What significant matters should be considered by the auditor in developing the overall audit plan?
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The auditor should set an overall strategy for the audit which sets the scope, timing and direction of the audit and assists with the development of the more detailed audit plan. This will involve: •identifying the characteristics of the engagement that define its scope, i.e. what reporting requirements are there, what financial reporting framework is the client using, what group companies are covered; •ascertaining the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required; •considering the factors that, in the auditor’s professional judgment, are significant in directing the engagement team’s efforts; To subscribe to this content, simply call 0800 231 5199 We can create a package
that’s catered to your individual needs. Or book a demo to see this product in action. B It involves establishing the overall audit strategy for the engagement and developing an audit plan in order to reduce audit risk to an acceptably low level. a. Reporting C Adequate planning of the audit work helps the auditor of accomplishing the following objectives, except: a.
Ensuring that appropriate attention is devoted to important areas of the audit. only 2 is correct Statement 1: The client should plan the audit work so that the audit will be performed in an effective manner. Statement 2: The auditor should develop and document an overall audit plan describing the scope and conduct of the audit. I to III Which of the following activities should be performed by the auditor at the beginning of the current audit engagement? I. Perform procedures regarding the continuance of the client relationship and the specific audit engagement. Both Which of the following procedures should be performed by the auditor prior to starting an initial audit? I. Perform procedures regarding the acceptance of the client relationship and the specific audit engagement. D Which of the following statements is incorrect? a. The auditor should plan the audit so that the engagement will be performed in an effective manner. C The auditor should plan the audit work so that the audit will be performed in an effective manner. The extent of planning will vary according to any of the following, except: a. Auditor's experience with the entity and knowledge of the business.
Both are correct Statement 1: Obtaining knowledge of the entity business is an important part of the planning the audit work. Statement 2: The auditor's knowledge of the entity's business assists in the identification of events, transactions and practices which may have a material effect on the financial statements. only 2 is correct Statement 1: The overall audit plan and the audit program should not be revised during the course of the audit. Statement 2: The auditor should develop and document an audit program setting out the nature, timing and extent of planned audit procedures required to implement the overall audit plan. Only 1 is correct Statement 1: According to PSA 300, the auditor may discuss elements of planning with those charged with governance and the entity's management. Statement 2: The audit plan sets the scope, timing and direction of the audit guides the development of the more detailed overall audit strategy. Statement 3: The overall audit strategy is more detailed than the audit plan and includes the nature, timing and extent of audit procedures to be performed by engagement team members to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level. A In planning the audit engagement, the auditor should consider each of the following except a. The kind of opinion (unqualified, qualified, or adverse) that is likely to be expressed. D Which of the following is least likely considered by the CPA when he makes an overall audit plan? a. The nature and timing of reports and other communication with the entity that are expected under the engagement D Which of the following matters should be considered by the auditor in developing the overall audit strategy? a. Important characteristics of the entity, its business, its financial performance and its reporting requirements including changes since the date of the prior audit b. Conditions requiring special attention, such as the existence of the related parties c. The setting of materiality level for audit purposes d. All of the above A In developing the overall audit strategy, the focus of the engagement team's efforts is considered. Which of the following is not appropriately classified as a factor affecting the focus of the team's efforts? a. The financial reporting framework on which the financial informati0D to be audited has been prepared, including any need for reconciliation to another reporting framework. D With respect to planning an audit, which of the following statements is always true? a. An inventory count must be observed at year-end. B In planning stage of an audit engagement, the auditor is required to perform audit procedures to obtain an understanding of the entity and its environment, including its internal control. These procedures are called a. Substantive tests c. Test of controls b. Risk assessment procedures d. Dual-purpose tests D Analytical procedures used in planning an audit should focus on identifying: a. Material weaknesses in the internal control system B The objective of performing analytical procedures in planning an audit engagement is to identify the existence of: a. Related party transactions B Which of the following procedures would an auditor most likely perform in planning an audit of financial statements? a. Inquiring of the client's legal counsel concerning pending litigation. C Analytical procedures used in planning an audit should focus on a. Reducing the scope of tests of controls and substantive tests.
