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AUD > Engagement Planning > Flashcards

Engagement Planning Flashcards

1
Q

What assurance does the auditor provide the users of financial statements?

A

Reasonable Assurance that the financial statements as a whole are free from Material misstatement due to fraud or error

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2
Q

What does the auditor express on the financial statement?

A

An opinion that it was prepared in accordance with the applicable framework in all material respects

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3
Q

What is the auditor not responsible for?

A

Not responsible for detecting theft or fraud

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4
Q

When is it best to hire an auditor and why?

A

Earlier hired prior to the balance sheet date the better for audit planning and efficiency

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5
Q

When can audit procedures carried out at interim dates?

A

Control Risk is low/Detection Risk is high

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6
Q

How can the auditor accept an engagement if the year closed?

A

If they can overcome the limitations of the engagement

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7
Q

An auditor uses ___________ to plan the ________ and _________ of the audit

A

Professional Skepticism
scope
objectives

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8
Q

When planning an audit, what should the external auditor do regarding the client’s _________?

A

Role and involvement of the internal auditor

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9
Q

What type of procedure should be done during planning stage?

A

Analytical - Comparing actual vs forecasted data (prior vs current)

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10
Q

If the current auditor would like to speak to the previous auditor, what should the current auditor do first?

A

Ask permission from the client to speak to the previous auditor

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11
Q

What should the auditor do with the audit procedures carried out by assistants?

A

Review the working papers
Adequately performed
Results consistent with the audit report

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12
Q

Audit strategy should be _______ ________

A

Mapped out

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13
Q

________ and ______- are foundations of GAAS

A

Materiality and Audit Risk

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14
Q

GAAS: Measure auditor’s __________________ and ___________

A

Professional qualifications and Judgment

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15
Q

What are the three general standards of GAAS? (TIP)

A

Training and Proficiency
Independence
Professional Care

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16
Q

What are the 3 standards of fieldwork of GAAS? (PIE)

A

Planning and supervision
Internal Control - Auditor must understand IC of entity
Evidence - Must obtain sufficient and appropriate audit evidence

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17
Q

What are the 4 standards of Reporting of GAAS (CDOG)?

A

Consistency - Implied, only referred if accounting principles arent applied correctly
Disclosures - Adequacy is implied, only referred if not adequately presented
Opinion - Based on F/S as a whole
GAAP - Audit report must state that the F/S were prepared in accordance with US GAAP

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18
Q

What are the 3 things that auditor should do prior to accepting audit engagement?

A

Review Client’s F/S - Appropriate framework
Speak to 3rd parties
Contact prior auditor

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19
Q

What if the client doesn’t give permission to current auditor to speak to the previous auditor?

A

No permission = no engagement

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20
Q

Audit Engagement agreement oral or written?

A

Must be written

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21
Q

Audit Engagement agreement covers __________ and __________ of engagement. Responsibilities of _________ and ________

A

Objectives and limitations of engagement

Responsibilities: Auditor and management

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22
Q

Management responsibilities (6)

A 
Written assertions
financial framework
Establishing and maintaining IC
Allow auditor access to records
Prepare F/S
Compliance with Laws
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23
Q

Responsibilities of Auditor (2)

A

Limited error/fraud responsibility

Document and remind the management annually the terms of the engagement still apply (oral or written)

24
Q

What does group engagement team do? (3)

A

Develop audit strategy
Communicate with component auditors
Evaluate audit conclusions

25
Q

Who makes up the group engagement team?

A

Partners
Group Engagement partner
Staff

26
Q

The group engagement partner is responsible for _________________ and _________

A

Group Audit Engagement

Audit Report

27
Q

What 3 things make up the group audit engagement

A

direction
supervision
performance

28
Q

How many parts does the component auditor do?

A

Only 1 part

29
Q

What makes a component significant? (2)

A

Financial materiality? - audit the financial information

Risk of Material Misstatement? - Audit procedures performed

30
Q

The audit committee is part of ________

A

Board of directors

31
Q

Who is not allowed part of the audit committee?

A

corporate officers

32
Q

What is the audit committee responsible for?

A

Hiring the external auditor

Overseas I/C

33
Q

What does the audit committee and auditor agree on? (4 things)

A

Responsibility of the parties
Audit Fee
Timing of audit
Audit Plan

34
Q

Audit committee acts as a liason between _____ and the ______

A

auditor and the BOD

35
Q

Auditor communicates concerns about 4 things to audit committee?

A

IC Deficiencies
Errors
Fraud
Illegal activities

36
Q

Materiality is based on __________ and ________ Measurements

A

Quantitative and Qualitative

37
Q

Materiality measured on _____ or ________ level

A

Transactional or F/S

38
Q

materiality is based on ___________ judgment

A

Auditor’s

39
Q

Audit should be planned to allow “reasonable assurance” that no ____________ ________ exist

A

material misstatements

40
Q

As acceptable materiality level decreases

A

Auditor must find smaller misstatements

41
Q

Audit Risk Formula

A

IR x CR x DR

42
Q

Definition of AR

A

Risk that material mistakes, errors, omissions or fraud will result in an inaccurate audit report

43
Q

How is audit risk based?

A

Auditor Judgment

44
Q

Control Risk (controllable?)

A

Will IC detect error or fraud?

Not controllable by auditor

45
Q

Inherent Risk (Controllable?)

A

Which transactions have higher level of risk?

Not controllable by auditor

46
Q

Detection Risk (controllable?)

A

Will the auditor fail to detect a material misstatement?

Controllable by auditor

47
Q

Low Acceptable DR

A

More substantive tests
year end testing
larger sample size

48
Q

How is quantitative measurements?

A

measured in %s

49
Q

Non quantitative measurements?

A

Measured in ranges

50
Q

Management’s responsibility to_____ and ______ fraud and illegal acts

A

Find and prevent

51
Q

Auditors Responsibility to fraud and illegal acts

A

Asses the risks that such things will lead to material misstatements

52
Q

Design the audit to provide reasonable assurance against material misstatements caused by _______ and ________ that directly affect the F/s and __________

A

fraud
illegal acts
material errors

53
Q

Report ____________ fraud to audit committee

A

Management fraud

54
Q

Required inquiries and procedures

A

Management inquiries
Analytical procedures
Discussions with audit personnel about fraud leading to material misstatement

55
Q

Fraud is intentional (RIO)

A

Rationalization
Incentive
Opportunity

56
Q

Fraud Risk Factor and material weakness in IC

A

Doesnt mean that there is fraud

AUD (3 decks)

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