Planning an Audit

2. BUSINESS UNDERSTANDING FOR AUDIT PLANNING (SA 315)

Name of Client: ………………………………….. Audit Period: .................

Question 1: Describe the client’s business and industry in detail

Response 1: ………………………………………………………….. Limited was incorporated on ………………………… It
is a wholly-owned subsidiary of ………………………………………..
………………………. was established to carry the following activities:
Activities relating to …………………………..
Activities relating to ………………….
Activities in ……………………………..
Activities of a ……………………
The company operates from the following locations:
……………………..
……………………..
……………………..
Factory/ Location where the construction is being done
The activities proposed to be conducted from the new site
Business objectives ……………………………..
Main Products ……………………………..
Major Brands ……………………………..
Sales Mix ……………………………..
Geographical spread ……………………………..
Credit Rating …………………………

Question 2 : Pertinent information about key shareholders

Response 2 : Name of Ownership No. of Shares % Shareholding
Shareholder Interest (` 10/- each)

Source:

Question 3: Pertinent information about key management personnel/Functional Heads

Response 3 : Name of Employee Designation Years with the Entity

Source:

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Audit Checklist – For Companies

Question 4: Information about Members of the Board of Directors

Response 4 : Name of Director Whether independent? Director since

Source:

Question 5: Information about members of the Audit Committee (if such a committee
does not exist, write “None”)
Response 5 : Name of Director Designation Member since

Question 6: Information about affiliated organisations or related parties

Response 6 : Name of Nature of Type Auditors Listed/ Not % Holding
Related relationship Listed
party

Source:

Question 7: Describe significant trends within the industry (e.g., growing, stable, or
declining)
Response 7:

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 Planning an Audit

Question 8: Describe how the client’s growth and financial results compare with those of
the industry and the reasons for significant variances
Response 8:

Question 9: Comment on the client’s competition, including significant shifts in market

share
Response 9:

Question 10: Describe the nature of the client’s significant assets, liabilities, revenues
and expenses
Response 10:

Question 11: Describe the extent of Government regulations that may affect the client
(with specific regulations directly/indirectly affecting the entity)
Response 11:

Question 12: Describe the methods used to advertise, sell, and distribute the entity’s
products or services. (Supply chain of the company e.g. C&F Agents, Stockist,
Distributors etc.)
Response 12:

Question 13: Describe the IT applications used which affect accounting / financial
reporting.
Response 13:

Question 14: Describe the Management Information System prevailing in the entity.
Response 14: The response to this question should briefly bring out:
— The nature of MIS system that exist.
— The frequency of MIS reporting.
— How is the MIS utilised by the management for control purposes?

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Audit Checklist – For Companies

Question 15: List of the primary users of the financial statements, e.g. shareholders,
bankers, vendors, Government, etc.
Response 15: — Shareholders – …………

Question 16: How is the entity financed?

Response 16:

Question 17: Alliances, joint ventures, and outsourcing activities.

Response 17:

Question 18: Key customers and suppliers of goods and services, employment
arrangements
Response 18:

Question 19: Investments in non-consolidated entities, including partnerships, joint

ventures and special-purpose entities.
Response 19:

Question 20: Other Important Matters

Response 20:

Prepared by: __________ Reviewed by: ____________

Date: __________ Date: __________

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