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Java

Hello

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damah43420
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© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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KPMK UK Audit Planning Summary

Client: Globo Gym

Audit Period: Year Ended 31 December 20xx

1. Objective
The objective of this audit is to express an opinion on the financial statements of Global Gym PLC for the
year ended 31 December 20xx, ensuring they are free from material misstatement, whether due to fraud
or error.

2. Materiality Standards
Overall Materiality

- Revenue-based Materiality:

- Benchmark: 1% of total revenue

- Calculation: £30,615,000 1% = £306,150

- Asset-based Materiality:

- Benchmark: 1% of total assets

- Calculation: £17,591,000 1% = £175,910

- Income-based Materiality:

- Benchmark: 5% of net income before taxes

- Calculation: £3,123,000 5% = £157,000

Chosen Overall Materiality: £157,000 (lowest of the three benchmarks)


Performance Materiality

- Set at 75% of overall materiality to reduce the risk of undetected misstatements.

- Calculation: £157,000 75% = £117,000

Specific Materiality

- Lower thresholds may apply to specific accounts or disclosures of particular interest:

- Bonus Scheme

- Related party transactions

- Contingent liabilities

- Obsolete equipment

Tolerable Misstatement

- Set at a percentage of performance materiality to guide detailed audit procedures.

- Calculation: £37,500

3. Qualitative Factors
When determining materiality, consider the following qualitative factors:

- The nature of the item or error, such as fraudulent transactions or related party transactions.

- The size of the item relative to prior periods or industry standards.

- The effect on trends or key ratios.

- Potential regulatory or contractual implications.

4. Audit Approach
Planning

- Risk Assessment: Identify areas of high risk and focus audit procedures accordingly.

- Materiality Levels: Apply the established materiality thresholds to determine the nature, timing, and
extent of audit procedures.
Execution

- Testing: Perform detailed testing on significant accounts and transactions, applying the materiality
levels established.

- Documentation: Ensure all findings are documented, particularly those approaching or exceeding
performance materiality.

Evaluation

- Assess Findings: Evaluate detected misstatements against overall and performance materiality.

- Qualitative Consideration: Consider qualitative factors when assessing the significance of findings.

5. Communication with Management


- Discuss materiality thresholds and their application with management to ensure transparency.

- Communicate any significant findings promptly to management and the audit committee.

6. Audit Team Responsibilities


- Audit Manager: Oversee the audit process, ensure compliance with materiality thresholds, and
communicate with management.

- Audit Senior: Conduct detailed testing, document findings, and report to the audit manager.

- Audit Associates: Identify accounts requiring additional work as part of materiality threshold, assist in
executing audit procedures and ensure accurate documentation.

7. Timeline
- Planning and Risk Assessment: [Date]

- Fieldwork: [Date]

- Review and Evaluation: [Date]

- Final Reporting: [Date]

8. Conclusion
This document outlines the materiality standards and audit approach for the Global Gym Business audit.
All audit team members should familiarise themselves with these guidelines to ensure a thorough and
efficient audit process.
Approved by: __________________

[Audit Partner]

Date: ________________________

{Date]

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