Planning the Audit, Assessing and Responding to Audit Risk, and Additional Auditing Considerations

This chapter provides guidance to the practitioner primarily on the application of certain standards. Specifically, this chapter provides guidance on the risk assessment process (which includes, among other things, obtaining an understanding of the entity and its environment, including its internal control) and some general auditing considerations for construction contractors. The objective of an audit of a construction contractor's financial statements is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework, which enhances the degree of confidence that intended users can place in the financial statements. As the basis for the auditor's opinion, GAAS require the auditor to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. AU-C section 300, Planning an Audit, states that the objective of the auditor is to plan the audit so that it will be performed in an effective manner and addresses the auditor's responsibility to plan an audit of financial statements and notes that planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan.