Background Research

The most important aspect is that before the start of the audit, the auditor must establish and discover as much as possible regarding the following:

  1. The present and the future trends and prospects regarding the industry into the client operates
  2. The past history and the present condition and future prospects and trends regarding the client
  3. The management and key personnel of his client and any recent changes
  4. The products and manufacturing and trading processes of the client and any recent changes
  5. The locations of all his client’s operations Any difficulties encountered by the client in manufacturing, trading, expanding, contracting, labour relations or financing
  6. Any problems in accounting or in internal control systems
  7. Any problems in accounting measurement
  8. Any problems likely to lead to audit risk
  9. Any problems likely to be met in carrying out the audit
  10. Any changes in law or accounting practising which may affect the client

The background research is done through reading and interviewing:

  1. Previous years audit files
  2. Audit staff who have been previously engaged on the audit
  3. Published materials concerning the client company and the industry
  4. The company’s interim, internal and management accounts
  5. The management of the enterprise
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