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A job will be effective (effective) and successful useful (efficient) if the work Such is based on a good plan, monitoring the implementation and evaluation of it to provide feedback for the preparation of further work plans. Likewise, the audit work / examination of financial statements which is the main type of assignment of each Public Accounting Firm (KAP), audit planning is absolutely necessary in order to obtain objective audit results (the audit objectives are achieved) and efficient (achievement of these objectives is obtained at the expense or audit fees that can be accounted for), thus the Public Accounting Firm (KAP) can compete with other public accounting firms (KAP-KAP) while continuing to provide quality audit services. Certainly not limited to what the auditor will get by making an audit plan and not only this that you can find out by studying the topics in this Module 7. There will be many things that you can get by studying this Module 7, among others you will also learn and know about analytical procedures and the application of analytical procedures in nature and their benefits for the auditor in carrying out audit tasks. But before discussing the main topics in this Module 7, an overview of the audit process will be discussed first, where the subject of Module 7 is one of the stages of the audit process. With the description of the audit process in advance it is expected that you will easily understand and relate it to the audit process both in Module 7 and in other modules. AUDIT PLANNING (AUDIT PLAN)

BASIC MAKING AUDIT PLANNING Audit planning (Audit Plan) is made so that the audit objectives (audit objectives) that are applied can be achieved efficiently. In the Financial Statement Audit (audit of financial statements) objectives to be achieved The auditor is to provide an opinion / opinion regarding the reasonableness of the presentation of the financial statements which are assertions or statements of management with the specified standards (SAK = Financial Accounting Standards). This goal (giving opinions) can only be achieved if the auditor has sufficient evidence and is compentent to support the following opinion statement.

Having evidence that will support his opinion means that the auditor has succeeded in gathering and evaluating the adequacy and reliability of the evidence. (Sufficient and Competent Evidence) which implicitly means that most of the audit procedures (steps taken by the auditor / pointer are detailed in gathering certain types of audit evidence obtained at certain times during the audit) that have been planned can be carried out without any audit linkup restrictions (scope restricrion) which means this shows that the auditor has succeeded in making the right audit plan by establishing the right combination of audit objectives set with the evidence that must be collected, and to facilitate achieving it by following the audit process .

The audit process according to Arens (2000) is defined as a methodology for organizing an audit to ensure that the evidence collected is sufficient and competent / reliable and that all specific audit objectives have been achieved appropriately.

The audit process consists of four stages which are described as follows

Plan and design

Audit approach

Transaction testing and control

Carry out analytical and testing procedures

Details of balances

Complete the audit and issue

Audit report

Source: Arens (2000)

Figure 7.1

Emoat Audit Stage

The four audit processes above will be explained briefly as follows:

Stage 1 Plan and design an audit approach (Audit & design and Audit Approach)

In every audit there are various approaches that can be taken by the auditor in gathering evidence to achieve the overall audit objectives.

Two main factors that must be taken into account are;

a. Sufficient competent evidence must be collected to fulfill the auditor's professional responsibilities.
b. The cost of gathering evidence is as minimal as possible.
The first consideration is the most important, but the issue of cost to get it must be taken seriously if the public accounting firm wants to continue to exist in increasingly competitive competition.
If the second factor is not considered, it will be very easy for the auditor to gather as much evidence as possible until he feels confident that there is no material error. And if so then there is no need and no use for planning. In fact, planning is made because of the two factors above, the point is how sufficient evidence (related to the decision of how much evidence must be collected that is considered sufficient to support the opinion to be given) and competent (regarding the type of evidence that must be collected that complies with the requirements the competence of evidence (see module 6) must be obtained with limited costs and time.The planning must produce an effective audit approach with a rational (reasonable) cost.
Regarding audit planning and details will be discussed further after this.
Arens (2000) divides this stage into several steps, two of which are;
A. Gain knowledge about the client's line of business, the aim being that the auditor can properly interact with the intent of the information obtained during the audit, including aspects that are typical of different types of businesses that are reflected in the financial statements, for example auditing insurance companies will be very different by auditing peruhasan engaged in the bridge construction industry.
An understanding of the client's business and industry is required by SAS 22 (AU 311).
B. Understand the structure of internal control and establish risk control.
Aiming that the auditor can determine the appropriate extent of audit linkup in gathering the necessary audit evidence, because with a good understanding of SPI (Internal Control Structure), the auditor is able to evaluate its effectiveness and determine control risk appropriately. If the SPI (Internal Control Structure) of the client is effective, then the risk of control (control risk) is low so that the evidence needed is less than the opposite condition.
Phase II Testing and Transactions (perform otest of control and substantive tset of transaction)
If the auditor, based on his understanding of the Internal Control Structure (SPI), has set a lower level of control risk, then he can narrow the extent of his assessment to the point where the accuracy of financial statement information directly related to the control must be verified by evidence collection. But to make sure the level of risk is correct, he must test its effectiveness 

