Selecting Items for Testing (1)

Question 1

What is the overall aim of the external audit?

Answer 1

For the auditor to give an opinion as to whether financial statements are free from material misstatement

Question 2

Why does auditor not test everything?

Answer 2

As it would be impractical to do so and they need to decide on the extent of testing they will perform

Question 3

What does ISA 500 state?

Answer 3

States that the auditor shall determine means of selecting items for testing that are effective in meeting the purpose of the audit procedure

Question 4

What are the approaches to ISA 500?

Answer 4

Selecting all items (100% testing)
Selecting specific items
Audit sampling

Question 5

Selecting specific items (not sampling)

Answer 5

Not sampling as cannot be projected to the entire population

Question 6

Selecting specific items appropriate for (high value)

Answer 6

High value or key items (e.g. suspicious, risky or prone to error)

Question 7

Selecting specific items appropriate for (items)

Answer 7

All items over a certain amount

Question 8

Selecting specific items appropriate for (information)

Answer 8

Items to obtain information

Question 9

Selecting specific items appropriate for (s)

Answer 9

Stratification