The first two stages in the audit process can be described as the preliminary stage and the planning stage. Planning can be further broken down into the following activities: 1. Establishing the (preliminary) audit strategy and materiality 2. Planning risk assessment procedures 3. Conducting risk assessment procedures 4. Planning "further" audit procedures and "other" procedures. The following list includes a number of activities or procedures which are carried out during the first two stages of the audit process: 1. Conducting a tour of the client's manufacturing facility to familiarise yourself with the manufacturing process. 2. Drafting an engagement letter for the audit. 3. Conducting a debtors circularisation. 4. Deciding in principle upon the use of an expert to assist in the valuation of inventory as was done on the prior year's audit. 5. Flowcharting (drawing a diagram of) the internal control system for sales. 6. Considering the potential effect on the audit, of the King III report on corporate governance. 7. Evaluating the schedule of uncorrected misstatements for the current audit. 8. Deciding on the balance between tests of controls and substantive tests. 9. Considering the appropriateness of the prior year's planning materiality level for the current year's audit. 10. Meeting with the audit committee members to discuss their opinions on the level of misstatement in the financial statements which would be acceptable to users of the financial statements. 11. Setting up a schedule of meetings (dates, times, who to attend) with the chairman of each of the board committees (other than the audit committee) to discuss the work of the committee for the year under audit. 108 12. Engaging other firms of auditors to conduct extensive physical inventory counts at the client's numerous branches because of the likelihood of manipulation of the annual financial statements. YOU ARE REQUIRED TO identify in which of the two stages mentioned in the question, each of the above activities or procedures will take place. When you select the planning stage you must identify the activity within planning into which the procedure falls. If the activity or procedure does not take place in either of the stages mentioned, indicate which stage of the audit process it does fall into