This milestone will give you practice using generally accepted auditing standards $($GAAS$)$ to plan an audit by filling in various sections of a working paper. You will revise this milestone in response to instructor feedback and resubmit it as part of Project One.

Scenario

The CPA firm of Penmen Associates is planning to take over the audit of financial statements of Keystone Inc. As a senior auditor for the firm, you have been tasked with evaluating Keystone, using GAAS, best practices, and risk assessment techniques to identify the objectives and scope of the audit for this client. After completion, Penmen Associates has asked you to prepare for the audit. You will gain an understanding of Keystone$$s internal control structure, financial accounts, business environment, materiality, and any inherent risks that may impact the company. You will also review external and other factors, including interview data, that could impact the audit.

Directions

For this milestone, you will create a working paper. A working paper is an informational report prepared by accountants and auditors as supporting documents for formal reports and financial statements.

Specifically, you must address the following rubric criteria:

Review the Keystone case study and the client suitability interview to validate Keystone as a viable client. Apply GAAS to the audit planning process.

Determine potential internal risk factors for conducting the external audit. Include the following:

Risk related to structure of the company based on the client interview

Risk discovered during due diligence process

Client risk profile

Determine potential external risk factors for conducting the external audit. Include the following:

Industry and market research that informs risk factors

Regulatory standards

Client risk profile

Describe the controls that are in place to minimize risk to the client. Consider the following:

How do these controls impact the audit plan?

Utilize auditing standards to determine potential issues for further analysis. Consider the following:

How is GAAS used to identify issues?

Determine the objectives and scope of the external audit. Include the following:

Processes that need to be audited

Associated deliverables needed for the audit

Data type to be investigated