C This serves as the set of instructions to assistants involved in the audit and as a means to control and record the proper execution of the work of the personnel involved in the service. a. Audit procedures C The auditor should design the written audit program, so that: a. All
material transactions will be selected for substantive testing. C In designing audit programs, an auditor should establish specific audit objectives that related primarily to the a. Selected audit techniques C The auditor should document the overall audit strategy and the audit plan including significant changes made during the audit engagement. Which of the following statements on documentation is incorrect? a. Documentation of the overall audit
strategy may be made in the form of a memorandum that contains key decisions regarding the overall scope timing and conduct of the audit. D Audit procedures may be classified as risk assessment procedures and further audit procedures. Which of the following best describes risk assessment procedures? a. These procedures are used detect
material misstatements at the assertion level. D The audit program should contain the following, except: a. Audit objective D Which of the following procedures is not performed as a part of planning an audit engagement? a. Reviewing working papers of the prior year C Cost-benefit considerations are part of audit planning. In relation to this, which of the following audit procedures is usually the least costly to perform? a. Tests of
balances C Which of the following procedures would an auditor least likely perform in planning a financial statement audit? a. Coordinating the assistance of entity personnel in data preparation. B Audit risk has three components: inherent risk, control risk and detection risk. Which of the following statements is correct? a. Detection risk is a function of the efficiency of an audit procedure. D Some accounts balances, such as those for retirement benefits and finance lease, are the results of complex calculations. The susceptibility to material misstatements in these types of accounts is referred to as a. Audit risk C Inherent risk and control risk differ from detection risk in that inherent risk and control risk are: a. Elements of audit risk while detection risk is not. C There is an inverse relationship that exist between the acceptable level of detection risk and the a. Risk of falling to discover material misstatement B Which of the following statements is not correct about materiality? a. The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GMP, while other matters are not important. A In considering materiality for planning purposes, Ash, auditor believes that misstatements aggregating P60,000 would have material effect on an entity's income statement, but that misstatements would have to aggregate P40,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate: a. P40,000 B Which of the following would an auditor most likely use in determining the auditor's preliminary judgment about materiality? a. The anticipated sample size of the planned substantive tests. both incorrect Statement 1: Supervision involves developing an overall strategy' for the expected conduct and scope of the audit. Statement 2: Planning involves directing the efforts of assistants who are involved in accomplishing the objectives of the audit and determining whether those objectives were accomplished. D In performing an audit of financial statements, the auditor should obtain a sufficient knowledge of a client's business and industry to a. Develop an attitude of professional skepticism concerning management's financial statement assertions. Yes The auditor's plan should be cost-beneficial No The auditor's plan should Succeed Action Yes The auditor's plan should Be flexible Yes Analytical procedures are required: (Y/N) As a risk assessment procedure performed during planning No Analytical procedures are required: (Y/N) As a substantive test procedure during evidence Yes Analytical procedures are required: (Y/N) As an overall review at audit completion What are the matters to be considered in developing an audit plan?Audit Plan
The planned nature, timing, and extent of the risk assessment procedures; The planned nature, timing, and extent of tests of controls and substantive procedures;12 and. Other planned audit procedures required to be performed so that the engagement complies with PCAOB standards.
What are the things to consider in developing the audit plan and why?Audit Planning & Developing an Active Audit Plan – Considerations, Advantages. Agreement with the Client.. Scope of Audit work (Audit Engagement Letter) ... . Knowledge of the Client's Business.. Knowledge of the Accounting System in Use.. Information about Client's Staff.. Technical Details.. Instructions to and Information from Client.. What are significant matters in audit?A significant matter is a matter clearly identified by the auditor as significant in an audit report (e.g. a management letter). For the independent auditor's report, a significant matter includes: a matter included in the Basis for Qualified Opinion section.
When developing the overall strategy for the audit the auditor will?The Overall Audit Strategy and Audit Plan
7. In establishing the overall audit strategy, the auditor shall: (a) Determine the characteristics of the engagement that define its scope. (b) Ascertain the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required.
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