these controls and their procedures are called test of control. Control testing generally includes checking documents that support transactions. Amounts in transaction documentation and testing of transaction documentation for the purpose of strength and accuracy of amounts in transaction documentation or one of them is called test of transaction. Concerning Internal Control Standards (SPI) will be specifically discussed in module 9, while audit risk is discussed in more detail in module 8. Stage III Performs Analytical Procedures and Detailed Testing of Balances (Perform Analytical Procedures and Test of Details of Balances). An analytical procedure is carried out to determine the suitability of the transaction and overall balance, for example in comparing the balance of the current year of each account with the balance of the previous year and determining whether the changes that make sense when compared with changes in the client's business Detailed testing of balances is a special procedure for testing monetary errors in financial statement balances, for example: confirmation to customers about accounts receivable, physical calculations of supplies, etc. This final balance test is very important in conducting an audit because the majority of the evidence is obtained from independent sources so it is more reliable.  Stage III is closely related to the previous stages, if the auditor has sufficient confidence in the financial statement obligations through an understanding of the Internal Control Structure (SPI), determination of control risks, testing controls and analytical procedures, then detailed testing of balances can be reduced . Stage IV Complete the Audit and Publish the Audit Report (Complete the Audit and issue an Audit Report) After completing all procedures, then connect all information obtained to obtain a comprehensive conclusion regarding the fairness of the presentation of financial statements. This is a very subjective process and very much depends on the professional judgment of the auditor (Professional Judgment). If the audit has been completed, the Public Accounting Firm (KAP) must issue an audit report that accompanies the client's published financial statements. The report must meet clear technical requirements that are affected by the scope of the audit and the nature of the auditor's findings. About Audit Report review module 5.
Matters that must be considered in Audit Planning From the audit process or phases above, it is seen that audit planning is the stage of the first audit process. As we know that quality audit must refer to the Auditing Standards, especially the Work Implementation Standards. Therefore, what underlies the auditor must make planning in his audit is the First Work Implementation Standards which read: 'Audit must be planned as well as possible and if used an assistant must be supervised properly'. According to Arens (2000) there are 3 (three) main reasons why auditors must plan their audit assignments properly, namely: 1. To obtain sufficient competent evidence in the current situation 2. Help reduce audit costs 3. Avoid misunderstanding with clients. Obtaining sufficient competent evidence is important. If the Public Accounting Firm (KAP) wants to reduce legal liability to a minimum and maintain a good reputation in the community by reducing costs within reasonable limits the Public Accounting Firm (KAP) can compete so that the opportunity to find clients in tight competition situations is wide open. The avoidance of misunderstanding with clients is very important to maintain good relations and facilitate the implementation of quality work at a reasonable cost. At this planning stage Arens (2000) describes it in 7 (seven) work steps, as shown in the following figure.

