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Help with audit planning.
01-31-2010, 05:12 PM
Post: #1
Help with audit planning.
Hi all, I need some pointers in answering the following question. Your help is greatly appreciated [)]

You are the partner in charge of a 4 partners firm of CPA. Your firm has been invited to tender for the audit of LAN Pte Ltd for the year end 31 May 2010.

LAN Pte Ltd provides gaming, does not charge members any fees for playing the games & rely on ads to earn revenue. Advertisers pays ad rates based on the position of their ad banner in the web page (thus the fixed component) & also based on the number of visitors to the website who view the ad, “click-through”. At month's end an activity report is printed showing each ad & no. of views.This is used for computing ad rates to bill ad customers. LAN set up by 4 founders (also the directors) own 25% shares each in the firm. There are 20 staff in the firm, mostly tech specialists. There is 1 trainee admin staff who performs bookkeeping. They decide to implement an off-the-shelf accounting software & wants use the new system from 1 Dec 2010 & to go ‘live’ with the new system on 1 Nov.Your firm audit software is compatible with the old system. LAN intends to float the company on the stock exchange in 2 years. Fresh capital injection is required to fund the continuing improvement of the games. The flotation involve issuing of new shares to the public & selling some of the founders’ shares.

An internal audit dept will be set up. The head has been appointed & will begin his duty on 1 Mar 2011.Other internal audit staff members will be recruited by him.

(i) Describe the matters you should consider before accepting the audit engagement

(ii) Assume audit engagement is accepted, identify factors affecting the audit risks associated with the audit
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