Practical Ways to Improve the Exercise and Documentation of Professional Scepticism in an ISA Audit

Transcription

1 Practical Ways t Imprve the Exercise and Dcumentatin f Prfessinal Scepticism in an ISA Audit May 2013

2 This paper was prepared by Auditing and Assurance staff at the Chartered Prfessinal Accuntants f Canada and the Institute f Chartered Accuntants in Australia. It has nt been adpted, endrsed, apprved r therwise acted n by the Canadian Auditing and Assurance Standards Bard r any ther cmmittee r bard f the Chartered Prfessinal Accuntants f Canada and the Institute f Chartered Accuntants in Australia. Practitiners are expected t use prfessinal judgment in determining whether and hw t apply the suggestins cntained in this paper. Questins r cmments n this dcument shuld be sent t: Gregry P. Shields, CPA, CA Directr, Auditing and Assurance Standards Chartered Prfessinal Accuntants f Canada 277 Wellingtn Street West Trnt, ON Canada M5V 3H2 Tel. +1 (416) gshields@cpacanada.ca Liz Stamfrd, FCA Head f Audit Plicy Institute f Chartered Accuntants in Australia 33 Erskine Street Sydney, NSW Australia 2000 Tel. +61 (2) liz.stamfrd@charteredaccuntants.cm.au 2 May 2013

3 Table f Cntents Intrductin and purpse f the paper 4 Key questins in develping a practical apprach t enhancing prfessinal scepticism 5 Hw the apprach set ut in this paper can enhance the exercise and dcumentatin f prfessinal scepticism 7 Overview f the apprach 8 Cncluding cmments 9 Appendix A: Prfessinal scepticism questin series 10 A. Enhancing prfessinal scepticism during preliminary engagement activities and planning the engagement 11 B. Enhancing prfessinal scepticism during the engagement 12 C. Enhancing prfessinal scepticism near the end f the engagement 15 Appendix B: Illustratin f a team planning discussin wrksheet 17 3 May 2013

4 Intrductin and purpse f the paper A high-quality audit requires the exercise f prfessinal judgment by the auditr and a mindset f prfessinal scepticism. Because it is part f the auditr s mindset, prfessinal scepticism depends n the persnal behaviural traits f thse invlved in the audit and is influenced by such things as the mtivatin, cmpetencies, educatin, training and experience f each auditr. The Internatinal Standards n Auditing (ISAs) nte that prfessinal scepticism is necessary t the critical assessment f audit evidence. This includes questining cntradictry audit evidence and the reliability f dcuments and respnses t inquiries and ther infrmatin btained frm management and thse charged with gvernance. It als includes cnsideratin f the sufficiency and apprpriateness f audit evidence btained in light f the circumstances. Evidencing the exercise f prfessinal scepticism is critical in demnstrating that the audit was planned and perfrmed in accrdance with ISAs. Audit inspectrs thrughut the wrld have expressed cncern abut whether prfessinal scepticism is being applied prperly in practice. Fr example, they have cmmented that sme auditrs have: nt respnded apprpriately in circumstances when incnsistent r cntradictry audit evidence was btained; been ver-reliant n management representatins; sught audit evidence t crrbrate rather than challenge management s assertins; r accepted unreliable audit evidence as being sufficient and apprpriate. The ISAs require the auditr t prepare sufficient audit dcumentatin t enable an experienced auditr, having n previus cnnectin with the audit, t understand, amng ther things: the results f the audit prcedures perfrmed and the audit evidence btained; and significant matters arising during the audit, the cnclusins reached theren and significant prfessinal judgments made in reaching thse cnclusins. Further, if the auditr identified infrmatin that is incnsistent with the auditr s final cnclusin regarding a significant matter, the auditr must dcument hw the auditr addressed the incnsistency. 4 May 2013

