Task 3: Be able to contribute to the planning and conduct of an audit assignment (LO 3: 3.1, 3.2, 3.3 and M1, M2, M3 & D1, D2, D3) 3.1. When you were asked to go for auditing to that organisation, what sort of questions came to your mind and how did you plan the audit with reference to scope, materiality and risk? 3.2. What are the different audit tests which can be applied for your audit plan? 3.3. How audit process is recorded, stored and why these documents are important? Why these documents are important?ContentsIntroduction:2Task 323.1 Audit Planning23.2 Audit Tests23.3 Audit Working Papers4References:4

Introduction:I have chosen Unilever for the purpose of this assignment as my company for analysis. It is one of the largest consumer goods companies in the world.Task 33.1 Audit PlanningAudit Planning is very essential part of successful audit. Every audit should preclude with a proper planning. We shall take into consideration following points for the purpose of audit planning: We shall first understand nature of business of the company. We shall also understand the nature of organization and its system, processes and policies. We shall understand rules and regulations governing the organization and its effect on financial statements before planning the audit. We shall obtain list of related parties to ensure that all the transactions with related parties are adequately covered in audit. We shall also consider scope of our audit at the time of planning. The scope can be ascertained from appointment letter and rules and regulations governing the organization. We shall evaluate internal control systems and its effectiveness to assess the audit risk. We will check whether the company has effective internal control systems or not. We shall also verify whether the internal control systems are working effectively or not. The stronger internal control systems reduce audit risk and weaker internal control systems increases audit risk. We shall also consider materiality of different items of financial statements. If the item is material, it should be given more weight for the purpose of audit and if the item is not material, test checks can be applied.3.2 Audit TestsAuditor needs to obtain sufficient audit evidence to conclude that financial statements are free of material misstatements. Therefore, he conducts audit tests to satisfy himself about quality of financial statements. The auditor should assess effectiveness of internal control system of the organization and carry out substantive tests for this purpose (IAASB, 2009).According to www.thecaq.org (2015), the auditor can apply following tests to audit plan: He can verify system of credits sales to new customer for the purpose of verifying internal control system on credit sales. He can verify whether the company takes credit reference for the new customer, fix credit limits or not. He can also verify whether the company has system of analyzing age wise accounts receivables and making follow ups. The auditor can verify cash collection system to verify internal control on cash receipts. The cashier should not have access to accounts of the customer and the accountant should not have authority to collect cash from the customer. He should confirm this. The auditor can also verify cash disbursement system to verify internal control over cash payments. He should ensure that purchase department should not make payment to suppliers and accounts department should not have authority to make purchase orders and receive materials. The auditor should also verify whole process of purchase. He should ensure that each purchase order is supported by material requisition memo and reorder level of the company. He should also ensure that competitive quotations are obtained from different suppliers and approved list of suppliers is prepared on the basis of this quotations and purchase order is placed to only these suppliers in normal circumstances. He should also ensure that material is received for all purchases. The auditor should also verify system of purchase of fixed assets and capital expenditure. He should ensure that capital budgets are prepared by the company and they are appropriately authorized. He should also ensure that in depth analysis is made before incurring any capital expenditure.

The auditor should also verify system of salary payment. He should ensure that there is proper system of recruiting employees and proper records are maintained for attendance and salary working of employees. He should also satisfy himself that there are adequate internal controls for payment of salary.If the internal control systems of the company are operating effectively, there is less chances of fraud and error in the financial statements. Therefore, auditor can rely on financial statements and reduce level of substantive tests. On the other hand, if the internal control systems of the company are not working effectively, there is likely chance that financial statements may be affected because of fraud and error. Therefore, the auditor is required to increase its substantive tests in this situation (IAASB, 2009).Thus, it can be seen from the above analysis that the auditor can apply various tests to his audit plan and he can modify his plan based on result of these tests.3.3 Audit Working PapersAudit process is recorded and stored through audit working papers. Audit working papers are the documents and records which auditor comes through auditing of an organization and on which he rely for the purpose of expressing his audit opinion. Audit working paper can be in the form of copy of important agreements, copy of minutes of shareholders meeting and directors meeting, article and memorandum of association etc. The auditor should retain important working paper for future reference (IAASB, 2009).According to www.accaglobal.com (2015), importance of audit working papers can be understood with following points: Audit working papers are necessary to ensure that all the quality parameters were followed during audit It provides assurance that the work delegated to the assistants was properly completed and reviewed by the audit partner. Auditor can fix responsibility on the audit assistant who sign the working paper. Audit working papers can assist auditor in court cases against the auditor. The auditor can justify basis of his opinion if creditors or someone else claims that auditor was negligent in performing his duties. It provides evidence that effective audit has been performed. Audit working papers increase the economy, efficiency and effectiveness of the audit It contains sufficiently detailed information which justifies the reasonableness of auditors opinion. It provides guidance to audit staff. It helps planning future audit engagements. It can be used as record of matters for the future audit engagements.Thus, it can be seen from the above discussion that audit working papers are very important for auditor. However, auditor should avoid storing unnecessary working papers as it increases cost of obtaining and retaining working papers without any corresponding benefit.

References:1. IAASB. (2009). 220 Quality Control for an audit of Financial Statements. UK 2. IAASB. (2009). 230 Audit Documentation. UK 3. IAASB. (2009). 240 The Auditors responsibility relating to fraud in an audit of financial statements. UK 4. IAASB. (2009). 300 Planning an audit of financial statements. UK 5. IAASB. (2009). 500 Audit Evidence. UK 6. IAASB. (2009). 520 Analytical Procedures. UK 7. IAASB. (2013). 530 The Independent Auditors report on Financial Statements. UK 8. IAASB. (2013). 580 Management Representations. UK 9. Avis, J. (2008). Management Accounting Decision Management. Oxford: CIMA Publishing.10. Delena, S. (2013). Fraud Analysis: Strategic and Methods for Detection and Prevention. London: Wiley11. Mike, P. (2013). Accounting Made Simple: Accounting explained in 100 pages or less. Simple Subjects LLC.12. Rose, H. (2008). Internal Control Policies and Procedures. London: Wiley 13. Scott, W. (2011). Financial Accounting Theory. Prentice Hall: FT Press14. Simon & Schuster Riahi- Belkaoui A. (2004). Accounting Theory. 5th edition Thomson Learning15. Stephen, P. (2009). Fraud 101: Techniques and Strategies for understanding Fraud. London: Wiley16. Thomas, C. (2011). A practice Guide to Risk Management. Research Foundation of CFA Institute:17. Tracy, J. (2013). Accounting For Dummies. For Dummies18. http://www.thecaq.org/docs/reports-and-publications/caq_icfr_042513.pdf?sfvrsn=2, accessed on March 18, 201519. http://www.accaglobal.com/in/en/student/acca-qual-student-journey/qual-resource/acca-qualification/f8/technical-articles/effective-audit-service.html, accessed on March 18, 201520. http://www.gatesheadhousing.co.uk/wp-content/uploads/2014/07/Item-08-KPMG-Representation-Letter-Year-Ended-31-March-2013.pdf, March 18, 2015