ENGAGEMENT PLANNING

Question 1

THE AUDITOR

Answer 1

• Provides users of financial reasonable assurance that the financial statements as a whole are
• • FREE from Material Misstatement
• ** Due to Fraud or error

Question 2

THE AUDITOR

Answer 2

• Expresses an Opinion on the Financial Statements
• • They are prepared in accordance with an applicable financial reporting framework
• ** In all material respects

Question 3

THE AUDITOR

Answer 3

• The earlier the auditor is hired prior to the balance sheet date, the better for audit planning and efficiency
• • Audit procedures can be carried out at interim dates if control risk for the accounts/transactions is low
• • review changes in balances at year end
• • if the year has already been closed, and auditor can take the engagement if they are able to overcome the limitations of the engagement

Question 4

An auditor uses professional skepticism to

Answer 4

• • plan the scope of the audit

* * plan the objectives of the audit

Question 5

When planning an audit

Answer 5

• • role and involvement of client’s internal auditors should be decided
• • analytical procedures performed
• ** compare actual vs. forecasted data

Question 6

When Planning an audit

Answer 6

• if issues relating to Predecessor auditor’s work on previous financial statements come up during the current audit
• • auditor must have client’s permission to discuss the issue
• audit procedures that are carried out by assistants
• • where they adequately performed?
• • review the working papers
• • are the results consistent with the audit report
• audit strategy should be mapped out
• • what are the reporting objectives?
• • what is the scope of the audit?

Question 7

GENERALLY ACCEPTED AUDITING STANDARDS (GAAS)

Answer 7

• Materiality and Audit Risk are foundations of GAAS
• • measure auditor’s
• ** professional qualification and judgment

Question 8

GENERAL STANDARDS (TIP)

Answer 8

• Training and Proficiency
• • education and audit experience
• Independence
• • in fact and appearance
• • honest
• • no direct financial interest
• • no indirect material financial interest
• Professional Care
• • technical abilities mirror those held by peers in the profession
• • follow GAAS standards
• • obtain a reasonable level of assurance
• • maintain reasonable level of skepticism
• • supervise audit staff
• • review judgment at every level

Question 9

STANDARD OF FIELDWORK (PIE)

Answer 9

• Planning and Supervision
• • audit should be adequately-planned and the work of any supporting staff should be supervise.
• Internal Control
• • auditor must understand the entity and its internal control environment
• Evidence
• • auditor must obtain sufficient and appropriate audit evidence

Question 10

STANDARD OF REPORTING (ACDO)

Answer 10

• GAAP audit must state whether the financial statement have been prepared in accordance with US GAAP
• Consistency - is implied, report only refers to consistency if accounting principles have not been consistently applied period-to-period
• Disclosures - adequacy is implied, report only refers to disclosures if disclosures are not adequate.
• Opinion - audit opinion is based on financial statements as a whole