4.62 Audit Strategy Memorandum. The auditor should establish an overall audit strategy that sets the scope, timing, and direction of the audit and guides the development of the audit plan. In establishing the overall audit strategy, the auditor should develop and document an audit plan that includes a description of (a) the planned nature, timing, and extent of the risk assessment procedures, (b) the planned nature, timing, and extent of tests of controls and substantive procedures, and (c) other planned audit procedures that must be performed so that the engagement complies with auditing standards. Required: Select a public company and determine a significant risk that could affect its financial state- ments. (Hint: Go to the EDGAR database at www.sec.gov and select the company's form 10-K. The 10-K will have a list of risk factors the company faces.) Describe the risk and how it could affect the financial statements, including what assertions might be misstated. Prepare an audit strategy memorandum for the risk describing what controls the company might use to mitigate the risk, how you could test the controls, and what substantive proce- dures you might use to determine whether there is a misstatement. Because this is early in your auditing class, do not worry about specific procedures; just be creative and think about a general strategy an auditor might use.