Question

Arif Agri products is a manufacturer of automatic machines used for agriculture purposes. Your auditing firm is the audit engagement partner for the company from the past fifteen years. You are responsible for the audit of Arif Agri products for this year.

The following are the main elements of the financial statements:  

1. Net profit for the year OMR 38 Million,

2. Total assets of the company OMR 78 Million

3. Total debts OMR 50 million. (The debt includes the loan from the bank Muscat and sundry creditors)

Arif agri products import the raw material from USA, German and Japan. The Settlement of the purchases through US dollars. For this purpose the company opened a bank account in HSBC Oman and maintaining transaction in US dollars.

You are conducting the current year audit for Arif Agri products, there are many of the new assistant auditors joined your team for the first time.  

Required:

1. Are all audit plans be same? Can an auditor follow the standard audit plan for all audit engagement. Justify   

2. “An audit plan is necessary when new staff member is assigned to an audit engagement” Justify

3. Why should an auditor document the audit plan?             

Answer 1

1. No, audit plan are not standard and they are drafted based on certain criteria ranges from

• Characteristics of engagement
• Reporting objectives
• Significant factors to direct efforts
• Results of preliminary engagement activities and
• Nature, time, extent of procedures to be performed.

2.Yes, it is necessary for principal auditor to draft the audit plan when new staff is engaged in audit engagement. This is due to the new staff member should get proper guidance based on his requisite capabilities and competence, allow him to co- ordination of work done by auditors of components & experts and also to facilitate direction and supervision to new staff.

3. These are the some of the reasons why audit is planned

• To devote appropriate attention to important areas
• To identify and resolve potential problems on timely basis
• To properly organised & manage audit