Audit Plan 11 Running head: AUDIT PLAN Audit Plan Introduction In this paper, selects a public accounting company and conduct an audit for the selected company. Public accounting company hired a senior partner to complete an external audit to ensure their stakeholders that the company’s financial statements are prepared according to the GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards) standards. In this paper, for conduct an external audit selects Hawaiian Airlines, Inc. that is 8th largest commercial airline largest airlines in term of revenues, profitability and market share in the US. Hawaiian Airlines, Inc. is based in Honolulu, Hawaii and it is considered as the number one on-time carrier in the United States in terms of their history of never had a fatal accident with a hull loss. As a senior partner to complete an external audit the financial statements of Hawaiian Airlines, Inc and test the effectiveness of internal control over financial reporting through evaluate the performance ratios. Outline the critical steps inherent in an audit planning and planning an effective audit program As a senior partner to complete an external audit of the Hawaiian Airlines, Inc, firstly outlines the critical steps related to audit planning that will help to plan an effective audit program. As an external audit partners primary responsibilities are identifies items that causing the financial statements to be materially misstated, execute or design tests to identify whether misstatements have happened, and test the internal control effectiveness over financial reporting thorough use of performance ratio (Thomas & Chizek, 2003). The below diagram is shown the audit planning is a three step process that is underlined by the external auditor, audit committee during evaluated the each audit cycle. International Standards on Auditing (ISA) no.300 has defined three step of the audit planning process, that is described in the below: · Understanding of the entity, its environment and its internal controls system, and information flow process, · Assessing financial reporting or statements risk related to material misstatement · Designing integrated audit processes with the evaluated risk level (Thornton, 2010). These three steps are mentioned in the below diagram of audit plan. (Source: Thornton, 2010) According to the above described the audit process, the senior partner company should undertake performance ratio examine and financial statement analyze actions during planning and designing the audit program. Examine at Least Two Performance Ratios The ratio analysis is used to evaluate the financial performance of a firm in compare to its past performance or competitions performance. Financial ratio indicates the firm ability to utilize the resources that will help to assess and compare financial performance of them over the period. In this audit plan, two performance ratios that is prof ...

1. Audit Plan 11
Running head: AUDIT PLAN
Audit Plan
Introduction
In this paper, selects a public accounting company and conduct
an audit for the selected company. Public accounting company
hired a senior partner to complete an external audit to ensure
their stakeholders that the company’s financial statements are
prepared according to the GAAP (Generally Accepted
Accounting Principles) or IFRS (International Financial
Reporting Standards) standards. In this paper, for conduct an
external audit selects Hawaiian Airlines, Inc. that is 8th largest
commercial airline largest airlines in term of revenues,
profitability and market share in the US. Hawaiian Airlines, Inc.
is based in Honolulu, Hawaii and it is considered as the number
one on-time carrier in the United States in terms of their history
of never had a fatal accident with a hull loss. As a senior
partner to complete an external audit the financial statements of
Hawaiian Airlines, Inc and test the effectiveness of internal
control over financial reporting through evaluate the
performance ratios.
Outline the critical steps inherent in an audit planning and

2. planning an effective audit program
As a senior partner to complete an external audit of the
Hawaiian Airlines, Inc, firstly outlines the critical steps related
to audit planning that will help to plan an effective audit
program. As an external audit partners primary responsibilities
are identifies items that causing the financial statements to be
materially misstated, execute or design tests to identify whether
misstatements have happened, and test the internal control
effectiveness over financial reporting thorough use of
performance ratio (Thomas & Chizek, 2003). The below
diagram is shown the audit planning is a three step process that
is underlined by the external auditor, audit committee during
evaluated the each audit cycle. International Standards on
Auditing (ISA) no.300 has defined three step of the audit
planning process, that is described in the below:
· Understanding of the entity, its environment and its internal
controls system, and information flow process,
· Assessing financial reporting or statements risk related to
material misstatement
· Designing integrated audit processes with the evaluated risk
level (Thornton, 2010).
These three steps are mentioned in the below diagram of audit
plan.
(Source: Thornton, 2010)
According to the above described the audit process, the senior
partner company should undertake performance ratio examine
and financial statement analyze actions during planning and
designing the audit program.
Examine at Least Two Performance Ratios
The ratio analysis is used to evaluate the financial performance
of a firm in compare to its past performance or competitions
performance. Financial ratio indicates the firm ability to utilize
the resources that will help to assess and compare financial
performance of them over the period. In this audit plan, two
performance ratios that is profitability and activity or efficiency

