Planning

STEPS IN ACCEPTING A NEW ENGAGEMENT
(“IIII DO”)

1. I ntegrity…Evaluate the integrity of management.
2. I dentify… Identify special circumstances and unusual risks.
3. I ndustry…Assess the auditor’s own industry competence to perform the audit.
4. I ndependence…Evaluate the auditor’s independence .
5. D ue care…Determine the ability to use due professional care.
6. O btain… Obtain an engagement letter.

★ Contents of the engagement letter: important elements.

・ Identify of the entity and financial statements to be audited.
・Type of service : audit, review, compilation or other service.
・Reference to the appropriate professional standards , such as GAAS.
・Nature and scope of the audit and the auditor’s responsibilities .
・A statement that a properly designed audit may not detect all material irregularities.
・A reminder to management that they are responsible for the preparation of the financial statements and for maintaining an adequate internal control structure.
・A reminder that management will be asked to provide a written representation letter to the auditor.
・A description of other services to be provided by the auditor.
・The basis upon which fees will be computed and billing arrangements.
・A request that the client confirm the terms of the engagement by signing the letter .

STEPS IN PLANNING THE AUDIT
(“UPMAPS”)

1. U nderstand…Obtain an understanding of the client’s business and industry.
2. P erform…Perform analytical procedures .
3. M ateriality…Make preliminary about materiality.
4. A udit risk…Evaluate audit risk.
5. P reliminary… Develop preliminary audit strategies .
6. O btain an understanding of the client’s internal control.

AUDIT RISK

Internal control○ － Control risk↑ － Detection risk↓（evidence↑）－ Substantive testing↑

Internal control× － Control risk↓ － Detection risk↑（evidence↓）－ Substantive testing↓

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