Enabling Competencies

Question 1

What are the four steps that encompass an audit planning Memo?

Answer 1

1. Risk
2. Approach
3. Materiality
4. Procedures

Question 2

What is the first step in the Audit Plan?

Answer 2

1. Assess OFSL Risk.
   - Identify case fact & explain why it is a risk

Question 3

What are the types of Audit approaches?

Answer 3

Combined approach and Substantive approach

Question 4

What should you consider when determining the approach?

Answer 4

Case fact that discuss
- the control environment
- the nature of the business

Question 5

What are examples of triggers that indicate more pervasive impacts on audit approach?

Answer 5

• a new audit client that has been audited by a predecessor auditor
• a new audit client that has never been audited before
• changes in the control environment e.g. new IT system
• changes in the business, new division or geographical expansion

Question 6

What does the concept of Materiality do?

Answer 6

Materiality recognizes that transactions, amounts and certain types of errors, directly influence the relevance and reliability of information for decision-making purposes

Question 7

How do you determine the benchmark for materiality?

Answer 7

Understanding of who your users are and what their objectives are allows you to select a benchmark for materiality that reflects that

Question 8

What is Performance Materiality?

Answer 8

Performance materiality is auditor focused. When setting the PM you consider the amount of audit work required to ensure that the identified and potential unidentified misstatements will not exceed overall materiality.

Question 9

What is specific materiality?

Answer 9

It is a separate materiality set for accounts that users are particularly concerned about. Typically indicated by specific case facts.

Question 10

True or False you should analyze the FR issues first and then discuss the audit implication of each?

Answer 10

True.
Most risks at the assertion level will be tired to FR issues.

Question 11

What should your description of an Audit procedure include?

Answer 11

• Verb. What do you want someone to do.
  -population. to be clear which population the sample is being selected
• Document. What should the sample agree to.
• Purpose. Describe the purpose of the procedure. What should they be looking for.

Question 12

What are the steps in a WIR analysis?

Answer 12

1. Weaknesses (assess the situation)
2. Implication (analyze major issues)
3. Recommendation (conclude & advise)