5 The ISAs nte that there may be n ne way in which the auditr s prfessinal scepticism is dcumented. Nevertheless, the audit dcumentatin may prvide evidence f the auditr's exercise f prfessinal scepticism in accrdance with the ISAs. Such evidence may include specific prcedures perfrmed t crrbrate management's respnses t the auditr's inquiries. The purpse f this paper is t prvide ne practical apprach fr practitiners t enhance the exercise f prfessinal scepticism in an audit f financial statements and reflect this in the audit dcumentatin. The tpic f prfessinal scepticism can be scped very bradly. This paper des nt attempt t address all matters. Fr example, the paper excludes actins that might be taken at the firm level that culd fster and enhance the exercise f prfessinal scepticism, such as thrugh recruitment, frmal training, incentive mechanisms, r perfrmance evaluatins. The paper is develped in the cntext f an engagement team made up f members with varying experience, training and prfessinal scepticism. Thse encuntering ther aspects, such as a sle practitiner, r grup audit situatins invlving grup and cmpnent auditrs, may find the suggestins in this paper useful in addressing their circumstances. Key questins in develping a practical apprach t enhancing prfessinal scepticism D the different rles played by persns invlved in the engagement affect hw they exercise prfessinal scepticism? Members f the engagement team, and thers prviding assistance n the audit, d have different rles in relatin t exercising prfessinal scepticism. Fr example: The engagement partner. The engagement partner sets the tne fr the engagement, including the exercise f prfessinal scepticism. The engagement partner brings extensive experience t bear in assessing whether prfessinal scepticism was exercised apprpriately thrughut the audit by ther members f the engagement team, as well as by experts and cnsultants wh have prvided input t the engagement. Thse wh perfrm a review functin during the audit, such as audit supervisrs r managers. Audit supervisrs have the experience t challenge the wrk perfrmed by mre junir staff and assist in integrating the findings f different engagement team members. Thse wh are respnsible fr perfrming audit prcedures and gathering audit evidence. Althugh less experienced, such team members face multiple pprtunities during an audit t apprpriately exercise prfessinal scepticism. 5 May 2013

6 Auditr s experts and cnsultants wh prvide input t the engagement team. Cmmunicatins with experts and cnsultants, and review f their wrk, takes int accunt that nt all experts and cnsultants will necessarily have the same educatin, training and experience as members f the engagement team in exercising prfessinal scepticism. The engagement quality cntrl reviewer. The engagement quality cntrl reviewer prvides an bjective evaluatin f the significant judgments made by the engagement team and cnclusins reached. They are in a key psitin t determine whether prfessinal scepticism was apprpriately exercised by the engagement team. What actins can be taken t enhance the exercise f prfessinal scepticism during an engagement? The fur elements f prfessinal scepticism set ut in paragraph A18 f ISA 200, Overall Objectives f the Independent Auditr and the Cnduct f an Audit in Accrdance with Internatinal Standards n Auditing, address this issue. The paragraph states that prfessinal scepticism includes being alert t: audit evidence that cntradicts ther audit evidence btained; infrmatin that brings int questin the reliability f dcuments and respnses t inquiries t be used as audit evidence; cnditins that may indicate pssible fraud; and circumstances that suggest the need fr audit prcedures in additin t thse required by the ISAs. Hw can prfessinal scepticism be better demnstrated in an engagement? Because prfessinal scepticism is influenced by persnal behaviral traits and individual cmpetence, demnstrating hw prfessinal scepticism was exercised is ften prblematic in an engagement. This paper suggests hw dcumentatin might be enhanced t mre clearly demnstrate hw prfessinal scepticism was exercised by thse invlved in the engagement thrughut the engagement. 6 May 2013