1. Initial Planning (preplan)

Initial planning is generally carried out at the beginning of the assignment, covering 4 (four) important things, namely:

a. Accept new clients or old clients
Even though obtaining and retaining clients is not easy in this competitive profession, the Public Accounting Firm (KAP) must remain cautious in
decide which clients are acceptable.
For new clients, the auditor must conduct an investigation before deciding to accept or reject it, especially with regard to client prospects in the business environment, financial stability, and relations with the Public Accounting Firm (KAP)
The predecessor auditor. For relations with the Public Accounting Firm (KAP)
Previously, Statement of Professional Ethics No. 5 or SAS 7 (AU 315) required auditors, who were new (successor auditors). Establish communication with the predecessor auditor, especially pleased with the reasons for the possibility of the client replacing the auditor or predecessor auditor refusing to assign assignments such as; the client does not have integrity, restrictions on audit procedures) audit procedures are not approved by the client, or honorium issues
(audit fee), and so on. In communicating with the predecessor the auditor must first obtain approval from the client and if the client does not approve, it is a separate note for the successor auditor to reconsider the assignment. If the client has never been audited, the source of information in the investigation can be obtained from local lawyers, other Public Accounting Firms (KAP), banks, other companies, or even seeking professional investigation. The same approach can be taken if the predecessor auditor is not willing to provide the information needed or there is an indication of a problem from the communication. To decide whether to continue assignments from old clients, the auditor usually re-evaluates problems that arise before or disputes that have not been resolved, usually regarding the scope of the audit, the type of opinion given, audit fees, integrity management, and others. If there are lawsuits from clients against the Public Accounting Firm (KAP) or vice versa, then the auditor can not carry out an audit again. b. Identify client reasons for auditing The auditor must know precisely what interests the client requests for audit services to be collected, namely: 
<>1.Who is the user of the report If the wide audience, then the evidence that must be collected must be more, for example in public companies, companies with large debts or companies that will be sold in the near future.
. The purpose of using the report Can be known from experience in past assignments and discussions with management for example to meet the requirements of bank loans, tax interests, and others.
c. Staff selection for assignments Applying appropriate staff in assignments is important to meet Auditing standards and improve efficiency.The first general standard reads;'' An audit must be carried out by a person or persons who have adequate technical expertise and training as editors '.'The main consideration influencing staffing is the need for continuity from year to year and staff must be good in the client's line of business.
d. Get an Engagement Letter An assignment letter is an agreement between a public accounting firm (KAP) and a lien for the implementation of audits and other related services.HS Munawir (1995) explains that all conclusions from the previous stages must be documented by the auditor on his working paper. If there is an agreement between the two parties regarding the nature, extent of the audit area, client assistance, type of assignment, time / duration of assignment, audit fees (audit fees) and others, the auditor prepares an Audit proposal for client approval. If the client agrees with the auditor's proposal which is a draft assignment letter, then he will

sign the audit proposal and formally become an Engagement Letter (Engagement Letter) or audit work agreement letter.The purpose of the assignment letter is to avoid misunderstanding between the two parties and protect against legal liability in the event of accusation of not carrying out the work promised.
Although there are no specific standards, in general, Engagement Letter
Make things as expressed by HS Munawir (1995) as follows:
1. Details of the work or services of auditors that must be performed in the assignment
2. The extent of the audit or limitations, if da provided by his client and the influence of these limits on the conduct of the audit and auditor's report.
3. The fee to be borne by the client or dasxar is used to determine the auditor's fee.
4. Work that must be carried out by client staff for the benefit of the auditor in order to help smooth the audit.
5. Estimated time needed to carry out the audit and the auditor's handover date
In PSA No. 55 (SA section 320) explained that the audit assignment letter made by the auditor for his client serves to document and confirm the auditor's acceptance of the appointment by the client, the purpose and scope of the audit, the extent of responsibility the auditor bears for his client, the agreement on reproduction of financial statements that have been audited, as well as the form of reports to be issued by the auditor.
The form and content of the audit assignment letter may vary between clients, but generally must make the following main contents:
a. The purpose of the audit of financial statements
b. Management responsibility for financial statements
c. The scope of the audit includes the mention of laws, regulations, statements from professional bodies that must be adhered to by the auditor
d. The form of report or other form of communication that will be used by the auditor to convey the results of the assignment
e. The fact that the audit has innate limitations that material errors and irregularities will not be detected
f. Arrangement of reproduction of audited financial statements
g. The auditor's ability to convey information about significant weaknesses in the internal control structure found
h. Access to various records, documentation, and other information required in connection with the audit
i. The basis on which the auditor is used to calculate the audit fee and the rules for its disclosure.

