6: Audit approach

Question 1

2 categories of substantive procedures

Answer 1

Analytical procedures - appropriate for large volumes of predictable transactions

Tests of details - appropriate to gain information about account balances, especially significant risks, particularly verifying the assertions of existence and valuation. These should always be carried out.

Question 2

3 substantive procedures the auditor must carry out

Answer 2

Agreeing on the FS to the underlying accounting records

Examining material journal entries

Examining other adjustments made in preparing the financial statements

Question 3

5 things of which to get an understanding to assess accounting estimates

Answer 3

1. Emphasises basic requirement to obtain sufficient appropriate audit evidence.
2. Complexity
3. Subjectivity
4. Estimation uncertainty
5. Other inherent risks factors

Question 4

5 procedures to carry out when deciding whether to rely on the work of someone else (STRIP)

Answer 4

Scope - has the work been performed in accordance with IFRS?

Technical competence - is the expert qualified/ up to date?

Resources - has the work been performed properly

Independence - is the expert independent (they may have an incentive to overstate results if they’re not)

Professionalism - is the expert taken seriously/ do they have the power to change things?