7 Hw the apprach set ut in this paper can enhance the exercise and dcumentatin f prfessinal scepticism There are many reasns why there may be an actual r perceived lack f prfessinal scepticism exercised n sme engagements. The fllwing are challenges t enhancing the exercise and dcumentatin f prfessinal scepticism at the engagement level and prvide a basis fr the apprach set ut in this paper: Establishing a clearer link between the exercise f prfessinal scepticism and the sufficiency and apprpriateness f evidence btained. Actins taken during the engagement may demnstrate prfessinal scepticism but are nt necessarily dcumented because they are cnsidered nt t be cntributing t sufficient apprpriate audit evidence. The apprach in this paper encurages the dcumentatin f these actins. Exercising prfessinal scepticism thrughut the engagement. Prfessinal scepticism needs t be exercised thrughut the engagement but may nt always be tp f mind. T prmte this mindset, frequent stand-back reviews during all phases f the engagement by all members f the engagement team are suggested. Establishing effective interactin amng senir and junir staff in exercising prfessinal scepticism. Senir engagement persnnel may nt understand hw t encurage the exercise f prfessinal scepticism by junir staff. The apprach in this paper may help reinfrce the rle f senir persnnel in this respect. Ensuring that the benefits f the additinal dcumentatin f the exercise f prfessinal scepticism utweigh related csts. The ISAs and Internatinal Standard n Quality Cntrl 1 (ISQC 1), Quality Cntrl fr Firms that Perfrm Audits and Reviews f Financial Statement, and Other Assurance and Related Services Engagements, already cntain extensive dcumentatin requirements. On the cst side, dcumentatin f prfessinal scepticism suggested in this paper is intended t be integrated, where practicable, with existing dcumentatin that cmplies with the ISAs withut creating a significant additinal dcumentatin burden. On the benefits side, this paper suggests dcumenting specific actins that demnstrate the exercise f prfessinal scepticism t facilitate quality cntrl reviews and audit inspectins. It avids the use f bilerplate r trite phrases (e.g., I have been prfessinally skeptical ) that d little t btain sufficient apprpriate audit evidence. 7 May 2013

8 Establishing a feedback lp frm the exercise f prfessinal scepticism n individual engagements t the firm s verall initiatives t imprve prfessinal scepticism. Firms ften prvide staff training n prfessinal scepticism but it is difficult t gauge hw effective such training was in practice. The apprach in this paper may help strengthen the understanding f thse invlved in the engagement f hw t apply that training in practice and prvide useful feedback t imprve such training. Overview f the apprach This paper sets ut a series f questins that were develped fr different phases f the engagement. The questins are based n the fur elements f prfessinal scepticism nted abve and are designed t reflect the different rles and levels f thse invlved in an engagement. The suggested questins are generally pen ended t prmte respnses that demnstrate hw prfessinal scepticism was exercised in the engagement. Cnsideratins and examples elabrate n the questins presented. Suggestins are als made as t hw the respnses t the questins psed may be dcumented. There are different ways f incrprating the questins and the related respnses int audit dcumentatin. One apprach might invlve the preparatin f individual selfreview questinnaires that wuld be integrated t readily enable reviewers btaining an verall understanding f hw prfessinal scepticism was exercised in the audit and drill dwn t any level f detail they cnsider apprpriate. The Prfessinal Scepticism Questin Series examples can frm the basis f these self-review questinnaires. There are advantages and disadvantages with this apprach. On the ne hand, it wuld require additinal dcumentatin. On the ther hand, this dcumentatin may be mre effective than ther appraches in fcusing attentin t the exercise f prfessinal scepticism, particularly in high risk areas f the audit where the exercise f prfessinal scepticism is critical. Anther apprach might be t incrprate the questins int ther existing frms r wrksheets used in the engagement. The paper prvides an illustratin f a Team Planning Discussin Wrksheet, which incrprates a sectin (sectin 6) dealing with prfessinal scepticism. Such an apprach wuld avid significant additinal dcumentatin. Hwever, it wuld require adaptatin f existing frms and wrksheets. These are just tw pssible appraches t dcumenting the exercise f prfessinal scepticism and ther appraches are pssible. Each audit firm wuld need t develp its wn apprach based n its circumstances and recgnizing the challenges t enhancing the exercise and dcumentatin f prfessinal scepticism identified in this paper. 8 May 2013

