Pre Engineered Building Manufacturers Hyderabad.pptx
Planning
1. Difference between materiality
and tolerable error
Materiality: concerns the financial
statements as a whole
Tolerable error: Only concerns the
population being tested
2. Analytical procedures
Analytical procedure are usually carried out
at three stages of the audit process
Analytical procedures comprise the
evaluation of financial information by
studying the relationship between this
information and other financial and non-
financial data.
They include comparison of financial
information with prior periods, budgets and
forecast and similar industries
3. Analytical procedure are used for two
main reasons.
To help understand the client’s financial
statements
To help spot possible errors
4. What is materiality?
“Information is material if its omission or
misstatement could influence the
economic decisions by users, taken on
the basis of the financial statements”
5. Why is materiality
If financial statements contain a material
misstatement they cannot show a true
and fair view.
Auditors therefore must design their
audit procedures to reduce the risk of
material misstatement to an acceptable
level.
This means that auditors must decide on
what they means by material before they
design their procedures
6. Documenting the planning
process
Knowledge of business
Preliminary analytical review
Risk assessment
Materiality
Tolerable error
Audit approach
Independent
Budget and staffing
Timetable and deadlines
8. 1.Gather/confirm knowledge of
the business
Nature of the business
Management
Key staff
Those charged with governance
Accounting systems
Internal controls
KOB discussion