In addition, things can also be included:

a. Audit planning arrangements

b. Hope to receive written confirmation from management about the representations made that are pleasing to the audit

c. Request the client to confirm that the terms of the assignment are in accordance with making the receipt of the audit assignment letter

d. Explanation of each letter or report the auditor expects to publish to his client. If relevant, the following points can also be entered:

a. Arrangements regarding inter auditor inclusion and others (or experts in some aspects of the audit)

b. Arrangements regarding the inclusion of internal auditors and other client staff

c. arrangements if there must be made with the predecessor auditor, in the case of last year's audit

d. an explanation of each letter or report the auditor expects to publish to his client. The detailed description above is concluded by HS Munawir (1995) as follows: 1. Details of the work or services of auditors that must be performed in the assignment 2. The extent of the audit or the limitations on the conduct of the audit and the auditor's report 3. The amount of the auditor's fee is determined on a certain basis 4. Work to be done by client staff in helping the smooth implementation of the audit 5. Estimated time needed to carry out the audit and the date of submission of the audit report Consideration of the first fieldwork standard recognizes that early appointment of auditors will provide many benefits for both the auditor and the client, because it allows the auditor to plan the audit so that it can be carried out quickly and efficiently.

Initial Planning
Obtain information about the client's background
Obtain regarding the client's legal obligations
Carry out preliminary analytical procedures
Determine materiality and determine the audit risk to be received and the inherent risk
Understand the structure of internal control and establish risk control
Develop a comprehensive audit plan and program
The seven steps above will not be fully discussed in this module. This Module 7 only covers up to the fourth step, while the fifth step is discussed in Module 8 and the final step and the second stage of the audit process will be discussed in the last module (Module 9).
The four steps of planning and designing the audit approach can be explained as follows:
Arens (2000) suggests four things that must be done
a. Gaining knowledge about the client's business and industry
b. Review factories and offices (tour the plant & office)
c. Identifying special relationships ((Related Parties))
d. Evaluate the needs of outside specialists.
The four things above will be explained as follows:
A. Gaining knowledge about the client's business and industry
1. Some industries have unique accounting that requires auditors to
Understand it in order to evaluate whether the financial statements are in accordance with generally accepted accounting principles (GAAP).
The unique aspects of the company are reflected in the financial statements.
Example: if the auditor is assigned to audit a mutual fund company that is planning a large-scale investment in the oil and gas industry, then the auditor must understand well the business fields of the mutual fund company and the oil and gas industry so that the audit can be carried out properly, as required in SAS 22
(AU 311)
2. The auditor can identify risks that affect the auditor's determination of acceptable audit risks. Risky industries such as banks, insurance and others,
3. Innate risks that exist in each industry, assisting auditors in identifying risks inherent in the client industry.
Knowledge of the client's business sector can be obtained from the company itself, both in permanent files, studying company guidelines and policies, discussions with previous auditors or auditors who are conducting similar assignments, industry audit guidelines and others.
B. Review the factory and office (tour the plant & office)
Useful for gaining a better understanding of the client's line of business and operations because there will be an opportunity to meet key employees and observe physical operations and facilities directly so as to provide a convincing picture of the physical security of assets, plant layout, production processes, main production results as well as the side and others. HS Munawir (1995) added

