OBJECTIVES
 
- To apply assured steps in the audit planning process, with emphasis on risk identification and audit response (policy) thereto.

- To offer you with the experience of working as a member of an audit team.

- To acquaint you with the yearly report filed on Form 10-K of a publicly-held company audited by a public accounting firm. Interim financial statements are filed quarterly on Form 10Q.

Part 1

A preliminary analytical appraisal of the company's most recent balance sheet and income statement using one or more prior years as a basis of comparison. Focus on these factors:

- Current year (that is, the year you are auditing) financial results.
- The company's financial viability and earnings trend.
- Any unusual variation of current year amounts from expected amounts.
- Significant and/or unusual transactions in current year.
- Account balances significantly influenced by the management estimates or judgment.
- Selection of accounting principles and practices by the management in those instances where alternative principles are acceptable.
- Critical cut-offs and accruals.

Part 2

For each material balance sheet and income statement line item, state your assessment of the level of inherent risk. You might use subjective terms such as "high," "moderate," or "low;" or alternately you may use percentages.

A convenient way to do this is using a matrix having two columns: (1) balance sheet and income statement line item name, and (2) inherent risk.