NECESSARY STEPS FOR AUDIT ENGAGEMENT
[1] Obtaining an understanding of the entity's business and the industry in which it operates.
[2] Inquiries concerning the entity's accounting principles, policies and practices.
[3] Inquiries concerning the entity's procedures for recording, classifying and summarising transactions, accumulating information for disclosure in the financial statements and preparing financial statements.
[4] Inquiries concerning all material assertions in the financial statements.
[5] Analytical procedures designed to identify relationships and individual items that appear unusual. Such procedures would include:
[a] Comparison of the financial statements with statements for prior periods.
[b] Comparison of the financial statements with anticipated results and financial position.
[c] Study of the relationships of the elements of the financial statements that would be expected to conform to a predictable pattern based on the entity's experience or industry norm.
In applying these procedures, the auditor would consider the types of matters that required accounting adjustments in prior periods.
[6] Inquiries concerning actions taken at meetings of shareholders, the board of directors, committees of the board of directors and other meetings that may affect the financial statements.
[7] Reading the financial statements to consider, on the basis of information coming to the auditor's attention, whether the financial statements appear to conform to the basis of accounting indicated.
[8] Obtaining reports from other auditors, if any and if considered necessary, who have been engaged to audit or review the financial statements of components of the entity.
[9] Inquiries of persons having responsibility for financial and accounting matters concerning, for example:
[a] Whether all transactions have been recorded.
[b] Whether the financial statements have been prepared in accordance with the basis of accounting policies indicated.
[c] Changes in the entity's business activities and accounting principles, policies and practices.
[d] Matters as to which questions have arisen in the course of applying the foregoing procedures.
[e] Obtaining written representations from management when considered appropriate.
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