9 Cncluding cmments This paper prpses practical ways in which the exercise f prfessinal scepticism can be enhanced in an audit f financial statements and reflected in audit dcumentatin by setting ut a series f questins fr different phases f the engagement. Practical experience f using the questins may enable the questins t be refined and assist in identifying the best means f demnstrating the exercise f prfessinal scepticism in an effective manner. 9 May 2013

10 Appendix A: Prfessinal Scepticism Questin Series This sectin cntains questins that may be asked by the respective individuals invlved in an audit engagement during different phases f the engagement. The questins are generally phrased as pen questins t encurage ther than Yes/N respnses. Cnsideratins and examples elabrate n the questins presented. Suggestins are made as t hw the respnses t the questins psed may be dcumented. Prfessinal Scepticism Questin Series: Preliminary and Planning 10 May 2013

11 A. Enhancing prfessinal scepticism during preliminary engagement activities and planning the engagement A: Questins fr the engagement partner and ther key engagement team members t cnsider 1. What actins t eliminate threats t independence, r reduce them t an acceptable level, were taken that will enhance the prfessinal scepticism f the team? 2. What factrs may affect the ability f the engagement team t exercise apprpriate prfessinal scepticism during the audit? 3. Hw has the directin, supervisin and perfrmance f the engagement been planned t prmte the applicatin f prfessinal scepticism by all f the team? 4. Hw have areas where the use f prfessinal scepticism will be critical t the audit been cmmunicated t the engagement team? Examples f actins t take in answering the questins Facilitate planning meetings that include a fcus n the apprpriate exercise f prfessinal scepticism. Explain what is meant by prfessinal scepticism and hw it applies t this engagement. Fster discussin amng team members that allws less experienced members t raise questins in a nn-threatening envirnment. Ensure all team members understand the bjectives f the assigned wrk, including thse aspects f their particular assignments where prfessinal scepticism is likely t be mst imprtant. Identify the types f circumstances when less-experienced team members must cnsult n a timely basis with mre experienced team members. Explain hw audit evidence btained by individual team members will be aggregated and integrated and the imprtance f cmmunicatin and cperatin in exercising prfessinal scepticism. Identify whether there are aspects f the audit f the prir year where, in retrspect, there is scpe t imprve the exercise f prfessinal scepticism. Discuss the relatinship f the engagement team with management and client staff fr the particular engagement, including: hw t balance the need t keep an apprpriate wrking relatinship with the client while maintaining a questining mind; and whether there are matters particular t this audit that need t be taken int accunt in dealing with client persnnel; fr example, shuld nly senir engagement team members deal with certain client emplyees wh are perceived as psing an intimidatin threat t junir engagement staff? Identify the higher risk areas f the audit that shuld be undertaken as early n as practicable in the audit s that time pressures near the end f the engagement will nt adversely affect the exercise f prfessinal scepticism. Such areas may be identified frm the planning prcess, prir audits f the entity, r frm audits f similar entities and related audit inspectin reprts that identify prfessinal scepticism implicatins. Such areas may include valuatins, ging cncern r related party transactins. Suggestins n hw respnses may be dcumented Questins A:1-4 and respnses may be dcumented by way f a Preliminary Engagement Prfessinal Scepticism Questinnaire (using the questins as a base) that is cmpleted when dcumenting cmpliance with paragraphs 11, 14 and 15(a) f ISA 220, Quality Cntrl fr an Audit f Financial Statements, and paragraph 5 f ISA 300, Planning an Audit f Financial Statements. Prfessinal Scepticism Questin Series: Preliminary and Planning 11 May 2013

