A4 (4) - EVALUATING AUDIT FINDINGS

Question 1

ANALYTICAL PROCEDURES USED AS AN OVERALL REVIEW

Answer 1

(1) . Evaluate overall financial statement presentation, to assess the conclusions reached.
(2) - Assist in forming an opinion on whether FSs as a whole are free of material misstatement

Question 2

EVALUATE WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIALMISSTATEMENT

Answer 2

1- Results of analytical procedures during overall review of FSs
2-Misstatements found during audit, Including incorrect
3- Qualitative aspects of company’s accounting practices
4- Conditions identified during audit related to fraud risk
5- Presentation of FSs, including disclosures
6-Sufficiency and appropriateness of the audit evidence

Question 3

EVALUATE WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIALMISSTATEMENT- Evaluation of Audit Findings

Answer 3

1- MATERIALITY LEVEL- , the auditor should consider the risk that the addition of undetected misstatements could cause materiality levels to be exceeded.

2- Prior period misstatements may affect FSs of current period.

3- Other Qualitative considerations (see below)

4- Whether or not a misstatement is considered material is ultimately a matter of professional judgment.

Question 4

QULATATIVE CONSIDERATIONS sometimes may cause an otherwise immaterial misstatement to be deemed material.

Answer 4

The specific circumstances surrounding an entity may lead to situations in which misstatements that do not exceed materiality limits are still likely to influence the
economic decisions of users

Question 5

Misstatements are more likely to be considered material if they

Answer 5

1- Affect trends in profitability
2- change a loss into income (or vice versa)
3- Affect the entity’s compliance with loan covenants
4- Affect the entity’s compliance with contracts
5- Affect the entity’s compliance with regulatory terms
6- Increase management compensation
7-indicate a pattern of management bias
8-involve fraud or an illegal act.
9- Affect significant financial statement elements

Question 6

EVALUATE WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIALMISSTATEMENT - Communication to Management

Answer 6

1- All misstatements, must be communicated on time

2-Request management to review & make corrections

3-The auditor should reevaluate the amount of likely misstatement remaining after management has made adjustments

4- If management does not correct some or all of the known and likely misstatements, the auditor should consider the implications on the auditor’s report.

Question 7

EVALUATE WHETHER THE FINANCIAL STATEMENTS ARE FREE OF MATERIALMISSTATEMENT - Documentation Requirements

Answer 7

1- Planning levels of materiality and tolerable misstatement.

2- Known and likely misstatements that were corrected by management

3- SUM with The aggregate effect on the financial statements

Question 8

REVIEWING THE WORK OF OTHERS -

Answer 8

Audit documentation should include:

1. Who performed work and date work completed.
2. Who reviewed audit documentation& date of review.

Question 9

ENGAGEMENT QUALITY REVIEW - Engagement Quality Reviewer

Answer 9

BY a partner who is not otherwise associated

with the engagement

Question 10

ENGAGEMENT QUALITY REVIEW - Engagement Quality Review Process

Answer 10

1- Evaluate the significant judgments related to engagement planning

2-Evaluate the engagement team’s assessment of and responses to significant risks

3-Evaluate significant judgments about materiality, corrected and uncorrected misstatements, and control deficiencies.

4-Review the evaluation of the firm’s independence in relation to the engagement

5- Review the engagement completion document and confirm that there are no unresolved matters

6- Review the financial statements, management’s report on internal control

7- Read other information to be filed with the SEC and determine whether appropriate action has been taken with respect to material Inconsistencies or material misstatements of fact.

8- Evaluate the consultations, documentation, and conclusions related to difficult or contentious matters

9- Evaluate communications with management, the audit committee, and regulatory bodies

10- Evaluate whether engagement documentation indicates that the engagement team responded appropriately to significant risks and whether such documentation supports
the conclusions reached by the engagement team

Question 11

A significant engagement deficiency exists when

Answer 11

1- The engagement team failed to obtain sufficient appropriate evidence

2- The engagement team reached an inappropriate overall conclusion

3- The engagement report is not appropriate for the circumstances

4- The firm is not independent of the client