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ISA 315 states that a firm should carry out the following when dealing with a new client engagement:
Making inquiries of management and others within the entity
Analytical procedures
Observation and inspection
How effective are the above and which is the most effective?
Also, in evaluating the effectiveness of each of the procedure, what are some of the questions to think about?You can’t really compare them and say which is the more effective as they are simply collecting information about the new client. They all have to be done anyhow.
Inquiries of management: think about access to individuals, whether they answer all questions, whether they seem evasive, whether they can be questioned on their own?
Analytical procedures: better if you can go back several years. More analysis has to be done if there are large changes.
Observation and inspection: are all areas freely available without notice? Does the auditor know what he or she is looking at? Dothe office, records and factory look well-ordered?
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