Final answer:
An auditor must plan ahead, select the most useful material, and review work while assessing an audit plan. This involves understanding risks, assessing control weaknesses, and preparing for probability scenarios.
Step-by-step explanation:
When planning an audit, an auditor should plan ahead to ensure a thorough and efficient audit process. This involves selecting the most useful material for examination, which requires an understanding of the client's industry, the risks of material misstatement, and the design of the organization's internal controls. The probability and expected number of audits in a specific time frame, such as a 20-year period, can inform the auditor's risk assessment and planning.
Assessing past grades of an audit is analogous to assessing past outcomes or issues in the client's financial statements to pinpoint areas needing closer scrutiny. The auditor should ask probing questions about their own understanding of the concepts, while also checking for any weaknesses in the subject's control environment. Additionally, it is imperative to assess whether the arguments and claims being made about the financial statements are coherent and supported by evidence.
Auditors must prepare for various scenarios. To find the probability that a person is not audited at all, or the probability of being audited more than twice, auditors utilize statistical sampling and other predictive tools. Ultimately, the audit plan should be comprehensive, using an organized approach such as a paragraph planner or a graphic organizer. Regularly reviewing work and planning is key to adapt to changes, like new accounting standards or shifts in the business environment.