Lecture 4

Question 1

Planning 8 stages > independence (3)

Answer 1

1) Independence checks
2) Perform client and engagement acceptance
3) Issue engagement letter

Question 2

Planning 8 stages > business understanding (3)

Answer 2

4) Hold planning discussion with client + ask for copy MAs
5) Improves business understanding
6) Perform planning analytics

Question 3

Planning 8 stages > draft documents (2)

Answer 3

7) Hold planning meeting

8) Document NET procedures

Question 4

Planning analytics =

Answer 4

Set ratios prepared by auditors using a set of accounts provided by management. Completed before start audit. Used to identify areas in financial statements where may be high risk of MM.

Question 5

Gross profit margin =

Answer 5

(Gross profit / Revenue) x 100

Question 6

Operating margin =

Answer 6

(Operating profit / Revenue) x 100

Question 7

Inventory days =

Answer 7

(Inventory / Revenue or COS) x 365

Question 8

Trade receivable days =

Answer 8

(TR / Revenue) x 365

Question 9

Trade payable days =

Answer 9

(TP / COS) x 365