AUD 3 - Engagement Acceptance, Planning, and Risk Assessment Flashcards
During the initial planning phase of an audit, the auditor would most likely discuss the timing of what with the client’s management?
Audit procedures
Who selects and appoints the independent external auditor?
Audit committee
SOX generally applies to whom?
Issuers
If the client is an issuer, then the auditor must perform what type of audit on the client’s FS and ICFR?
Integrated audit
A precondition for an audit is that the auditor should obtain the agreement of management that it acknowledges and understands its responsibility for what?
F/S and Internal Controls
The auditor should not accept an engagement if prior to the engagement acceptance, management imposes a scope limitation that will result in the auditor issuing what sort of opinion on the F/S as a whole?
Disclaimer of opinion
If the audit is required by law or regulation and a disclaimer is acceptance, is the auditor permitted to accept the engagement?
YES
EXPLANATION: The auditor is permitted but not required to accept. An example of such an audit is that of an employee benefit plan.
What type of scope limitations do not preclude engagement acceptance?
Auditor may still accept engagement:
- Management imposed scope limit that will result in a qualified opinion
- Scope limit is imposed by circumstances beyond management’s control
Is a lack of records considered a scope limitation?
YES
Engagement letter = signed ________
agreement
The engagement letter should be provided to the audit committee ________.
annually
What is defined as an audit engagement for an existing audit client for whom the auditor performed the preceding audit?
Recurring audit
What is defined as an engagement in which the f/s for the prior period were not audited or were audited by a predecessor auditor?
Initial audit
In an initial audit, the auditor is required to talk to whom before engagement acceptance?
Talk with predecessor auditor
Is client permission needed before communicating with the predecessor auditor before engagement acceptance?
Yes
EXPLANATION: If the client is unwilling to agree to this procedure, the auditor should consider the implications and decide whether to accept the engagement.
Does the audit strategy stay constant throughout the audit?
No
EXPLANATION: The auditor should be prepared to revise the audit strategy and the audit plan based on the results of audit procedures.
What three things is the engagement partner responsible for?
1) Planning the audit
2) Supervising the work of engagement team members
3) Compliance w/ relevant auditing standards
Once the engagement has been accepted, the auditor must obtain an understanding of the client’s _______ and ________.
Industry and business
Name a common source of industry info.
- AICPA accounting and audit guides
- trade publications and professional trade associations
- government publications
- AICPA Accounting Trends and Techniques
The overall audit strategy has to be in _______.
Writing
One factor that determines the focus of the audit team’s efforts include preliminary evaluations of what?
- Material
- Audit risk
- Internal control
A written audit plan (i.e. documentation of specific audit procedures) is ______.
Required
Are risk assessment procedures required in all financial statement audits?
YES
What is the mnemonic for the six main f/s assertions?
COVER U
