Planning and Supervision

Question 1

The audit plan usually cannot be finalized until the

Answer 1

The audit plan (sometimes referred to as the “audit program”) documents the auditing procedures to be performed. It cannot be finalized until consideration of the entity and its environment, including internal control, has been completed.

Question 2

Which of the following factors is most likely to affect the extent of the documentation of the auditor’s understanding of a client’s system of internal controls?

Answer 2

The use of information technology in the accounting system greatly impacts the auditor’s documentation of that system. For example, a highly automated system will result in very different documentation than a manual system.

Question 3

following conditions most likely would pose the greatest risk in accepting a new audit engagement?

Answer 3

ANY client-imposed scope limitation is a problem.

Question 4

In planning a new engagement, an auditor would consider:

Answer 4

1) the nature of the engagement;
2) the type of report to be issued;
3) the nature of the financial statements, schedules, or other information on which the auditor is reporting;
4) the nature and condition of the client’s records;
the assessed level of control risk (including the estimated occurrence rate of attributes); and
5) the needs in the particular circumstances for supervision and review of the work.

The auditor would NOT consider the content of the management representation letter obtained at the end of the engagement.

Question 5

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of

Answer 5

The audit is to be planned and performed with an attitude of professional skepticism. This means that all evidence gathered needs to be objectively evaluated to determine whether the financial statements are free of material misstatement.

Question 6

Audit programs should be designed so that

Answer 6

that the audit evidence gathered supports the auditor’s conclusions. The audit program must detail the procedures considered necessary to accomplish the objectives of the audit.