AC10-31 Module 2 PSQC1, PSA 220, PSA 300, PSA 315

Question 1

a. Leadership responsibility for quality within the firm
b. Ethical requirements
c. Acceptance and continuance of client relationships and specific engagements.
d. Human resources
e. Engagement performance
f. Monitoring

Answer 1

Elements of a System of Quality Control

Question 2

to be established by the firm to provide it with reasonable assurance that the firm and its personnel comply with professional standards and regulatory and legal requirements; and the reports issued by the firm or engagement partners are appropriate in the circumstances

Answer 2

System of Quality Control

Question 3

should implement quality control procedures that are applicable to the individual audit engagement

Answer 3

engagement team

Question 4

should:
a. Take responsibility for the overall quality on each audit engagement to which that partner is assigned.

b. Consider whether members of the engagement team have complied with ethical requirements.

c. Be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and specific audit engagements have been followed, and that conclusions reached in this regard are appropriate and have been documented.

d. Be satisfied that the engagement team collectively has the appropriate capabilities,
competence and time to perform the audit engagement in accordance with professional standards and regulatory and legal requirements, and to enable an auditor’s report that is appropriate in the circumstances to be issued.

e. Take responsibility for the direction, supervision and performance of the audit engagement in compliance with professional standards and regulatory and legal requirements, and for the auditor’s report that is issued to be appropriate in the circumstances.

f. Be satisfied that sufficient appropriate audit evidence has been obtained to support
the conclusions reached and for the auditor’s report to be issued.

Answer 4

engagement partner

Question 5

The purpose of this standard is to establish standards and provide guidelines on:
a. Agreeing the terms of the engagement with the client; and
b. The auditor’s response to a request by a client to change the terms of an engagement to one that provides a lower level of assurance.

Answer 5

PSA 210

Question 6

a letter that is in the interest of both client and auditor, preferably before the commencement of the engagement, to help in avoiding misunderstandings with respect to the engagement

Answer 6

Audit Engagement Letters

Question 7

An engagement letter would generally include reference to: (7)

Answer 7

● The objective of the audit of financial statements.
● Management’s responsibility for the financial statements.
● The financial reporting framework adopted by management in preparing the financial statements.
● The scope of the audit, including reference to applicable legislation, regulations or pronouncements of professional bodies to which the auditor adheres.
● The form of any reports or other communication of results of the engagement.
● The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal controls system, there is an unavoidable risk that even some material misstatement may remain undiscovered.
● Unrestricted access to whatever records, documentation and other information requested in connection with the audit.

Question 8

Planning an audit of financial statements involves: (3)

Answer 8

● establishing the overall audit strategy for the engagement and
● developing an audit plan,
● in order to reduce audit risk to an acceptably low level.

Question 9

Activities an auditor should perform at the beginning of the current audit engagement (3)

Answer 9

Preliminary Engagement Activities

● Perform procedures regarding the continuance of the client relationship and the specific audit engagement.
● Evaluate compliance with ethical requirements, including independence.
● Establish an understanding of the terms of the engagement.

Question 10

sets the scope, timing and direction of the audit, and guides the development of the more detailed audit plan

Answer 10

overall audit strategy

Question 11

The establishment of the overall audit strategy involves: (3)

Answer 11

a.) Determining the characteristics of the engagement that define its scope;

b.) Ascertaining the reporting objectives of the engagement to plan the timing of the audit and the
nature of the communication required; and

c.) Considering the important factors that will determine the focus of the engagement team’s
efforts.

Question 12

-to be develop by an auditor to reduce audit risk to an acceptably low level
-more detailed than the overall audit strategy and includes the nature, timing and extent of audit procedures to be performed by engagement team members in order to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level
-includes a description of the nature, timing and extent of planned risk assessment procedures sufficient to assess the risks of material misstatement
-includes description of the nature, timing and extent of planned further audit procedures at the
assertion level for each material class of transactions, account balance, and disclosure

Answer 12

audit plan

Question 13

should be updated and changed as necessary during the course of the audit

Answer 13

overall audit strategy and the audit plan