3. ratio is selected to find out efficiency of internal control system
of Hawaii. The below table indicates the past two years
profitability and activity ratio of Hawaiian Airlines, Inc., that
indicates the company performance is declined due to the
declined of ratio in year 2013 from 2012 (Brigham & Daves,
2009).
The profitability ratio of Hawaiian Airlines indicates that the
profitability position of it is decreased continuously as all
profitability ratios are decreased in year 2013 from 2012. Gross
and net profit margin ratios are declined in 2013 from 2012, it
indicates Hawaii profit earning capacity also diminished.
Earnings per share and return of equity ratios are also reduced
that presents the company financial position is not well (Nissim
& Penman, 2001). It represents this situation also declined the
shareholders value that is not significant of the company to
enhance the capital resources as more investors will not invest
in the company.
Activity or efficiency ratios show the efficiency of Hawaii’s
business and management. The company account receivable
ratio and account payable ratio is increased in 2013 from 2011
that indicates its efficiency in collecting outstanding sales and
payable ability. In addition, declined in turnover ratio indicates
the inefficiency of management and business to utilize the
resources (Stickney, Weil, Schipper & Francis, 2009).
2013
2012
Profitability Ratios
Net profit margin
2.41%
2.71%
Gross profit margin
6.20%
6.59%

4. Return on equity (ROE)
13.07%
19.82%
Earnings per share (EPS)
0.98
1.01
Activity Ratios
Net working capital turnover
-40.81
-23.95
Asset turnover
1.00
1.05
Fixed asset turnover
1.62
1.84
Average collection period
12.57
15.02
Accounts receivable turnover
29.04
24.30
Accounts payable period
24.01
23.91
Days of cash
0.23
0.24
Three analytical procedures: Analytical procedure is an
essential part of the audit process and consists of assessments of
financial information through both the financial and non-
financial data. The three analytical procedures that would use in
this audit are ratio analysis, financial statements analysis and
internal control reviews.

5. Analyze the Balance Sheet and Income Statement of the
Company
In this section, financial statements of the Hawaii analyzes
through use of common size analysis method. A common-size
financial statements are produced to display line items as a
percentage on a statement of one common figure that is also
shown in the below appendixes. The common size analysis is
easy to analyze a firm overtime. In the appendixes tables
indicates the common size analysis of the balance sheet and
income statement of Hawaii and represents the company
expenses has increased in 2013 from 2011 that means the
company has not control its operations and other process
(Brigham & Daves, 2009).
The common figure for an income statement represents as a
percent of total sales, while balance sheet common figure
indicates as a percent of total assets and total liabilities and
shareholders’ equity. In the below appendixes the common size
income statement for Hawaii shows that the company spend
more than 60% of sales on aircraft fuel, wages and benefits, and
maintenance materials and repairs. The common size income
statement indicates the company aircraft fuel, wages and
benefits, and maintenance materials and repairs expenses also
increased in 2013 (61.68%) from 2012 (60.74%). It impacts on
the total net income of the company such as the total net income
percent of total sales also decreased in 2013 (2.41%) from 2012
(2.71%). It indicates the weakness of the company internal
control and management less effectiveness (Drake & Fabozzi,
2012).
In addition, common-size balance sheet indicates the company
current sales portion on total sales has declined as it is 30.65%
in 2012 declined to 27.99% in 2013 and the company property
and equipment section increased in 2013 (61.65%) from 2012
(57.28%). Moreover, declined in goodwill in 2012 (4.93%) from
2012 (5.72%) indicates the company has depended on
acquisitions for growth. At the same time, declined in short-
term and long-term liabilities percent of total liabilities and

6. shareholders’ equity in 2013 from 2012 indicates the company
is dependent on the markets to refinance debt while it comes
due (Stickney, Weil, Schipper & Francis, 2009).
Audit Risk Model
The sampling technique would use as the audit risk model to
support the preliminary judgment about materiality. The
sampling technique is widely adopted method of auditing
because it provides the option for the auditor to get the
minimum audit evidence that is appropriate to form valid
conclusions on the preliminary judgment materials (Whittington
& Delaney, 2011). This technique is widely used to reduce the
risk of over auditing at the audit review stage.
The Primary Responsibilities of the Audit Firm
The primary responsibility of the audit firm is to ensure audit’s
is done right and with integrity. In the case of end result is an
unqualified audit report, the audit firm responsibility is to
detect fraud or misstated financial reporting or information and
after find the issues or fraud report in question in the final audit
report (Thornton, 2010).
References
Brigham, E.F. & Daves, P.R. (2009). Intermediate Financial
Management (10th ed.). USA: Cengage Learning.
Drake, P.P. & Fabozzi, F.J. (2012). Analysis of Financial
Statements (3rd ed.). USA: John Wiley & Sons.
Nissim, D. & Penman, S.H. (2001). Ratio Analysis and Equity
Valuation: From Research to Practice. Review of Accounting
Studies, 6, 109–154.
Stickney, C.P., Weil, R.L., Schipper, K. & Francis, J. (2009).
Financial Accounting: An Introduction to Concepts, Methods,
and Uses (13th ed.). Canada: Cengage Learning.
Thomas, E.M. & Chizek, C. (2003). The Seven-step Process to
Risk-based Auditing. The Institute Of Internal Auditors, 2(4).
Thornton, G. (2010). Planning the external audit. Retrieved
from:
http://www.grantthornton.com/staticfiles/GTCom/Audit/Assuran

