And with planning procedures, and, again, more memory aids, more mnemonics, because
we love mnemonics because they help you to remember some of the details, and they help
you to get through multiple choice and understand the big picture.
But when we think about different types of planning procedures, some of the different
procedures for planning would be BRAIN STOPS.
In other words, you're tired, you're cranky, first day of audit.
You thought you were going to come in, get your book and leave early.
Ha ha ha.
I don't think so.
So, right now you're tired, you�re cranky, a lot of you went to bed too late.
What's happening?
Your brain stops.
So, your brain stops.
Let's look at our mnemonic.
It says basic discussions with the client.
In other words, some of the planning procedures...What do you need to do?
It says basic discussions with the client about the nature and the engagement, it says
the overall audit strategy or the timing of the may be discussed, but don't discuss the
specific audit procedures.
Remember or what?
Materiality.
We said don't discuss.
Review of audit documentation.
You want to talk to the old auditor.
Ask about recent developments, any kind of mergers.
Interim information.
We want to ask about interim.
Now, what we call annual versus interim.
Interim would be like quarterly.
So, one of the things we�ll learn in the regulation exam is the 1933, 1934 Federal
Security Regulations Act.
What it says is, you have to do a 10k, 10q and an 8k.
What is a 10k?
Annual audited statements.
What is the 10q?
Quarterly reviewed interim, and an 8k, significant changes in the company.
So one of the things we need to do is we need to do a 10k,10q, so 10q are interim or quarterly
statements.
It also says we're concerned with the performance of such analytical procedures which is mandatory
in planning.
We�ll learn about this in audit 3, but analytical procedures are the study of data comparisons
in relationships.
At the beginning of the audit, you want to look at ratio analysis, how the numbers compare,
how they relate.
At the end of the audit, you need to do ratio analysis.
In the middle, while you're doing substantive testing, you can use analytic procedures as
a substantive test.
It is not required, but is recommended, but in planning, you have to do analytical procedures,
which is what?
Ratio analysis.
So, for example, I'm looking at dollar or percentage changes.
I'm looking that inventory went up by 47%, and you go, �Wait a sec...That doesn't really
make sense.
You know what?
While we're doing our audit, let's do more work in that area.� So, in the planning,
analytical procedures, mandatory.
Number 5.
Non-audit personnel.
Talk to them, like the tax department.
Staffing.
Find out about the budgets.
What�s the definition of a budget by the way?
That is the thing that management sets up.
It is the thing you blow every year.
For those working in public accounting, what is a budget?
That number that management says, �Now make sure you stay within budget,� and, if not,
what do you do?
Start eating time.
Mmm...A little salt.
You�re not supposed to eat time, but you want to keep your job in this economy.
So, that is called a budget.
Timing of various things, for example, internal control testing, inventory counts, management
rep letter.
So, the timing.
Those are things in planning you need to consider.
Maybe, for example, the client has specialized inventory.
You're going to do the inventory count, but you need specialized inventory in the sense
that maybe I need an expert to come out and tell me...I�m auditing a jewelry store,
I need to know if the jewelry is real, diamonds are real, or if they�re zirconium.
Hopefully my spouse doesn�t know.
Outside assistance.
Do I need a specialist?
A specialist.
Pronouncements.
That talks about the new FASB 159, 160, 161 and so on.
So you need to be up on those, and then finally scheduling with the client.
Scheduling with a client.
That means the client generally will set up things like a lead schedule.
They'll set up a lead schedule that leads you into the working trial balance which leads
you into what?
The financial statements.
So those are things that you need to schedule with the client as far as the work they're
going to do.
All of those together gives us what?
The mnemonic BRAIN STOPS, and, again, you're tired, you're cranky, but those are the planning
procedures.
These are things we need to do.
Again, usually for multiple choice-type questions.