AUD1

Question 1

Per ISA 260, all four matters must be communicated to those in charge of governance:

Answer 1

The auditor’s responsibilities in relation to the financial statement audit
The planned scope and timing of the audit
Significant timing of the audit
Auditor independence

Question 2

During the initial planning of a financial statements audit conducted in accordance with generally accepted auditing standards, an auditor considers certain procedures for developing an overall strategy for the expected conduct and scope of the audit. These procedures include

Answer 2

determining the extent of involvement of the client’s internal auditors.

Question 3

Obtaining a written representation letter from the client’s management. The letter date should be the same as the date of the

Answer 3

auditor’s report.

Question 4

Difficulties encountered during the audit that should be communicated include the following:

Answer 4

Significant delays in management providing required information
An unnecessarily brief time within which to complete the audit
Extensive unexpected effort required to obtain sufficient appropriate audit evidence
The unavailability of expected information
Restrictions imposed on the auditor by management
Management’s unwillingness to make or extend its assessment of the entity’s ability to continue as a going concern when requested

Question 5

The vouchers payable department should:

Answer 5

match vendor’s invoice with the related receiving report, which ensures that goods billed were received (i.e., that voucher is valid).
approve vouchers for payment by having an authorized employee sign the vouchers (authorization).
indicate the asset and expense accounts to be debited (ensuring proper classification).

Question 6

Certain factors would make relying on controls tested in prior audits not feasible. These factors could include:

Answer 6

• a weak control environment,
• weak monitoring controls,
• a significant manual element to relevant controls,
• personnel changes that significantly affect the application of the control,
• changing circumstances that indicate the need for changes in the control, and
• weak information technology (IT) controls.