The types of knowledge that Domingo must obtain to plan the engagement for his

prospective client which is a financial institution are:

Relevant industry, regulatory and other external factors including the

applicable financial reporting framework for financial institutions
Nature of the entity, including:
o Operations
o Ownership and governance structures
o Types of investments the entity makes and plans to make
o Way that the entity is structured and how it is financed, classes of
transactions, account balances(opening and prior period balances)
and disclosures to be expected in the financial statements
Selection and application of accounting policies, including reasons for
changes thereto
Objectives and strategies and related business risks
Measurement and review of financial performance
Internal control
Supplementary information:
Business operations such as:
Nature of revenue sources, services, and markets, including involvement in
electronic commerce such as Internet marketing activities.
o Role as financial intermediaries
Conduct of operations (for example, stages and methods of lending
money , or activities exposed to environmental risks).
Alliances, joint ventures, and outsourcing activities.
Geographic dispersion and industry segmentation.
Location of facilities, offices, and other branches
Key customers and employment arrangements (including the existence of
union contracts, pension and other post employment benefits, stock option or
incentive bonus arrangements, and government regulation related to
employment matters)
Research and development activities and expenditures.
Transactions with related parties.
Investments and investment activities such as:
Planned or recently executed acquisitions or divestitures.
Investments and dispositions of securities and loans.
Capital investment activities.
Investments in non-consolidated entities, including partnerships, joint
ventures and special-purpose entities.
Financing and financing activities such as:
Major subsidiaries and associated entities, including consolidated and
nonconsolidated structures.
o Types of bonds issued and other marketable securities

How to obtain?

Observation of entitys activities and operations

Inspection of documents(business plans and strategies) , records, and
internal control manuals
Reading of reports prepared by management(quarterly management report
and interim financial statements) and those charged with
governance(minutes of board meetings)
Visits to premises and facilities
Discussion with people within and outside the entity
Reading books, periodicals and other publications related to financial
institutions

Discuss how this knowledge of the client and its environment will help Domingo in
planning and performing an audit in accordance with Philippine Standards in
Auditing?
The knowledge he obtained of his client and its environment will help him in
planning and performing audit by being an aid in:

Assessing risks and identifying potential problems

Doing the planning and performance of the audit effectively and
efficiently
Evaluating audit evidence as well as the reasonableness of clients
representations and estimates
Providing better service to the client
Determination of the consistency of the assertions to what is really in
the business

Explain specific ways that the knowledge gained by Sison during the plant tour may
help in planning and conducting the audit.

During the plant tour, Sison will surely be observing the internal control
procedures and processes and most probably will notice some material
defects or inadequacy in it and other material misstatements resulting from
weak internal control systems of the entity. This will be a great help in
planning the audit as to what extent the substantive testing will be
conducted.
Plant tour will also will give him information as to what really is the nature of
the entity. Transactions that will most probably be and should be existent
both in the records and the operations will be identified. He will also be given
a hint on what transactions will be focused on during the audit which are
associated with different kinds of risk.