12 B. Enhancing prfessinal scepticism during the engagement B1: Questins fr the individuals perfrming audit prcedures and gathering audit evidence t cnsider 1. What reasnable alternatives ther than thse put frward by management have I cnsidered? 2. What evidence have I btained that supprts management s assertins and what evidence des nt supprt thse assertins? 3. Des the evidence I have btained integrate with that btained in ther areas f the audit? 4. Hw have I respnded t identified discrepancies r incnsistencies? 5. Hw d I knw that the audit evidence I have btained is reliable? 6. What were the results f my stand-back review befre cncluding n the prcedures perfrmed and the evidence btained? 7. What is my basis fr cncluding n the sufficiency and apprpriateness f the evidence I have btained? Examples f actins t take in answering the questins Obtain and apply an bjective viewpint in cnsidering all reasnable alternatives. Management may have a biased view f pssible alternatives. The extent t which alternatives need t be cnsidered may be affected by matters such as: the significance f the risks being addressed; whether the alternatives put frward by the client are cnsistent with thse f previus perids; whether there are alternatives that management identified but rejected withut apparent gd reasn; whether there are alternatives nt cnsidered by management; the cmplexity r subjectivity f the matter indicating the need t cnsult with mre experienced engagement team members, cnsultants within the firm, r auditr s experts; and the auditr s previus experience with similar items. Use inquiry techniques that recgnize the pssibility f different perspectives n an issue and give apprpriate cnsideratin t each. The auditr may btain audit evidence that supprts but als evidence that cntradicts management s assertins. Cnsider whether evidence btained in ther areas f the audit either crrbrates r is incnsistent, and reslve significant incnsistencies. It may be necessary t cnsult with senir members f the engagement team t help identify and/r reslve incnsistencies in evidence btained. Reslutin may require a change in the management s psitin, which may need t be escalated t the engagement partner fr discussin with management and thse charged with gvernance. Where practicable, develp the auditr s wn expectatin f the utcme f the prcedure befre perfrming it. This enables the auditr t avid being biased by the initial psitin taken by management. Identified discrepancies r incnsistencies may affect the auditr s assessment f the risks f material misstatement and ther planned audit prcedures. Cnditins that indicate pssible fraud need t be brught t the attentin f the audit supervisr/manager. Be alert fr circumstances when audit evidence may have been tampered with (e.g., evidence btained electrnically in an unsecured manner). Representatins frm management n their wn d nt prvide sufficient apprpriate audit evidence abut a matter. Prfessinal Scepticism Questin Series: During Engagement 12 May 2013

13 B1: Questins fr the individuals perfrming audit prcedures and gathering audit evidence t cnsider Examples f actins t take in answering the questins (cntinued) Stand back at apprpriate times in perfrming each audit prcedure and ask Am I missing smething? In particular, a stand back helps in assessing why ther alternatives were rejected. Cnsider the sufficiency and apprpriateness f audit evidence in relatin t the risk f material misstatement and ptential impact n sharehlders. D yu have sufficient apprpriate audit evidence t be able t cnclude n management s assertins such as existence, cmpleteness and valuatin? Suggestins n hw respnses may be dcumented Questins B1:1-7 and respnses may be dcumented by way f a Staff Prfessinal Scepticism Self-Review Questinnaire (using the questins as a base) when meeting the dcumentatin requirements in paragraph 8 f ISA 230, Audit Dcumentatin. Prfessinal Scepticism Questin Series: During Engagement 13 May 2013

