Obtaining an understanding of the nature of internal control is an essential part of this understanding, as it allows the auditor to identify areas that may be misstated and to design other procedures based on characteristics of the existing system. Risk assessment procedures are used here and include inquiries of management and others within the entity, analytical procedures, observation and inspection, and other procedures. Obtain an Understanding of the Client and Its Environment Īuditors must attain a sufficient background to assess the risk of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Planning continues throughout the entire audit as the auditor accumulates sufficient appropriate audit evidence to support the audit opinion. In addition, they develop an overall audit strategy, an audit plan, and an audit program. During planning auditors establish an understanding with their client as to the nature of services to be provided and the responsibilities of each party-this is ordinarily accomplished through use of an engagement letter. Audit planning involves developing an overall strategy for performing the audit.
