Planning and Risk Assessment

Question 1

Before the appointment

Answer 1

Ethical Issues

Qualified/Resources

Level of Risk

Client: integrity

Present Auditors
Obtain permission to contact previous auditor

If not given then refuse the engagemtn

If there are any professional or ethical reasons

not to accept appoitnment

Review their responses

Question 2

Preconditions of an Audit?

Answer 2

Is the FR framework acceptable?

Consider the entity & the purpose of the FS

Perhaps, also, laws say which FR framework should be used

Do Management accept their responsibilities?

For preparing FS

For internal controls

For giving the auditor all relevant information they request

If not

decline.

Question 3

Engagement Letter

Answer 3

Confirms understanding between auditor and those charges with governance

Contents:

Objective and scope of the audit

Responsibitliy of auditor

Responsibility of mangaement

Financial reporting framework

Expectation of providing written representation

Access to information to be allowed

Restrictions to the auditors liability

Reference to inherent limitations of an audit

Deadlines and confidentiality

Expectations of management representations

Basis of fees

Question 4

Why is Audit Planning/Strategy important?

Answer 4

Problems and deal with them on a timely basis

E fficient and effective: Organise the engagemnt

Risky areas

T Team competence to respone to anticipated risks

Question 5

What are the sources of information when planning an audit

Answer 5

Prior year financial statement: policies, opinion was modified or not

Prior year auditors: Key issues and approach

Prior year report to mangagement: defifienceies

Accounting systems: control risk

Discussions with managemet: accounting policies

Review of Board minutes: key issues

Company website: background that would identify risks

Financial statemnts of competitors: asessing performance for going concern

Question 6

What is Audit Timing

Answer 6

Interim Audit

Final Audit

Question 7

Professional Skepticism

Answer 7

It is “An attitude that includes a questioning mind,

being alert to conditions which may indicate possible misstatement due to error or fraud,

and a critical assessment of audit evidence”