Instructions This week focuses on the relationship between audit planning, the industry, and obtaining or retaining of the engagement. Auditors are required to exercise due diligence before accepting an engagement. The term engagement, when used in relation to an audit, signifies a contractual agreement between an audit firm and a business entity. The terms obtain or retain relate to whether a new engagement will begin between the two entities or if the engagement is a continuing of a previous relationship. Audits are like vacations–the more planning you put into it, the better the outcome. Therefore, planning is the most important part of every audit. The completion of the audit is time-sensitive; therefore, placing emphasis on planning ensures that an auditor’s time is used wisely. If an audit firm is to make a profit, planning will help keep activities within the contract rate. Select one of the following industries: • Clothing manufacturing • Pharmaceuticals • Food distributor Then, search the Internet for a publicly-traded company in one of these categories. Locate the most recently published financial statement, and then complete the following: • Provide an overview of the industry, the company, and identify primary competitors. • Use the current state of the industry to identify the key concerns you would have if your firm were to enter into an engagement with this company. • Complete the assignment with an explanation of the critical items you would include in the audit plan. Length: 3-5 pages, not including title and reference pages References: Include an entry in the bibliography for the selected company. Include at least 4 resources to support your discussions. Helpful articles/links for this assignment: – https://pcaobus.org/Standards/Auditing/Pages/AS2101.aspx – (Important) Read: Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Chapter 5 & Chapter 6 – What auditors think about audit quality – A new perspective on an old issue. Journal of Managerial Issues, 30(4) – Do external quality certifications improve firms’ conduct? International evidence from manufacturing and service industries – Areas of Deficiency Overview: Assessing the Industry and the Auditing Process Auditing and industry planning saves time, prevents waste, and is a good practice in the field of accounting. Following the mandates of AU-C Section 300, Planning an Audit, as set forth by the AICPA (2018), it is required that the auditor carefully plan the audit process. Audit planning, or fieldwork, is the process by which (a) a clear strategy is developed; (b) areas of concern and risk are identified; (c) an appropriate schedule of activities can be created; and, (d) the audit team members are identified. Execution of the planning processes for an audit of financial statements saves time and tends to maximize effectiveness and efficiency. Developing an audit opinion that is valid and trustworthy, the auditor must carefully execute processes, collect evidence, and critically evaluate all information available. At the center of the audit process is an understanding of human nature; people generally will be truthful unless there is something of supposed value to be gained from doing otherwise. Therefore, auditors, following the standards to maintain independence, must use practices that protect all stakeholders. A key part of the planning process is preparing for the engagement. Depending on the entity that will be audited and the auditor’s experience, the time allocated to planning is integral to the integrity of the audit process. For example, if an auditor has experience with audits in the pharmaceutical industry and has a request from a biomedical engineering company to perform similar services, this decision should be given due consideration. While the industries are related, there are distinct differences in the treatment of assets, product shelf-life, and so on. An audit engagement with a biomedical engineering company may require specific technical knowledge. This week focuses on the relationship between audit planning, obtaining and retaining an engagement, and the industry. The auditor must exercise due diligence before, during, and after accepting an audit engagement with any entity.