Module 15 Flashcards
What is the audit strategy?
scope, timing, direction of the audit
what is the detailed Audit plan?
formed from the audit strategy
details nature, timing and the extent of audit procedures
What are the aspects of the entity that must be understood to from an assessment on inherent risk?
NAOMII
- Nature of the entity
- accounting policies
- objectives and related business risks
- measurement and review of performance
- internal controls
- industry, regulatory and other external factors
How should information be gathered by the auditor in order to understand the entity?
- analytical procedures
- enquiry
- inspection
- observation.
AEIO (NO U)
What are enquiries?
-asking directors and management, third parties and other employees
What is inspection?
inspecting documents such as
prior year audit files, business plans etc
What are analytical procedures?
involves the evaluation of financial info through analysis of plausible relationships among financial and non-financial data
When are analytical procedures performed?
planing and completion
can choose to use at substantive too
What are some techniques that can be used as analytical procedures?
Comparison Ratio analysis Reasonableness Test Trend analysis Large and unusual items review
What is overall materiality?
what is significant to the financial statements as a whole
What is performance materiality?
below overall materiality -used in testing
What is specific-items materiality?
individual accounts
What does performance materiality impact?
- where to focus attention
- statistical sample sizes
- whether analytical review variances should be investigated
- asses the romm
When is overall materiality calculated?
planning then reassessed throughout the audit
recalculated at completion -known as reporting materiality
What are the two types of fraud?
- fraudulent financial reporting (by management)
- misappropriation of assets (by employees)
What are the fraud risk factors?
- incentives or pressure -inherent
- opportunities -internal control
- rationalisation -inherent
What are the advantages of ADA?
- data processed quickly and accurately
- cost effective
- improves audit quality
What are the steps when planning, carrying out and evaluating the ADA?
- overall objective of the ADA and how it will be achieved
- obtain and cleanse the data
- is data relevant and reliable
- carry out ADA
- evaluate and report on the result
