Audit Planning and Control

With regards to external audit, the audit committee, it is ta responsibility of the audit
committee to ensure that the work of auditors is done with integrity and done right. In the United
States, audit committees are expected to oversee the integrity of the external auditor and process
of financial reporting. To meet these charged responsibilities, the members of audit committee
are needed to be prepared to oversee and evaluate both the external auditor and the audit plan
(Greenwood, 2002). The responsibility also includes overseeing the, appointing, and
compensating the work done by any registered accounting firm a company employs during the
audit process, the external auditors are expected to report to the audit committee directly. As a
result, the audit committee must be familiar with how auditors perceive management assertions
present in the planning process and the financial statements for them to perform their duty before
giving out their decisions. Finally, the audit committee guides a series of summarized audit
planning process and outlines some given attributes the members of the audit committee need in
an effective audit plan (Wilson & Gilligan, 2005).
External auditors are independent bodies of audit professionals who audit financial
statements of organizations, legal entities, and companies, and are expected to give their opinion
on whether the financial statements are true and fair picture of the actual financial position of the
audited firm and that the financial statements don’t have material misstatement. The main
responsibilities of external auditors are: identification of items that are likely to cause financial
statement to be materially misstated; execution and designing of tests that determine the
occurrence of material misstated financial statements; and testing of effectiveness of internal
control on financial reporting in some specified public entities (Greenwood, 2002).
Plan and design of a generalized audit program

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Audit planning is an iterative process of three steps the external auditors undertake and
the audit committee evaluates in every audit cycle. International Standards on Auditing (ISA)
No. 300 requires audit planning to include the three steps which include: having a clear
understanding of the company, its internal control system and the environment in which it
operates; risk assessment of the materially misstated items in the financial statement; and
designing of the audit criteria that comply with the assessed risk level. During the planning
process, there are financial assertions that the audit committee considers once a company
management issues its financial statement (Wilson & Gilligan, 2005). Upon issuance of the
financial statement, the management makes assertions with reference to the measurement,
presentation, recognition, and disclosure of information in the presented financial statement. The
assertions identify the most critical elements in a given financial statement reporting or
disclosure. As a result, on the planning phase when the auditors design the tests to be used in the
audit process, the assertions enable the auditors to focus on the important elements of the
financial statement to its users (Wilson & Gilligan, 2005).
Also During the planning process, the auditors focus on the likely understated items
rather than the overstated items (Greenwood, 2002). The assertions that auditors normally
consider are divided into three categories:
Transactions

1. Occurrence — the time the transactions took place.
2. Completeness — timely record of transactions
3. Accuracy — the amounts of transactions and other data have been recorded appropriately.
4. Cutoff — the recorded transactions match the periods
5. Classification — all transactions are recorded in the required accounts

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Account balances

1. Existence — equity, Assets and liabilities interests exist.
2. Rights and obligations — right assets mandated for right liabilities.
3. Completeness — all liabilities, equity and assets interests have been recorded in a timely
   manner.
4. Valuation and allocation — financial statements have appropriate recordings of liabilities,
   Assets, and equity
   Presentation and disclosure
5. Occurrence, obligations and rights — disclosed transactions were experienced and pertain to
   the entity.
6. Completeness — proper and timely inclusion of disclosures.
7. Classification and understandability — proper presentation of financial information and, clear
   expression of disclosures.
8. Accuracy and valuation —fair and proper discloser of accurate amounts.
   In real life, to design a practical audit which has ha capability of eliminating all
   misstatements risks is next to impossibility. As a result, the auditors must design an audit that is
   highly likely to focus on areas which potentially have misstatements and methodologies which
   offer reasonable assurances that misstatements are eliminated. To achieve this, auditors two key
   factors in the execution and planning of audits. The two factors are audit risk and materiality
   (Greenwood, 2002).
   Audit use materiality to evaluate the findings of the audit and to conclude whether the
   uncorrected errors render the financial statement inaccurate. Materiality is judged through
   qualitative and quantitative measures whereby quantitative materiality if found by calculating the

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percentages of meaningful items in the financial statement such as total assets, or pretax net
income (Gantz, 2014). The auditors then make use of the percentages in the design of the tests.
The fraction of the overall materiality, tolerable error, is a representation of the maximum
undetected error which auditors are willing to tolerate or accept in the selected samples during
tests. On the other hand, auditors adjust testing scopes in the presence of qualitative risks and are
likely to influence the conclusions made concerning the role of an identified error that maybe
rendered immaterial in pure quantitative measures (Wilson & Gilligan, 2005).
Audit risk assessment is normally done to identify the materially misstated elements ion a
financial statement. This implies that when the material misstatement is low, the detection risk
acceptable by the auditors becomes high. In cases where the audit risk is high, external auditors
develop audits with more extensive testing with less dependability on other peoples work, hence
reduced interim work.
Following the planning and design process of external auditing and the analysis of
presented financial statements by the management, my opinion to the stakeholders and Board of
Directors of Ford Motor Company is that financial statements of the company conform to the
generally accepted accounting principles in the United States. This is because for the three years
period, that is until December 31, 2013, operation results of cash flows and the balance sheet,
income statement, equity and cash flows represent the financial position of the company and its
subsidiaries in the due date (Ford Motor Co, 2015). Likewise, during the period, the company
sustained stable internal control over financial reporting conforming to the criteria developed by
Internal Control – Integrated Framework (1992) that Committee of Sponsoring Organizations of
the Treadway Commission (COSO) issued (Wilson & Gilligan, 2005).

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Moreover, the management of Ford Motors Company is responsible for the financial
statements that maintain the effective Control over Financial Reporting and for the assessment of
effectiveness of Internal Control over Financial Reporting as reported in annual report. The
responsibility of the external audit committee was to express financial statement opinion and the
Control over Financial Reporting of the company based on the integrated audit. The audits were
conducted with regards to the Public Company Accounting Oversight Board standards in the
United States. The standards need the audit to assure that the material misstatements are not
present in the financial statements and if Control over Financial Reporting is maintained in all
material respects. The financial statement audit included examining of evidence supporting
disclosure and amounts in financial statements. The proposed significant managerial estimates
and the general evaluation of the financial statements presentation were the basis of assessing the
financial accounting principles (Ford Motor Co, 2015).
Moreover, Control over Financial Reporting comprised of assessment of the material
assessment weakness, testing, evaluation, and effective operation of Control over Financial
Reporting. The purpose of auditing was to form an opinion based on the financial statement as a
whole. Also, the sector based balance sheets and related statements of income and cash flows
were used to help in further analysis though they were not part of the main financial statement.
The Ford Motors Company Control over Financial Reporting is a designed process for provision
of assurance as far as reliability of preparation of financial statement and financial reporting
comply with the generally accepted accounting principles (GAAP) (Gantz, 2014). Also, it
involves the record maintenance in a manner that is accurate, and fairly reflects dispositions and
transactions of the company assets. In addition, it provides a worth assurance concerning timely
detection or prevention of unauthorized use, disposition, and acquisition of the assets of the

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company that are present on the financial statements. Finally, internal Control over Financial
Reporting cannot detect or prevent misstatement (Ford Motor Co, 2015).