Audit planning consists of process involving three steps necessary to be taken by external
auditor. Audit committee analyzes it. The audit process involves these three steps: understanding
of the business, its environment and control systems which are internal to organization. The
purpose of the audit planning is to take everything in account for the performance an audit. It is
necessary for the auditors to know the nature of the business, the industry, the firm belongs to. The
inconsistencies point out to the malfunctioning in the internal systems and pinpointing the mistakes
and flaws and to correct them is the ultimate objective of the audit.
An important reason of audit planning is to know the industry and business of the client.
This is done for the assessment of risks of audit, risks of business of client and risk of the
misstatements relating to financial statements. The other allied components of the audit planning
are to ensure the materiality and analyze the risks pertaining to audit including inherent risks. An
analysis into the risks of the fraud is also carried out. It also aims at a conclusive audit plan and
program. (Charan, 2005).
The analytical procedures involve the data relating to industry. The data related to past,
the expectations of the client in term of results, what auditor expects to be the results and the
expectations regarding results by employing non financial information.
Apple Inc should understand the business thoroughly it is in, the company is in the
business of manufacturing the software and hardware products. Apple should also understand the
environment of the business along with the internal control systems. Apple should also look into
the misstatements in the financial statements and should carry out the design procedures in line
with the analysis of the risk level.
The two performance ratios I have picked are: cash ratio and accounts receivables turnover.
Companies are in a need of certain level of liquidity. The cash ratio is effective to analyze the
ability to pay debts instantaneously. The activity ratios in terms of accounts receivables are of
extreme importance to the auditors. The account receivables turnover ratio is used to analyze the
extent of accounts which are uncollectable.
During the audit I would analyze the balance sheet and income statement of Apple. The
three analytical procedures I would use during the external audit. I would perform preliminary
analytical review to gain an insight into comprehension about business and the environment of the
business. (Charan, 2005)
In order to minimize the risk linked with misstatements of the financial statements. To
ensure, that the financial statements of Apple are in line with my comprehension. If would find
any malfunctioning I would go for risk assessment again and would employ and augmented...