14 B2: Questins fr individuals perfrming a supervisin r review functin (the audit supervisr/manager) t cnsider 1. T what extent d the cnclusins reached accrd with my wn expectatins? 2. Hw d I knw that staff reached cnclusins in an unbiased manner? 3. T what extent is the audit evidence btained sufficient and apprpriate in relatin t the assessment f the risks f material misstatement? 4. Hw were incnsistencies r cntradictins identified and apprpriately reslved? 5. T what extent have any implicatins fr ther aspects f the audit been identified and cmmunicated t thse respnsible and where are they evidenced? 6. Has my stand-back review f the audit wrk perfrmed identified anything that is nt apprpriately dcumented in the file? 7. What supprt d I have t cnclude n the sufficiency and apprpriateness f the evidence btained? Fr example, am I satisfied that I have seen clear evidence t supprt management s assertins such as cmpleteness, existence, rights and bligatins, and valuatin fr each material item? Examples f actins t take in answering the questins Challenge the cnclusins reached by less-experienced team members. Such challenges will be based, fr example, n the insights and experience the supervisr has btained frm being invlved in ther aspects f the audit r ther audits f similar entities. Challenge any indicatin that staff has accepted the representatins f management withut cnsidering the need t crrbrate them with ther audit evidence. Staff may have inapprpriately discunted evidence that cntradicts management s assertins. Identify and reslve dubts abut the reliability f audit evidence btained, including, fr example, cntradictins r incnsistencies in the audit evidence btained that less-experienced staff may either nt have identified r nt apprpriately reslved thrugh ther audit prcedures. Fr example, findings in ne area may indicate ptential management bias that may need t be cnsidered in relatin t findings in ther areas f the audit, r may indicate the need t revise risk assessments and related audit prcedures. Indicatrs f pssible fraud need t be specifically addressed. It may als be useful t rank the types f audit evidence btained based n varius factrs (e.g., relative reliability f the surce f the evidence). Suggestins n hw respnses may be dcumented Respnses t questins are ften best btained thrugh a review f the audit wrking papers in cnjunctin with an engaged discussin between the audit supervisr/manager and staff. Questins B2:1-7 and respnses t this discussin may be dcumented by way f an Audit Supervisr Self-Review Questinnaire (using the questins as a base) and/r by enhancing the existing dcumentatin prepared by ther engagement team members (e.g., thrugh preparatin f additinal memranda). The audit supervisr/manager that is respnsible fr a number f different aspects f an audit may need t summarize and integrate the Audit Supervisr Prfessinal Scepticism Self-Review Questinnaires fr thse aspects f the audit int an verall summary t facilitate the engagement partner s review f hw prfessinal scepticism was applied in key parts f the audit. Prfessinal Scepticism Questin Series: During Engagement 14 May 2013

15 C. Enhancing prfessinal scepticism near the end f the engagement C1: Questins fr the engagement partner t cnsider 1. T what extent d the cnclusins reached accrd with my wn expectatins? 2. Hw have I satisfied myself that any implicatins fr ther aspects f the audit were identified and addressed? 3. Hw have I satisfied myself that incnsistencies and cntradictins were identified and addressed? 4. Hw have I satisfied myself that cnditins that indicate ptential fr fraud were identified and addressed? 5. Hw have I satisfied myself that apprpriate additinal audit prcedures were perfrmed when warranted? 6. Hw have I satisfied myself that prfessinal scepticism was applied by engagement team members in btaining sufficient apprpriate audit evidence? 7. Have thse charged with gvernance been infrmed f areas where apprpriate exercise f prfessinal scepticism was critical in assessing the sufficiency and apprpriateness f audit evidence btained? Examples f actins t take in answering the questins Challenge the cnclusins reached by team members. Such challenges will be based n, fr example, the insights and experience the engagement partner has btained frm being invlved in ther aspects f the audit, r ther audits f similar entities. Perfrm a stand-back review f hw prfessinal scepticism was applied in key aspects f the engagement t supprt the engagement partner s cnclusin that the audit pinin was supprted by sufficient apprpriate audit evidence. Fr example, cnsider perfrming a walk-thrugh t understand hw the engagement team has respnded t significant risks and ther risks f material misstatement. Such a walkthrugh may invlve challenging staff as t hw they have applied prfessinal scepticism during the engagement and where this is evidenced in the file. Cmmunicate with thse charged with gvernance when the auditr has faced challenges in exercising prfessinal scepticism during the audit, as it may assist the audit cmmittee fulfill its respnsibility fr versight f the financial reprting prcess. It may als allw thse charged with gvernance t assist the auditr in identifying apprpriate surces f audit evidence. Suggestins n hw respnses may be dcumented Questins C1:1-6 and respnses may be dcumented in an Engagement Partner Prfessinal Scepticism Walk- Thrugh Questinnaire (using the questins as a base) as part f dcumenting cmpliance with paragraph 17 f ISA 220, Quality Cntrl fr an Audit f Financial Statements. Cmmunicating abut prfessinal scepticism with thse charged with gvernance may be dcumented when dcumenting cmpliance with the requirements in ISA 260, Cmmunicatin with Thse Charged with Gvernance. Prfessinal Scepticism Questin Series: Near the End 15 May 2013

