Chapter 3 Section 2: Planning and Supervision Flashcards
Are you allowed to revise the audit strategy and plan based on results of audit procedures?
Yes. You’re supposed to
What is the engagement partner responsible for?
Planning the audit
Supervising the work of engagement team members
Compliance with relevant auditing standards
What should you do to gain an understanding of the client’s business?
Tour client facilities
Review financial history
Obtain understanding of their accounting
Inquire of client personnel
What needs to be done regarding the audit strategy?
Write out the NET of the plan
What factors determine the focus of the audit?
Preliminary evaluations of materiality, audit risk, and internal control
What do PCAOB standards say you need to evaluate when establishing the overall strategy?
Knowledge of their internal control Matters affecting the industry Extent of recent changes Preliminary judgment about risk and materiality Control deficiencies Legal or regulatory matters Relative complexity of operations
Regarding materiality what level should be considered?
The smallest level of misstatement that could impact them
What three categories are tested?
Transactions
Account balances
Disclosures
What type of assessment is required in all financial statement audits?
Risk assessment procedures
What do you test controls to ensure?
That they will prevent and detect material misstatements
What is included in substantive procedures?
Tests of details (for transaction classes, account balances, and disclosures) and analytical procedures
What are the six financial statement assertions?
COVERU
Completeness Cutoff Valuation, allocation, and accuracy Existence and occurrence Rights and obligations Understandability and classification
What are the financial statement assertions under PCAOB?
CEO APROVED
Completeness Existence Occurrence Allocation Presentation Rights Obligations Valuation (e) Disclosure
What is the role of the client’s internal auditors?
They have to be objective, but aren’t independent. You can’t share responsibility for decisions, judgments, or assessments with them
Can you trust the internal auditor when making judgments?
You can trust it, but you can’t rely on it alone
