Approach

Question 1

What is the purpose of the audit approach

Answer 1

An audit approach sets the scope, timing, and direction of the audit. It’s based on the results of the RMM at OFSL and the RMM at assertion level

Question 2

What are the 2 types of audit approach?

Answer 2

Purely substantive audit approach that focuses solely on substantive procedures,

Combined audit approach that focuses on both test of controls and substantive procedures.

Question 3

What are substantive procedures?

Answer 3

Audit procedure designed to detect material misstatements at the assertion level. Substantive procedures comprise:
Tests of details
Substantive analytical procedures

Question 4

What are test of controls

Answer 4

Audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level

Question 5

What is a Substantive approach?

Answer 5

Places no reliance on the operating effectiveness of controls.
Used when the control risk is high
Useful if there are few transactions only

Question 6

What is combined approach

Answer 6

Considers the operating effectiveness of controls and whether or not the operating effectiveness of controls can be relied upon to reduce detection risk to an acceptably low level
Uses both test of controls and substantive procedures

Question 7

Why perform test of controls?

Answer 7

The auditor’s assessment of risks of material misstatement at the assertion level includes an expectation that the controls are operating effectively.

Substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level.

Question 8

Why can’t you rely purely on test of controls?

Answer 8

CAS 330 requires the auditors to design and perform substantive procedures for each material class of transactions, account balance, and disclosure