Audit Planning Flashcards
What are the objectives of adequate planning
Give appropriate attention to important areas
Identified potential problems
Carry out the work expeditiously (reasonably quick efficient)
Ensure that the right number of staff are in the audit team with the right skills
To coordinate if necessary with other parties i.e. internal audit
Facilitate the direction and supervision of the audit team and review their work
What most risk assessment procedures include
Enquiries of management and others who may have information that is likely to assist in identifying risk of material misstatement
Analytical procedures which may help identify unusual transactions and ratios or trends that have ordered applications
Observation and inspection to support enquiries and provide information
 And what is important regarding the system of internal controls for an auditor
Hi SA315 requires the auditor not only to understand the controls relevance to the audit but also:
Evaluate the design of controls-should they prevent or detect and correct material misstatement
To determine whether they have been implemented – are the controls operating efficiently
Enquiry alone is not sufficient to answer these questions
When is there a risk of material misstatement
A misstatement statement occurring (i.e. likelihood) and
It’s being material if it were to occur (magnitude)
What are the two levels that risk of material misstatement must be assessed
The financial statement level (i.e. relating to the financial statements for example the risk of management overriding internal controls):
The assertion level (i.e. relating to classes of transactions account balances and disclosures)
Why is the risk of material misstatement assessed at the assertion level
It is assessed at the assertion level to the term in the nature, timing and extent of the audit procedures necessary to obtain sufficient appropriate or evidence. It has two components
Inherent risks
Control risks
What are the definitions of materiality
Hey Matt is material if it’s a mission or mistake Millward reasonably influence economic decisions uses taken on the basis of the financial statements
It is affected by the size or nature of the misstatements
What are the rule of thumb guidance for materiality
If greater than:
0.5% – 1% of revenue
1%-2% of total assets
5% - 10% of profits before tax
What is performance materiality
It is the aggregates misstatements that when added together could exceed financial statement materiality
