Engagment Planning

Question 1

When a audit strategy and audit plan is revised, what is it based on?

Answer 1

Results of audit procedures

Question 2

What does PCAOB standards state that the nature and extent of necessary planning activities depend on?

Answer 2

Size and complexity of the company, auditor’s previous experience with the company, and changes in circumstances that occur during the audit

Question 3

What is the engagement partner responsible for?

Answer 3

Planning the audit, supervising the work of engagement team members, and compliance with relevant auditing standards

Question 4

Should an auditor obtain an understanding of the client’s industry and business once the engagement has been accepted?

Answer 4

Yes

Question 5

What are the most common sources of industry information?

Answer 5

AICPA accounting and audit guides, trade publications and professional trade associations, government publications, and AICPA Accounting Trends and Techniques

Question 6

What may the auditor do when gaining knowledge of the client’s business?

Answer 6

Tour client facilities, review the financial history of the client, obtain an understanding of client accounting, and inquire of client personnel

Question 7

What does the scope of the audit equal?

Answer 7

Extent

Question 8

What does Reporting Objectives, Audit Timing, and Required Communications equal?

Answer 8

Timing

Question 9

What does factors that determine the focus of the audit equal?

Answer 9

Nature

Question 10

What are the 3 preliminary evaluations used to develop an overall audit strategy?

Answer 10

Materiality, Audit risk, and Internal control

Question 11

PCAOB standards state that when establishing an overall audit strategy should consider?

Answer 11

Knowledge of the company’s internal control, Matters affecting the industry, Matters relating to the company, Extent of recent changes in the company, Auditor’s preliminary judgments about materiality risk, control deficiencies previously communicated, Legal or regulatory matters, and the Relative complexity of the company’s operations

Question 12

When assessing materiality, the auditor should use?

Answer 12

The smallest level of misstatement that could be material to any one of the financial statements

Question 13

What types of judgments are used to make the preliminary assessment of materiality?

Answer 13

Quantitative and qualitative judgments

Question 14

What are the 3 categories of cycle tests?

Answer 14

Transactions, account balances, and disclosures

Question 15

What are the different types of cycle tests?

Answer 15

Revenue, expenditure, inventory, investment, PP&E, payroll, and financing

Question 16

Can preliminary assessments of materiality be revised as the audit progresses?

Answer 16

Yes

Question 17

What is the auditor required to communicate with those charged with governance?

Answer 17

Planned scope and timing of the audit

Question 18

What does the audit plan outline?

Answer 18

Nature, extent, and timing of the procedures to be performed during the audit

Question 19

Is a written audit plan required?

Answer 19

Yes

Question 20

What are procedures categorized as?

Answer 20

Risk assessment procedures, further audit procedures, and timing of audit procedures

Question 21

What does further audit procedures include?

Answer 21

Tests of the effectiveness of internal controls and substantive procedures

Question 22

What are tests of controls used for?

Answer 22

To evaluate the operating effectiveness of internal controls in preventing or detecting material misstatements

Question 23

What are substantive procedures used for?

Answer 23

To detect material misstatements

Question 24

What does substantive procedures include?

Answer 24

Test of details and substantive analytical procedures

Question 25

What are the 6 main financial assertions?

Answer 25

Completeness, CutOff, Valuation, Allocation, and Accuracy, Existence and Occurrence, Rights and Obligation, and Understandability and Classification

Question 26

What are the relevant assertions for transactions and events?

Answer 26

Completeness, cutoff, accuracy, classification, and occurrence

Question 27

What are the relevant assertions for account balances?

Answer 27

Completeness, allocation and valuation, rights and obligations, and existence

Question 28

What are the relevant assertions for presentation and disclosure?

Answer 28

Completeness, understandability and classification, rights and obligations, and valuation and accuracy

Question 29

PCAOB standards state that the financial statement assertions are?

Answer 29

Completeness, Existence, Occurrence, Allocation, Presentation, Rights, Obligations, Valuation, Disclosure

Question 30

What is the mneumonic for PCAOB assertions?

Answer 30

CEO APROVED

Question 31

What must internal auditors maintain?

Answer 31

Objectivity and integrity

Question 32

Are they considered independent of the client?

Answer 32

No

Question 33

The independent external auditor cannot share with the internal auditor any of the responsibility for?

Answer 33

Audit decisions, judgments, or assessments made as part of the audit

Question 34

What are the external auditor responsibilities in regards to the internal auditor?

Answer 34

Obtain an understanding of the internal audit function and assess competence and objectivity

Question 35

The auditor should have a sufficient understanding of the specialist’s field of expertise to enable the auditor to?

Answer 35

Determine the nature, scope, and objectives of the work of the auditor’s specialist and evaluate the adequacy of the specialist’s work for the auditor’s purposes

Question 36

If information to be used as audit evidence is prepared using the work of a a management’s specialist, the auditor should?

Answer 36

Evaluate the competence, capabilities, and objectivity of the specialist, obtain an understanding of the work of the specialist, and evaluate the appropriateness of the specialist’s work as audit evidence for the relevant assertion

Question 37

When vouching during tests, what assertions are involved?

Answer 37

Existence, support, and occurrence

Question 38

When tracing during tests, what assertions are involved?

Answer 38

completeness and coverage