Chapter 2

3.Name three sources of business and industry information

Sources of business and industry information are the following:

- PICPA audit and accounting guides
- Industry trade publications
- Government publications

8. "An audit program is desirable when new staff members are assigned to an engagement, but
an experienced auditor should be able to conduct an audit without reference to an audit
program." Do you agree? Discuss.

I don’t agree, because the quotation implies that an audit plan is no more than checklists
of instructions for inexperienced auditors. In deciding whether to accept or reject an
audit engagement one of the things firms need to consider if it is competent enough to
accept the engagement and its ability to serve the client properly. The audit work should
be assigned to personnel who have the appropriate capabilities, competence and time to
perform the audit engagement in accordance with professional standards. The nature
and extent of planning activities will vary according to the size and complexity of the
entity, the auditor’s previous experience with the entity, and changes in circumstances
that occur during the audit engagement. So everyone has a capability and competence to
accept an audit engagement. It is just that the assigning of work is completely based on
the complexity of an engagement.

Exercise 2
Mary dizon has been asked to accept an engagement to audit a small financial institution. Dizon
has not previously audited a financial institution

C. discuss how this knowledge of the client and its environment will help dizon on planning and
performing an audit in accordance with generally accepted auditing standard

In terms of accepting a client, mostly they investigate first the company to determine its
acceptability. To know its standing in business, financial stability and its relation to its
previous auditor firm. Some firms choose clients with low risk to prevent potential
lawsuits, non billable time and unpaid fees.

However, in terms of planning and performing an audit engagement having a knowledge

of your clients environment will be a big help. The nature and extent of planning
activities will vary according to the size and complexity of the entity.The auditor must
obtain a sufficient understanding of the entity and its environment to assess risks of
material misstatement of the financial statements and to design and perform further audit
procedures.