingmatters,andspecificreferencestothesources(orcauses)ofadjustmentsmadetothefinancialstatements.Theauditoralsoshouldreviewtheeffectivenessandefficiencyoftheprioryear'
sengagementtoidentifyauditingproceduresthatshouldbecontinued,expanded,reduced,oreliminatedinordertoenhancethequalityandefficiencyofthecurrentauditandclientserviceplan.
Foranewengagement,muchoftheneededinformationmaybeavailablefromareviewofthepredecessorauditor'
sworkingpapers.AsnotedinChapter3,predecessorauditorsgenerallymakeatleastcertainoftheirworkingpapersaccessibletosuccessorauditors.Ordinarily,areviewoftheprior-yearworkingpaperswillprovidefactualinformationabouttheentity'
sinternalcontrol,analysesofcertainbalancesheetaccounts,detailsrelatingtocontingenciesandcommitments,andsummariesofproposedauditadju
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