Know your client in Detail (understanding business and its activities)

I.

Client Overview
(a) Client History and Background
Provide a description of relevant client background

Client Profile
Nature of client business
Number of Branches/offices (if any)
Directors
Major shareholders
Chief Executive Officer (Address and telephone number)
Chief Financial Officer (Address and telephone number)
Head of internal audit (Address and telephone number)
Company Secretary (Address and telephone number)Legal Advisor(s)
List of related parties and their relationship
Tax Advisor
Major Banks
Organizational Charts, etc.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________

(b) Client Business Objectives and Related Business Strategies

Provide a summary of the objectives, strategies and method of implementing
the strategies.
Business Objectives

Related Business Strategies

1.
2.
3.
(c) Client Business Components
(i)

Major Markets

(ii)

Major Products and Services

(iii)

Major Customers

(iv)

Major Competitors

(v)

Alliances (including suppliers) and other relationships

(d) List of Authorized Signatories

Name
__________
__________
__________
__________
__________

Designation
_________
_________
_________
_________
_________

Monetary Limit Allowed

____________
____________
____________
____________
____________

Signature
________
________
________
________
________

Note: Information shall be used in performing audit procedures (e.g. Test

of Controls & Substantive Testing). If there are no significant
changes since previous audit, this may be transferred to the
permanent file.
(e) Notes of Meeting with Client
(for recurring audits)
CLIENT NAME

DATE
VENUE
TIME

FIRM
REPRESENTATIVES

Name

Designation

CLIENT
REPRESENTATIVES

Name

Designation

CONCLUDING
REMARKS

Sign off
Prepared by

Reviewed by

Date

Date

Agenda for Meeting

Latest audited accounts
Coordinating persons

Name

Designation

Information about Other Auditors/ Coauditors(if any)

Availability of Accounting and/ or
Internal audit / Internal Control System
manuals and any changes
Areas Requiring special attention
Physical Existence Verification
A
p
p
r
o
x Date
V
a
l
u
e
Stock
Cash
Investment
Others

Location(s)

Coordi
nator(
s)

Clients expectation of completion of test

of controls
Expected date of Client to prepare
financial statements
Clients expectation of completion of
audit
Clients expectation of receipt of audited
accounts
Any significant accounting and audit
issues identified during the last audit
which are brought forward
Involvement of internal audit
a. No. of staff
b. Name of department head
c. Reporting authority
d. Type of reports issued
e. Frequency of reports
Confirmation circularization dates
Banks
Debtors
Creditors
Legal Advisors
Tax Advisors
Other
Changes in economic conditions
Changes in industry and operations
Significant changes in business since
last year
Changes in key finance and operations
managers
Changes in management / stake
holders / owners
Business objectives and whether they
are being met

Changes in market strategies

Availability of latest cash flows /
budgets
Actual results to date (comment
generally)
Financial restriction placed by debt
covenants
Risk / Probability of breach of debt
covenants
Changes in credit terms for customers
since last year
Changes in information systems and
technology in use
Changes in significant accounting
processes
Effects of any recent or pending
government legislation / actions

Effects of outcomes of litigation since

last year
Effect of any new tax rules / legislation

New competitors in product lines of the

company
Changes in market share
Significant changes in major customers
/ suppliers
Acquisitions / disposals of associates/
subsidiaries or any anticipation thereof
Changes in internal reporting formats
Changes in capital structure of the
entity
Names of key financiers and changes
thereto.
Significant changes in system of

internal controls since last year

Whether any instances of fraud or
material error during the year. How
management / those charged with the
governance responded?
Significant changes in accounting
policies
Effect of new accounting
pronouncements
Clients international reporting
requirements and changes thereto
Miscellaneous

II.

Business Control Environment

When analyzing the business control environment understand the clients:

business structure;
culture and ethics;
remuneration management;
personnel profiles;
communication of information;
Business structure

Culture and ethics

Remuneration management

Personnel profiles

Communication of information

III.

Computer Information Systems (CIS)

Business processes are often facilitated by computer information systems. Obtain an

understanding of the:
level of dependence the client has on computer information systems (include
a list of the clients computer information systems);
computer information systems personnel structure and skills;
security of computer information systems; Access Controls, Backups,
Disaster Recovery.
reliability of computer information systems; Data Integrity, Processing, and
Reporting Controls.
degree and rate of change in computer information systems;
dependence on external computer processing; Use of Service Organisationunderstanding and evaluation thereof.

IV.

Financial Reporting Environment

Obtain an understanding of the:

financial reporting framework applicable to the entity;
accounting policies applied by the entity and applied within the industry;
potential impact of accounting policies upon specific aspects of the financial
statements.

Financial Reporting Issues

Consider the following for identification of financial reporting issues to be addressed
while analyzing or consulting with colleagues, experts:
client's accounting practices and policies;
new accounting pronouncements;
the going concern assumption;
legal and regulatory changes
Financial reporting issue

Reason for identification

V.

Critical Audit Areas / Significant Financial Statement Components

Critical audit areas are generally those where judgment is involved and significant
estimation is used. For example, making accounting estimates, fair value, selection and
application of accounting policies etc. The approach to those areas and resulting impact on
the financial statements relating to the audit is documented. It also includes
consideration of previous years brought forward issues.
Critical Audit Areas/
Objective
significant estimates
made
New borrowings with
extra-ordinary terms and
conditions
Acquisition
of
significant asset

Management Response

Discontinuation of major
suppliers
Discontinuation
major customer
Loss of a
market share

of

significant

Related
party
transactions
Impairment of assets
Examples of major critical areas may include:

Proposed Audit
Approach

VI.

Reasons for use of Experts and other parties

Description includes a summary of the issue, why it is considered significant to engage or

use and its potential financial statement effects.
Involvement of: Computer Information System (CIS) Specialist
Description of basis, nature, extent and conclusions related to the
involvement of CIS Specialist:
[Description]

Involvement of: Other specialist or other party involved in the audit

e.g.Actuary, Valuers, Internal audit, taxation
Description of significant issue and decision related to the involvement
of others:
[Description]

Findings