7. cepublications/Audit%20committee%20guides/ACH-
Guides_Planning-External-Audit_WEB.pdf
Whittington, O.R. & Delaney, P.R. (2011). Wiley CPA Exam
Review 2012, Auditing and Attestation (9th ed.). USA: John
Wiley & Sons.
Appendixes
Hawaiian Holding Inc.
Consolidated Statements of Income
For the Years Ended December 31, 2013, & 2012
2013
2012
Operating Revenue:
Passenger
90.12%
90.05%
Others
9.88%
9.95%
Total Revenue
100.00%
100.00%
Operating Expenses:
Aircraft fuel, including taxes and delivery
32.41%
32.19%
Wages & benefits
19.83%
19.19%
Aircraft rent
5.03%

8. 5.03%
Maintenance materials and repairs
9.43%
9.35%
Aircraft and passenger servicing
5.60%
5.29%
Commissions and other selling
5.84%
5.83%
Depreciation and amortization
3.85%
4.36%
Other rentals and landing fees
3.77%
4.36%
Other rentals and landing fees
8.03%
100.00%
Lease termination changes
Total expenses
93.80%
93.41%
Operation Income
6.20%
6.59%
Non-operating income (Expenses):
Interest expenses and amortization of debt discounts and
issues cost
-2.34%
-2.22%
Interest income

9. 0.03%
0.03%
Capitalized interest
0.59%
0.54%
Losses on fuel derivatives
-0.25%
-0.58%
Gains on Investments
Other, net
-0.22%
0.01%
Total
-2.20%
-2.22%
Income before income taxes
4.01%
4.37%
Income tax expense
1.60%
1.66%
Net income (loss)
2.41%
2.71%
Net income (loss) Per Common Stock Share:
Basic
1.00
1.04
Diluted
0.98
1.01
Weighted Average Number of Common Stock Share

10. Outstanding:
Basic
52099
51314
Diluted
53155
52535
Hawaiian Holding Inc.
Consolidated Balance Sheets
For the Years Ended December 31, 2013, & 2012
2013
2012
ASSETS
Current Assets:
Cash and cash equivalent
19.56%
21.75%
Restricted cash
0.90%
0.27%
Total Cash, Cash equivalent and Restricted Cash
20.46%
22.02%
Account receivable, net
3.43%
4.33%
Spare parts and suppliers, net
0.91%

11. 1.48%
Deferred tax assets, net
0.80%
0.95%
Prepaid expenses and others
2.39%
1.88%
Total
27.99%
30.65%
Property and equipment, net
Flight Equipment
60.06%
53.60%
Pre-delivery deposits on flight equipment
8.72%
10.35%
Other property and equipment
7.99%
6.71%
77.04%
70.65%
Less accumulated depreciation and amortization
-15.11%
-13.37%
Total
61.65%
57.28%
Other assets:
Long-term prepayments and other
4.25%

12. 2.98%
Restricted cash
0.07%
-
Deferred tax assets, net
-
1.95%
Intangible assets, net
1.11%
1.42%
Goodwill
4.93%
5.72%
Total assets
100.00%
100.00%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
4.15%
4.40%
Air traffic liability
18.90%
20.83%
Other accrued liabilities
4.51%
4.01%
Current maturities of long-term and capital lease obligations
2.87%

13. 5.80%
Total
30.43%
35.04%
Long-term Debt, less discount, and Capital Lease Obligations
34.39%
29.64%
Other Liabilities and Deferred Credits
Accumulated pension and other postretirement benefit
obligations
12.20%
18.89%
Other liabilities and deferred credits
2.75%
2.03%
Deferred tax liability, net
1.89%
-
Total
16.84%
20.92%
Commitments and Contingent Liabilities
Shareholders’ equity:
Special preferred stock, $0.01 par value per share
Common stock, $0.01 par value per share,
2013 and 2012, respectively

14. 0.02%
0.03%
Capital in excess of par value
12.47%
14.20%
Accumulated income
7.82%
6.29%
Accumulated other comprehensive loss, net
-1.97%
-6.11%
Total
18.34%
14.40%
Total liabilities and shareholders’ equity
100.00%
100.00%