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Audit Planning Spritzer

Audit Planning is an audit plan is the specific guideline to be followed when

conducting an audit. It helps the auditor to obtain sufficient and appropriate evidence for the
circumstances, helps keep audit costs at a reasonable level, and helps avoid
misunderstandings with the client. The process of audit planning includes following
procedures that are knowledge of client's business, development of audit strategies or overall
plan about who, when and how and preparation of audit program. Audit Objective are
transaction related, balanced- related and Presentation and disclosure-related.
Auditors should understand, review and report information about a companys
stewardship, accounting and annual report. An auditor should also independently make
statement regarding a companys financial information. The information selected to be
reviewed is the information where there is the highest risk for significant misstatements.
Segregation duties are implied to make sure that the audit work is accurate, competent and
reduce the errors and fraud potential. In Spritzer Company, the auditors review and
recommend the quarterly results and annual financial statements, prior to the approval by the
Board, focusing particularly on changes in or implementation of major accounting policies
and practices, significant and unusual events, compliance with accounting standards and
other legal requirements, and the going concern assumption. This is important to ensure that
there are no significant errors in a companys financial information.
Materiality is the magnitude of an omission or misstatement of accounting
information that, in the light of surrounding circumstances, makes it probable that the
judgment of a reasonable person relying on the information would have been changed or
influenced by the omission or misstatement. It is measured or observes in financial reporting.

The purpose with the level of materiality is to find a level that makes it possible to detect
material misstatements in a companys financial statements. To decide the level of materiality
the auditor must use professional judgment.
When an auditor assesses which information is going to be controlled, he/she should
consider many different types of risks the risks an auditor should normally keep in mind are
the detection risk, the control risk and the inherent risk, together these risks create the so
called audit risk. The meaning of detection risk is that there is a risk of not finding
misstatement during the audit process. Control risk is the risk that a companys own internal
controls fail to detect an error. Inherent risk is the risk that comes with the companys
business and this means that errors can occur before the companys internal controls are
involved. The detection risk is the only one of these three risks that the auditor can affect
during the audit process. The other two risks lies within the company. Different risks might
arise depending on which industry the company operates in, because some risks are specific
for a certain industry.
In the nature of water bottle Company, the Inherent risk that might occur is physical
or operational risk. The physical risk is related to the inability to access adequate water
supplies or services to manage a companys operation. This can be caused by drought or
long-term water scarcity, flooding causing damage to infrastructure and/or disruptions in
supply, or pollution to the extent that such water is rendered unfit for operational use. High
quality water insufficient quantity is crucial for many industrial production systems. Next is
regulatory risk that is when policymakers changing or introducing laws or regulations or
management practices. Stricter water regulation can be driven by conflict among various
needs, public perception of a companys water practices as wasteful or poor water
management among a regions different water managers. Increasing regulatory pressure
represents a challenge to companies, as they struggle to reconcile a more forceful approach to

environmental regulation and enforcement with the historical and more familiar lack luster
performance of many government agencies. Companies in breach of these measures are
increasingly being prosecuted and fines are increasing. After that, a critical issue for any
utility sector that in transition is economic risk in pricing. The unstable price of water is a
challenge to predict the rate of price increases as these could dramatically affect cash flows
for both companies that use water as a key input because it make the costs increasing. Third
is reputational risk. Reputational risks stem from diminished stakeholder perceptions due to
inefficient or harmful operational activities that have negative water-related impacts on
watersheds, ecosystems and communities. Reputational concerns can lead to decreased brand
value or consumer loyalty or changes in regulatory posture and can ultimately threaten a
companys legal and social license to operate. Reputational risk relates to damage to brand or
image and can potentially impact market share as consumers exercise their right to choose.
Plus, supply chain risk reflect the considerable uncertainty facing companies with extensive
supply chains that are themselves operating in water-stressed environments. Last but not least
is investment risk that refers to the potential impact of water-related risks on access to capital.
The investor community is beginning to recognize the reality of Malaysias water crisis, its
potential impact on companies operating in the region and the implications to corporate
financial performance.
There are two type of test that is risk assessment procedures and further audit
procedures. A major part of risk assessment procedures are done to obtain an understanding
of internal control. The audit test is done in the sales and collection cycle as it is observe from
financial statement. The account will be audited if there are any errors or misstatement and
whether it is compatible or not after audited with the financial statement. The audit risks
model is about tests of controls plus substantive tests plus analytical procedures plus tests of
details of balances equals to sufficient competent evidence per GASS. Further audit

procedures are tests of control, substantive tests of transactions, analytical procedures and
tests of details of balances. While example of types of evidence are physical examination,
confirmation, documentation, observation, analytical procedures and recalculation. The first
phases in the audit process are plan and design an audit approach. In this phase auditors
accept client and perform initial planning then understand the clients business and industry
after that Assess clients business risk and Perform preliminary analytical procedures. Next,
set materiality and assess acceptable audit risk then understand internal control and assess
control risk and inherent risk then gather information to assess fraud risks and lastly develop
overall audit plan and audit program.
The second phase is Perform tests of controls and substantive tests of transactions.
Auditors can observe and determine that whether it needs to reduce assessed level of control
risk or not. If needed, auditors will have to perform tests of controls. If not auditors just
proceed to perform substantive tests of transaction. Then, assess likelihood of misstatements
in financial statements. Phase three perform analytical procedures and tests of details of
balances. In this phase, auditors need to determine whether the internal control is low,
medium, high or unknown. Then, the auditors will perform Analytical procedures and then
perform tests of key items. After that, perform additional tests of details of balances. In phase
four, complete the audit and issue an audit report. In this phase auditors will perform
additional tests for presentation and disclosure then accumulate final evidence and evaluate
results. After that, Issue audit report and lastly communicate with audit committee and
AP involves the analysis of relationships between items of the financial data, or
between items of financial and non-financial data, deriving from the same period and
comparable financial information deriving from different time periods to identify
consistencies and predicted patterns. There are three types of Analytical procedures that are

Simple Trend Analysis (of one account), Ratio analysis (included trend analysis, comparative
analysis and common-sized analysis) and reasonableness tests. Analytical procedures can be
applied to all the stages of the audit like planning, fieldwork and final review. At the planning
stage, they serve to identify areas of potential audit risk and help in planning the nature,
timing and extent of other procedures. Meanwhile at fieldwork stage, an analytical procedure
is used at this stage to obtain evidence about the financial statement account balances. Lastly,
at final review stage analytical procedure is used at this stage to help the auditor assess the
adequacy of substantive tests performed, the sufficiency of the evidential matter obtained and
the validity of the conclusions reached, including the opinion on the financial statements
taken as a whole.

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