Planning And Documentation

Question 1

Auditor Acceptance Procedures:

Before accepting nomination the auditor must:

Answer 1

1

Ensure professionally qualified to act.
Consider whether disqualified on legal or ethical grounds.

Question 2

Auditor Acceptance Procedures:

Before accepting nomination the auditor must:

Answer 2

2

Ensure existing resources adequate.
Consider available time, staff and technical expertise.

Question 3

Auditor Acceptance Procedures:

Before accepting nomination the auditor must:

Answer 3

#3
Communicate with present auditors.
Enquire whether a re reasons/circumstances behind the change which the new auditors ought to know, also courtesy.

Question 4

Included in the Engagement Letter

Answer 4

The audit engagement letter must include the following:
- The objective and scope of the audit
- The auditor’s responsibilities
- Management’s responsibilities
- Identification of the applicable financial reporting framework for the
preparation of the financial statements.
- Expected form and content of any reports to be issued

Question 5

Engagement Letter May include:

Answer 5

The audit engagement letter may include the following:
- The form of any other communication of results of the audit engagement
- The fact that some material misstatements may not be detected.
- Arrangements regarding the planning and performance of the audit,
including the composition of the audit team
- The expectation that management will provide written representation
- The basis on which fees are computed and any billing arrangements

Question 6

Why need Audit Planning

Answer 6

Audit planning
The auditor formulates an overall audit strategy which is translated into a
detailed audit plan for audit staff to follow.
Why needing an audit plan?
- An effective and efficient audit relies on proper planning procedures. ISA 300
planning an audit of financial statements states the auditor shall plan the
audit work so that the engagement will be performed in an effective manner.

Question 7

Objectives Of Audit Planning

Answer 7

• Ensuring the appropriate attention is devoted to important areas of the
audit
• Ensuring that potential problems are identified in time
• Ensuring that the work is completed expeditiously
• Proper assignment of work to assistants
• Coordination of work done by other auditors and experts
• Facilitating review

Question 8

What is contained in an Audit plan

Answer 8

Audit plan contain the following information:
• Timetable of planned audit work
• Allocation of work to audit team members
• Audit procedures for each major account area (e.g. inventory, receivables,
cash, etc)
• Materiality for the financial statements as a whole and performance
materiality

Question 9

Interim and Final Audits

Answer 9

Planning visit: procedures are likely to include:
• Review of client’s business
• Review of client’s current operations and performance year to data
• Preliminary client meeting
• Prepare audit strategy
• Prepare detailed audit plan

Question 10

Interim and Final Audits

Answer 10

Interim audit: procedures are likely to include:
• Analytical procedures
• Tests of controls
• Updating risk assessments
• Review of relevant internal audit reports
• Substantive testing (of transactions in first part of year)

Question 11

Interim and Final Audits

Answer 11

Final audit:
At this stage a set of draft financial statements or at least a trial balance will be
available
Procedures are likely to include:
• Completion of tests of controls and substantive tests of transactions started at
interim
• Analytical procedures on financial statements
• Detailed substantive testing of financial statements