Topic 5 - Planning

Question 1

Benefits of Planning

Answer 1

• Attention paid to important areas
• Potential problems solved in a timely manner
• Organise and manage in an effective manner
• Appropriately assigned work
  Reduces the risk of the wrong opinion.

Question 2

Audit Strategy - set overall approach elements

Answer 2

• Engagement characteristics
  
  • Framework
  • Industry and business
    knowledge
  • Timing and client availability
• Reporting objectives
• Significant engagement factors
• Resources needed
• Preliminary activity results
• Direction and supervision

Question 3

Elements of developing a Plan

Answer 3

Nature of:
- direction, supervision and
review
- Risk assessment procedures
- Audit Procedures; what,
who, how and when work
should be done.
- Other necessary procedures.

Question 4

Interim and Final Audit

Answer 4

Interim Audit

 Advantages	 - Errors and Fraud are discovered at an early stage. - Books and records of clients are always up to date. - Reduces workload for the final audit.

 Disadvantages	 - Audited figures may be altered. - Not relevant for small entities. - High cost.

 Differences - Carried out during the accounting period. - Voluntary. - Suitable for large organisations

Final Audit

 Advantages - Allocation of work to staff becomes easier. - Costs are lower. - No duplication of work.

 Disadvantages - Delay in presentation of final accounts and completion of work. - May overlook some detailed aspects.

 Differences - Carried out at the end of the accounting period.  - Compulsory. - Suitable for small organisations

Question 5

Auditor’s responsibility to detect fraud and error:

Answer 5

o Responsible to obtain reasonable assurance that the FS are free from material misstatement, whether caused by fraud or error.
o Required to identify and address risk of material misstatement due to fraud.
o Auditor must respond appropriately to fraud or suspected fraud identified during the audit.
o Ensure that the whole engagement team is aware of the risks and responsibilities of fraud and error.
o Must report any actual or suspected fraud to appropriate parties.

Question 6

Purpose of working papers:

Answer 6

o Provides evidence of the auditor’s basis for a conclusion about the achievement of the overall objective of the audit.
o Provides evidence that the audit was planned and performed in accordance with ISAs and regulatory requirements.
o Assists the engagement team in the planning of the audit.
o Records matters of continuing significance to future audits.

Question 7

Contents of working papers:

Answer 7

o Name of client – identifies the client being audited.
o Year-end date – identifies the year end timings.
o Subject – identifies the area of the FS being audited and the topic area of the working paper.
o Working paper reference – provides a clear reference.
o Preparer and date prepared
o Reviewer and date of review