that during the visit the auditor must also be alert to the signs of various possibilities, such as: the presence of machines or other equipment that is idle identifies the possibility of the termination of assets that are not recorded (unrecorded retirement of fixed assets), the availability of low turnover (slowing moving) and the loss in the value of goods. Adequate knowledge of physical facilities will greatly assist the auditor in planning physical observations or inspections. In addition to the aforementioned matters during the visit will be known the location of recording and the number of employees in general and gives the auditor the opportunity to know the types of internal documents used as the basis for recording company activities, such as reports on receipt of goods, letters of request for raw materials, etc. others, all of which are important for the auditor in evaluating the client's internal control structure. For repeat audits, visits to the client's factory and office are usually limited to matters that have changed in the year being audited. c. Identifying special relationships (Related Partis) Related Parties in SAS45 (AU334) are defined as affiliated companies, the main owners of client companies, or other parties related to clients where one party can influence the management or the operational policies of the other party. A special relationship transaction is a transaction between a client and a related party. Some examples of this transaction are stated by Arens (2000) as another party. a. Sales and purchases between the parent company and subsidiaries. b. Exchange of fixed assets (equipment) between two companies owned by the same person. c. There is a strong influence of the main customers on client management. In Statement on Auditing Standards (PSA) No. 34 (SA section 334) explained that transactions which by their nature might identify parties having special relations include: a. Loan transactions without provisions regarding the schedule and method of repayment. b. Transactions that are processed in an unusual manner carried out on similar transactions and others. The auditor must identify the possibility of a special relationship between his client and another party, because generally accepted accounting principles / standards require adequate disclosure (adequate disclosure) in financial statements if the effect is significant. HS Munawir (1995) adds that the disclosure of this transaction must include: the nature of the relationship between the parties, explanations regarding the transaction that occurred and the amount

rupiah as well as the terms and method of settlement. In addition, the substance of a transaction can be significantly different from its form and the financial statements must identify the substance not just the legal form. Therefore the auditor considers this before accepting the assignment. D. evaluating the needs of outside specialists Specialist in Auditing Standards Statement (PSA) No 39 (SA section 336) is interpreted as: Orang ’People or companies that have special skills or knowledge in certain fields other than accounting and auditing‘ ’ What will be contacted by the Auditor if he is confronted with a situation that requires Khusuh as determined by SAS 11 (AU 336), and examines his work. For example, as Arens (2000) found, an auditor will contact a diamond expert to assess the cost of replacing a diamond, or contact an actuary to determine the value of the written value of an insurance loss reserve or consult an attorney to make a legal interpretation of a contract. PSA NO. 39 (SA section 336) are examples of the types of problems that the auditor may consider require specialist work to include, but are not limited to, the following: 1. Evaluation, for example: artwork, special drugs and restricted securities. 2. Determination of physical characteristics related to the available quantity or condition, for example mineral reserves or piles of raw materials in a warehouse. 3. Determination of the value obtained by using special techniques or methods, for example some actual calculations. 4. Interpretation of technical requirements, regulations or approvals, for example the potential effect of a contract or other legal document or right to property. The determination of the auditor will require the specialist to be very influenced by the extent to which he understands his client's industry and with good planning the auditor can better convince himself that a specialist is ready if necessary and the specialist is truly competent, even if possible independent of the client. In conducting audits of financial statements based on Auditing Standards established by the Indonesian Accounting Association (IAI), the auditor can use specialist work as one of the audit procedures to obtain competent evidence. The same understanding between auditors, clients and specialists must be related to the nature of the work that the specialist must do. This understanding should be documented and include the following matters: a. The aims and scope of specialist work b. Specialist statements regarding relationships, if any, with clients. c. The method and or insurance used

d. Comparison between the method or assumption used now with the last year

e. Specialist understanding of the use of specialist findings by auditors as supporters in relation to the presentation of financial statements.

f. The form and content of specialist reports that will enable the auditor to evaluate The results of work or specialist findings if it supports the presentation of its financial statements, means that the auditor has obtained sufficient and competent audit evidence, but if otherwise the auditor must perform additional procedures. If additional procedures have not been able to resolve the problem, the auditor must obtain the opinion of other specialists, unless it is deemed that the problem cannot be solved. Next he made a conclusion. If the overall procedure shows that the presentation of financial statements is not in accordance with generally accepted accounting principles, then the opinion that may be given is reasonable on condition (Qualified) or unfair (Adverse). Regardless of the type of opinion provided, the auditor must refer to the work results or specialist findings. In addition to emphasizing responsibility, this also shows the weight of the report's auditor's reliability. 3. Obtain information about Kien Legal Obligations (obtain information about Client’s legal obligations) Initial knowledge of the client's legal documents and records will enable the auditor to interpret the evidence while the assignment is taking place and ensure that appropriate disclosures have been made in the financial statements. Arens (2000) states that there are three closely related documents and legal records that must be examined at the beginning of the assignment, namely:

a. Deed of incorporation and articles of association of the company

b. Minutes / Minutes of Meeting: Board of Directors Commissioners, Shareholders

c. Contracts. The three documents and company legal records above will be explained as follows:

