Planning

Question 1

Professional judgement

Answer 1

the application of relevant training,
knowledge and experience in making informed decisions about the
courses of action that are appropriate in the circumstances of the
audit engagement

Question 2

The audit strategy

Answer 2

The audit strategy sets the scope, timing and direction of the audit.

Question 3

The audit plan

Answer 3

The strategy sets the overall approach to the audit and the plan fills in the
operational details of how the strategy is to be achieved.
The audit plan should include specific descriptions of:
 The nature, timing and extent of the planned direction and supervision of
engagement team members and the review of their work.
 The nature, timing and extent of risk assessment procedures.
 The nature, timing and extent of further audit procedures, including:
– What audit procedures are to be carried out
– Who should do them
– How much work should be done (sample sizes, etc.)
– When the work should be done (interim vs. final)
 Any other procedures necessary to conform to ISAs

Question 4

Interim and final audit

Answer 4

The auditor must consider the timing of audit procedures such as whether to
carry out an interim audit and a final audit, or just a final audit.
For an interim audit to be justified, the client normally needs to be of a sufficient
size because this may increase costs. However, an interim audit should
improve risk assessment and make final procedures more efficient

Question 5

It is important to note that the interim audit and final audit are two stages
of

Answer 5

the same audit. One set of financial statements are audited. One
auditor’s report will be issued. The audit work however is being performed
in two stages – some work before the year end and some work after the
year end

Question 6

Fraud

Answer 6

an intentional act by one or more individuals among
management, those charged with governance, employees or third
parties, involving the use of deception to obtain an unjust or illegal
advantage

Question 7

Fraud can be split into two types:

Answer 7

 Fraudulent financial reporting – deliberately misstating the financial
statements to make the company’s performance or position look
better/worse than it actually is.
 Misappropriation – theft of a company’s assets such as cash or inventory.

Question 8

Error

Answer 8

An error can be defined as an unintentional misstatement in financial
statements, including the omission of amounts or disclosures, such as the
following:
 A mistake in gathering and processing data from which financial
statements are prepared.
 An incorrect accounting estimate arising from oversight or a
misinterpretation of facts.
 A mistake in the application of accounting principles relating to
measurement, recognition, classification, presentation or disclosure