16 C2: Questins fr the engagement quality cntrl reviewer (EQCR) t cnsider 1. T what extent d the significant judgments and cnclusins reached by the engagement team reflect the apprpriate exercise f prfessinal scepticism? 2. Hw have I satisfied myself that selected audit dcumentatin I have reviewed related t the abve matters reflects the apprpriate exercise f prfessinal scepticism? 3. Hw have I satisfied myself during discussins f significant matters with the engagement partner that prfessinal scepticism was exercised? Examples f actins t take in answering the questins In perfrming the quality cntrl review required by paragraph 20 f ISA 220, Quality Cntrl fr an Audit f Financial Statements, bjectively evaluate f the significant judgments made by the engagement team and the cnclusins reached in frmulating the auditr s reprt, including specific cnsideratin f whether there is evidence that apprpriate prfessinal scepticism was exercised by the engagement team in making thse judgments. Suggestins n hw respnses may be dcumented Questins C2:1-3 and respnses may be dcumented in an EQCR Prfessinal Scepticism Questinnaire, as part f dcumenting cmpliance with paragraph 20 f ISA 220. Prfessinal Scepticism Questin Series: Near the End 16 May 2013

17 Appendix B: Illustratin f a Team Planning Discussin Wrksheet Entity Perid ended Date/time f discussin 20 Attendees Objective: T discuss amng the engagement team the susceptibility f the entity s financial statements t material misstatement and t develp a respnsive and efficient audit strategy. Agenda Ntes and decisins reached W/P Ref. 1 Discuss the nature f the entity, users f the financial statements, materiality, changes in peratins, key persnnel and areas t watch. Als address: (a) timing and scpe f engagement; (b) etc. 2 Discuss the susceptibility f the entity s financial statements t material misstatement due t fraud r errr. Cnsider: (a) material balances and transactins; (b) etc. 3 Identify the ptential fr fraud. (Cnsider develping specific fraud scenaris.) Refer t step 2 abve and discussins abut fraud with management. Als cnsider: (a) knwn instances f fraud that has ccurred in the past; (b) etc. 4 Discuss ptential audit efficiencies: (a) reducing wrk perfrmed where the risk f material misstatement is lw; (b) etc. Team Planning Discussin Wrksheet 17 May 2013

18 5 Discuss and agree n the verall audit strategy. Cnsider: (a) nature f risk assessment prcedures required; (b) etc. 6 Discuss the means f enhancing prfessinal scepticism. Cnsider: (a) whether specific actins are needed t enhance prfessinal scepticism (e.g., has senir engagement staff dealt with difficult client emplyees); (b) fcusing n high risk areas earlier in the engagement t avid ptential time pressures; (c) circumstances where engagement team members are likely t need t cnsult mre senir team members (e.g., when reviewing management assumptins abut cmplex accunting estimates); (d) hw audit evidence will be integrated acrss the whle engagement team (e.g., t identify cntradictins and incnsistencies); and (e) areas arising frm planning, prir audits f the entity r frm similar entities, and related audit inspectin reprts where cncerns may arise abut the need fr prfessinal scepticism (e.g., when evaluating the reliability f audit evidence). Describe actin steps arising frm meeting Wh is respnsible Deadline Actual cmpletin All significant matters raised during the audit planning meeting are dcumented abve. Reviewed by Date Final sign-ff All matters identified fr actin abve (actin steps) were cmpleted. Reviewed by Date Team Planning Discussin Wrksheet 18 May 2013