A. Deed of Establishment and Articles of Association of the Company Company establishment certificate issued by our country the company was established and is an important legal document to recognize the company as a stand-alone business unit, containing the company name, date of establishment, type and share capital authorized for placement, and types of business activities
may be done by the company. For this type of share capital, the voting rights of each type of share value or share value are included. Defined, preferences and requirements needed for dividend and main rights in liquidation. The articles of association include rules and procedures established by the company's shareholders, describing matters concerning the company's fiscal year, frequency of shareholder meetings, methods of ownership of directors and commissioners, and obligations and authority of the company's management. By studying the company's Deed of Establishment and articles of association the auditor can assess the appropriate disclosures regarding shareholder wealth, the accuracy of dividend payments, etc., in the client's financial statements.

B. Minutes / Minutes of Meeting Minutes of corporate meetings are the official records of the meetings of the board of directors and shareholders, including a summary of important issues and decisions determined by directors and shareholders as such: - Announcement of dividends - Payroll authorization for employees - Contract agreements and agreements - Authorization for acquisition of assets - Merger agreement - Authorization for long-term loans - Approval to sell shares - Authorize employees entitled to sign checks - Reporting on the progress of the company's operations Before the auditor completes the audit, there must be a follow-up on important information above to ensure that management has reviewed the provisions made by the shareholders, board of directors and board of commissioners, for example payroll that has been authorized by employees must be traced to the salary records , each employee to test whether the correct amount of salary has been paid.

C. Contracts In examining the contract Arens (2000) argues that the main concern must be focused on the terms of the legal agreement that affects financial disclosure. The contract can have an important impact on the financial statements if the subject of the contract is stated directly at a certain monetary value, for example for mortgages and bond obligations. The effect that a contract may have on the financial statement is very dependent on its nature, for example, for long-term notes requiring disclosure that is completely different from a contract with the government for the shipment of finished goods.Some examples of contracts other than those mentioned above are: stock options, retirement plans, contracts with sellers for later distribution of goods, royalty agreements, contracts with trade unions, and leasing.Contracts are generally required in each part of the audit, and in practice receive special attention during the various stages of detailed testing, for example the backup of the three main steps / parts of planning and their subdivisions as well as a brief explanation of each described as follows:

Source: Arens (2000) processedFigure 7.5

Overview of the First Three Steps in the planning and stages
Planning an Audit Approach
`All information that has been obtained by the auditor above must be documented in a permanent working paper (for those that have been valid for more than one period) or current working paper (current file for only that period).

Audit planning must be made in order to meet the first Auditing Implementation Standards.
To carry out audits in accordance with the above standards, HS Munawir (1995) explains that the auditor must prepare an audit plan or audit plan or audit plan of action to organize, coordinate and arrange for the activities of the auditor staff.
Audit planning includes determining a general strategy or game plan regarding the things to be carried out and the extent of the audit.
According to PSA No 05 (SA section 311) what is meant by audit planning is as follows:
’’ Audit planning includes developing the overall strategy for implementation and expected scope of audits ‘’.
The nature, extent and timing of planning varies with the size and complexity of the business unit, the experience of the business unit and the knowledge of the business unit, but at least the following must be considered in audit planning, namely:
a. Problems related to business / line of business, but most operate therein
b. Its policies and accounting procedures for business units
c. The methods used in processing significant accounting information, including the use of outside service companies to process the company's principal accounting information
d. Determination of planned control risk levels
e. Initial consideration of materiality level for audit purposes
f. Post financial statements that may require adjustments

g. Conditions that may require the expansion or alteration of audit testing, such as the risk of material errors and irregularities or the occurrence of transactions between related parties

h. The nature of the audit report that is expected to be submitted to the assignor.


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