00:48Firstly, auditors need to determine the characteristics of the client company, which will define the scope of the engagement.
00:55For example, if the client is a listed company, JSC listing requirements and the King-IV report requirements may affect the scope of the engagement.
01:04Understanding these characteristics helps auditors tailor their approach to the specific needs and regulatory environment of the client, ensuring compliance and relevance.
01:13Secondly, auditors must establish the reporting objectives of the engagement, which will influence the timing of the audit.
01:20This includes considering reporting deadlines and scheduled meetings with the audit committee.
01:25Aligning the audit schedule with these objectives ensures timely and accurate reporting, meeting the needs of stakeholders and regulatory bodies.
01:33Thirdly, auditors need to identify important factors that will determine the focus or direction of the audit.
01:40This includes considering results of previous audits and account headings that carry a higher risk of misstatement.
01:46By focusing on these critical areas, auditors can allocate resources effectively and address potential risks proactively.
01:53Fourthly, auditors should consider any aspects of the preliminary engagement activities that may affect the audit strategy.
02:01This includes concerns over the competence and experience of senior accounting personnel.
02:06Addressing these concerns early in the process helps ensure the audit team is adequately prepared and equipped to handle the engagement.
02:14Fifthly, auditors must ascertain the resources necessary to perform the engagement.
02:19This involves determining the resources to be allocated to specific audit areas, such as the level of staff experience required and the use of experts.
02:28The amount of resources to be allocated, including the number of staff for tasks like the inventory count, the timing of the allocation of resources, such as during an interim stage,
02:38how the resources are to be managed, directed, and supervised, including meetings, evaluations, and quality control reviews.
02:46Proper resource allocation ensures that the audit is conducted efficiently and effectively with the right expertise applied to critical areas.
02:54Let's consider an example.
02:56ABC Audit Firm is planning an audit for XYZ Limited.
03:01They start by determining XYZ Limited S characteristics, such as their listing on the JSC and adherence to the KING-IV report.
03:09They establish reporting objectives aligned with scheduled meetings and deadlines.
03:14They identify key focus areas based on previous audit results and high-risk accounts.
03:19They address preliminary concerns about the competence of XYZ Limited S senior accounting personnel.
03:26Finally, they allocate resources, ensuring the right expertise and personnel are available at the right times.
