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:
- The present and the future trends and prospects regarding the industry into the client operates
- The past history and the present condition and future prospects and trends regarding the client
- The management and key personnel of his client and any recent changes
- The products and manufacturing and trading processes of the client and any recent changes
- The locations of all his client’s operations Any difficulties encountered by the client in manufacturing, trading, expanding, contracting, labour relations or financing
- Any problems in accounting or in internal control systems
- Any problems in accounting measurement
- Any problems likely to lead to audit risk
- Any problems likely to be met in carrying out the audit
- Any changes in law or accounting practising which may affect the client
The background research is done through reading and interviewing:
- Previous years audit files
- Audit staff who have been previously engaged on the audit
- Published materials concerning the client company and the industry
- The company’s interim, internal and management accounts
- The management of the enterprise
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