01, 2 4.38 PLANNING IN CONTEXT OF IT SYSTEM CHANGES Identify the audit risks associnted with the installation of the new IT system for patient revenue. 4.39 DETERMINING AUDIT STRATEGY Comment on the audit strategy likely to be adopted for the audit of patient revenue for Gardens Nursing LO3 Home, CASE STUDY - CLOUD 9 PART 1 Materiality W&s Partners commenced planning the Cloud 9 audit by gaining an understanding of the client's structure and its business environment. A major task is to consider the concept of it applies to the client. The auditor will design procedures in order to identify and correct errors or irregularities that would have a material effect on the financial report and affect the decision making of the users of the financial report. Materiality is used in determining audit procedures and sample selections, and evaluating differences from client records to audit results. It is the maximum amount of misstatement, individually or in aggregate, that can be accepted in the financial report. In selecting the base figure to be used to calculate materiality, an auditor should consider the key drivers of the business. They should ask, 'What are the end users (that is, shareholders, banks etc.) of the accounts going to be looking at?' For example, will shareholders be interested in profit figures that can be used to pay dividends and increase share price? W&S Partners' audit methodology dictates that one planning materiality (PM) amount is to be used for the financial report as a whole (that is, rather than separate PMs for the income statement and the balance sheet). Further, only one basis should be selected -a blended approach or average should not be used. The basis selected is the one determined to be the key driver of the business W&S Partners use the following percentages as starting points for the various bases: Base Profit before tax Turnover Gross profit Total assets Equity Threshold (%) 5.0 0.5 2.0 0.5 8 Auditing:A Practical Approach 01, 2 4.38 PLANNING IN CONTEXT OF IT SYSTEM CHANGES Identify the audit risks associnted with the installation of the new IT system for patient revenue. 4.39 DETERMINING AUDIT STRATEGY Comment on the audit strategy likely to be adopted for the audit of patient revenue for Gardens Nursing LO3 Home, CASE STUDY - CLOUD 9 PART 1 Materiality W&s Partners commenced planning the Cloud 9 audit by gaining an understanding of the client's structure and its business environment. A major task is to consider the concept of it applies to the client. The auditor will design procedures in order to identify and correct errors or irregularities that would have a material effect on the financial report and affect the decision making of the users of the financial report. Materiality is used in determining audit procedures and sample selections, and evaluating differences from client records to audit results. It is the maximum amount of misstatement, individually or in aggregate, that can be accepted in the financial report. In selecting the base figure to be used to calculate materiality, an auditor should consider the key drivers of the business. They should ask, 'What are the end users (that is, shareholders, banks etc.) of the accounts going to be looking at?' For example, will shareholders be interested in profit figures that can be used to pay dividends and increase share price? W&S Partners' audit methodology dictates that one planning materiality (PM) amount is to be used for the financial report as a whole (that is, rather than separate PMs for the income statement and the balance sheet). Further, only one basis should be selected -a blended approach or average should not be used. The basis selected is the one determined to be the key driver of the business W&S Partners use the following percentages as starting points for the various bases: Base Profit before tax Turnover Gross profit Total assets Equity Threshold (%) 5.0 0.5 2.0 0.5 8 Auditing:A Practical Approach