Task – Planning

Message from Graeme Moore, Audit Senior, Alex Gold:

Your tasks for this week are to complete the following:

  • A draft engagement letter is attached (see below) – this has been completed by a junior auditor in the office and is not complete - Ensure that this engagement letter contains all the information required by ISA 210 with the exception of the form of the audit report and billing arrangements which I will complete – (there are notes attached on engagement letters). Complete the letter and save it on your computer.
  • Complete the following tasks in regard to planning the audit...

(Note: I have provided relevant documents and videos of interviews I conducted when visiting Sheridan AV. You will find these on our electronic filing/media system. To access these please go to your Virtual Desk then Planning Visit – documents and resources)

  • Draft notes on your knowledge of the business and the general economic conditions. Information can be obtained from interviews with the Managing Director and other staff and minutes of directors’ meetings.
  • Complete the “potential risks” and “control environment” forms. You will need to download these to your computer, complete the forms and save it on your computer.
  • Review the draft accounts and perform preliminary analytical review
  • Determine materiality levels
  • Based on these tasks, write a short document describing your assessment of risk in this audit and how this will affect subsequent work.

DRAFT AUDIT ENGAGEMENT LETTER

To:Mr Sheridan

Managing Director

Sheridan Audio Visual Ltd

Dear Mr Sheridan

The objective and scope of the audit

You have requested that we audit the financial statements of Sheridan Audio Visual Ltd, which comprise………………….. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements.

The responsibilities of the auditor

We will conduct our audit in accordance with International Standards on Auditing (ISAs). These standards require that we comply with ethical requirements and plan and perform the audit to obtain ……………………

An audit involves……………….

Based on the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that ………..

In making our risk assessments, we consider internal control relevant to the entity’s preparation of the financial statements in order to …………………..

The responsibilities of management

Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility:

  1. For the preparation and fair presentation of the financial statements in accordance with the International Financial Reporting Standards
  2. For such internal control as management determines is necessary to enable the preparation of the financial statements that are free from ……………………….
  3. To provide us with………………………..

As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit.

We look forward to full cooperation from your staff during our audit.

Please sign and return the attached copy of this letter to indicate your acknowledgement of, and agreement with, the arrangements for our audit of the financial statements including our respective responsibilities.

Alex Gold

ENGAGEMENT LETTER

ISA 210 contains the principal form and contents of the engagement letter. A copy of an engagement letter is shown at

.

Per ISA 210 the letter should contain reference to:

  • The objective of the audit of financial statements
  • Management’s responsibility for the financial statements
  • The scope of the audit, including reference to applicable legislation, regulations, or pronouncement of professional bodies to which the auditor adheres
  • The form of any reports or other communication of results of the engagement
  • The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatements may remain undiscovered.
  • Unrestricted access to whatever records, documentation and other information requested in connection with the audit.