Chapter 1.4 - Audit Process

Question 1

List down 5 audit process

Answer 1

1. Obtaining, accepting & continuing audit
2. Audit planning
3. Internal control
4. Substantive procedure
5. Review & report

Question 2

1a) Obtaining

Answer 2

• Advertising
• Tender
• Reference

Question 3

1b) Accepting

Answer 3

• Cannot immediately agree despite high fee
• Consider whether the company fit to be the potential client of the firm (1MDB vs Petronas)
• To avoid reputation damage (business sustainability)
• Firm will decide whether to accept/reject, at this stage
• Contract - Engagement Letter, to prevent misunderstanding in the future

Question 4

2a) Audit Strategy

Answer 4

1. Understanding the business
2. Risk (assumptions)
3. Materiality (cannot be disclose)
4. Scope, timing, direction

Question 5

2b) Audit Planning

Answer 5

1. Description of risk assessment procedure
2. Description of further audit procedure

Question 6

3. Internal control

Answer 6

• Evaluate the systems that prepares the FS
• does it have loopholes?
• does it (or the staff) enter the data correctly?
• follow acctg std (IAS, IFRS)

Question 7

4. Substantive Procedure

Answer 7

• carry ot actial audit (gathering evidence)
• to detect actual material misstatements (that audit team has predicted in planning stage)
• eg. Inspection of documents, recalculation, etc

Question 8

5a) Audit review

Answer 8

• Subsequent event review (adjusting/non-adjusting)
• Going concern review
• Obtain representation letters
• Communicate all misstatements

Question 9

5b) Audit report

Answer 9

• Unmodified = true & fair view (positive)
• Modified = contains material misstatements/have unresolved issues (negative)