Planning & Supervision

Question 1

Audit Strategy/Plan

Answer 1

The auditor plans the audit to be responsive to the initial assessment of the risk of material misstatement, but should be prepared to revise the audit strategy and the audit plan based on the results of the audit procedures.

Question 2

Engagement Partner

Answer 2

is responsible for:

planning the audit, supervising the audit team and make sure to comply with all relevant audit standards

Question 3

Audit Strategy

Answer 3

written plan that outlines the scope of the audit engagement, reporting objectives, timing of the audit, required communications, and the factors that determine the focus of the audit. Also a preliminary assessment of materiality and tolerable misstatement.

Question 4

Focus of the Audit in the audit strategy

Answer 4

Preliminary evaluations of materiality, audit risk and internal control (used to determine if there are areas to rely on). Areas where there is a high risk of material misstatement.

Question 5

Materiality

Answer 5

• determined for the FS as a whole.
• based on professional judgment
• must consider qualitative and quantitative factors
• must be expressed at a specific amount
• use the smallest level of misstatement that could be material to any one of the FS

Question 6

Performance Materiality

Answer 6

the amount or amounts set by the auditor at less than materiality for the FS as a whole to reduced to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the FS as a whole.

Question 7

Tolerable Misstatement

Answer 7

the maximum error in a population that the auditor is willing to accept.

Question 8

Audit Plan

Answer 8

• based on the audit strategy
• outlines the nature, extend and timing of the procedures to be performed
• required

Question 9

Audit Procedures

Answer 9

• Risk Assessment Procedures - used to obtain understanding of the business and its environment including internal control
• Further Audit Procedures - Tests of operating effectiveness of internal controls and substantive procedures.

Question 10

Tests of Control

Answer 10

• testing of areas we will like to rely on so therefore we make sure its working
• evaluating how well its working in preventing or detecting material misstatements

Question 11

Substantive Procedures

Answer 11

• used to detect material misstatements
• includes test of details and substantive analytical procedures
• looking at dollar amounts
• performed in response to planned level of detection risk which maybe based on the results of test of controls

Question 12

Financial Statements

Answer 12

• are not statement of facts

- they are claims and assertions, made implicitly or explicitly by management

Question 13

Financial Statement Assertions

Answer 13

• Completeness
• Cutoff
• Valuation, Allocation, and Accuracy
• Existence and Occurrence
• Rights and Obligations
• Understandability and Classification

Question 14

Assertions

Answer 14

Are used to form a basis for assessing risk and for the design and performance of further audit procedures.

Question 15

Analytical Procedures

Answer 15

Its is required during planning stage or final review stage