Engagment Planning Flashcards
When a audit strategy and audit plan is revised, what is it based on?
Results of audit procedures
What does PCAOB standards state that the nature and extent of necessary planning activities depend on?
Size and complexity of the company, auditor’s previous experience with the company, and changes in circumstances that occur during the audit
What is the engagement partner responsible for?
Planning the audit, supervising the work of engagement team members, and compliance with relevant auditing standards
Should an auditor obtain an understanding of the client’s industry and business once the engagement has been accepted?
Yes
What are the most common sources of industry information?
AICPA accounting and audit guides, trade publications and professional trade associations, government publications, and AICPA Accounting Trends and Techniques
What may the auditor do when gaining knowledge of the client’s business?
Tour client facilities, review the financial history of the client, obtain an understanding of client accounting, and inquire of client personnel
What does the scope of the audit equal?
Extent
What does Reporting Objectives, Audit Timing, and Required Communications equal?
Timing
What does factors that determine the focus of the audit equal?
Nature
What are the 3 preliminary evaluations used to develop an overall audit strategy?
Materiality, Audit risk, and Internal control
PCAOB standards state that when establishing an overall audit strategy should consider?
Knowledge of the company’s internal control, Matters affecting the industry, Matters relating to the company, Extent of recent changes in the company, Auditor’s preliminary judgments about materiality risk, control deficiencies previously communicated, Legal or regulatory matters, and the Relative complexity of the company’s operations
When assessing materiality, the auditor should use?
The smallest level of misstatement that could be material to any one of the financial statements
What types of judgments are used to make the preliminary assessment of materiality?
Quantitative and qualitative judgments
What are the 3 categories of cycle tests?
Transactions, account balances, and disclosures
What are the different types of cycle tests?
Revenue, expenditure, inventory, investment, PP&E, payroll, and financing
Can preliminary assessments of materiality be revised as the audit progresses?
Yes
What is the auditor required to communicate with those charged with governance?
Planned scope and timing of the audit
What does the audit plan outline?
Nature, extent, and timing of the procedures to be performed during the audit
Is a written audit plan required?
Yes
What are procedures categorized as?
Risk assessment procedures, further audit procedures, and timing of audit procedures
What does further audit procedures include?
Tests of the effectiveness of internal controls and substantive procedures
What are tests of controls used for?
To evaluate the operating effectiveness of internal controls in preventing or detecting material misstatements
What are substantive procedures used for?
To detect material misstatements
What does substantive procedures include?
Test of details and substantive analytical procedures
What are the 6 main financial assertions?
Completeness, CutOff, Valuation, Allocation, and Accuracy, Existence and Occurrence, Rights and Obligation, and Understandability and Classification
What are the relevant assertions for transactions and events?
Completeness, cutoff, accuracy, classification, and occurrence
What are the relevant assertions for account balances?
Completeness, allocation and valuation, rights and obligations, and existence
What are the relevant assertions for presentation and disclosure?
Completeness, understandability and classification, rights and obligations, and valuation and accuracy
PCAOB standards state that the financial statement assertions are?
Completeness, Existence, Occurrence, Allocation, Presentation, Rights, Obligations, Valuation, Disclosure
What is the mneumonic for PCAOB assertions?
CEO APROVED
What must internal auditors maintain?
Objectivity and integrity
Are they considered independent of the client?
No
The independent external auditor cannot share with the internal auditor any of the responsibility for?
Audit decisions, judgments, or assessments made as part of the audit
What are the external auditor responsibilities in regards to the internal auditor?
Obtain an understanding of the internal audit function and assess competence and objectivity
The auditor should have a sufficient understanding of the specialist’s field of expertise to enable the auditor to?
Determine the nature, scope, and objectives of the work of the auditor’s specialist and evaluate the adequacy of the specialist’s work for the auditor’s purposes
If information to be used as audit evidence is prepared using the work of a a management’s specialist, the auditor should?
Evaluate the competence, capabilities, and objectivity of the specialist, obtain an understanding of the work of the specialist, and evaluate the appropriateness of the specialist’s work as audit evidence for the relevant assertion
When vouching during tests, what assertions are involved?
Existence, support, and occurrence
When tracing during tests, what assertions are involved?
completeness and coverage
