Chapter 5

Question 1

APES 320 requires the firm:

Answer 1

as part of quality control, to establish policies for undertaking and continuing engagements

Question 2

What is APES 320 quality policy requirements:

Answer 2

• competent to perform engagement
• can comply with ethical requirements
• considered integrity of the client

Question 3

ASA 220 is:

Answer 3

Acceptance and Continuation evaluation procedures

Question 4

APES 110 requires that:

Answer 4

the nominated auditor requests permission of the previous auditor before accepting the engagement.

Question 5

ASA 210 requires that:

Answer 5

the auditor and the entity agree on the terms of engagement and that these are contained in the engagement letter

Question 6

The engagement letter will contain:

Answer 6

• The objective and scope of the financial report audit
• The responsibility of the auditor
• The responsibility of management
• The identification of the applicable financial reporting framework
• The form and contents of any reports, and a statement that there may be circumstances in which a report may differ from its expected form.
• Fees

Question 7

ASA 300.2 indicates that adequate planning benefits the auditor,0
by assisting the auditor to:

Answer 7

• devote attention to important areas
• Identify potential problems
• organise and manage audit team
• select team and assign tasks
• supervision is adequate
• Coordinate with all parties

Question 8

ASA 315.A1 points out that knowledge of the entity and its environment can help the auditor to:

Answer 8

• Assess the risks and identify problems
• Determine materiality
• Consider the appropriateness of accounting policies and disclosures
• Identify areas requiring special audit consideration’
• Develop expectations for use when performing analytical procedures during
  the audit
• Design audit procedures in response to assessed risks of material
  misstatement
• Evaluate audit evidence

Question 9

ASA 315:

Answer 9

Identifies a number of methods of obtaining knowledge of the entities business;
- Consideration of previous experience with the entity and industry
- Discussion with senior people within the entity
- Discussion with internal auditors within the entity and review their reports
- Discussion with other auditors, legal advisers and other advisers who have provided
services to the entity or within the industry
- Discussion with knowledgeable people such as industry economists, regulators,
suppliers, customers or competitors.
- Review of significant legislation and regulations affecting the entity
- Visits to the entity’s premises
- Performance of analytical procedures

Question 10

Analytical procedures involve:

Answer 10

use of ratios, trend analysis and operating statistics

for comparison with internal and external data.

Question 11

In analytical procedures you:

Answer 11

-compare current balances in FRs with balances previous
-compare (compute) ratios & % relationships and compareto previous.
Then;
investigate any significant variations

Question 12

ratio analysis on un-audited financial

information in the planning stage for what purpose:

Answer 12

any ratios not in accordance with the auditor’s expectations will
indicate areas requiring significant audit attention.

Question 13

Compare ratios in ratio analysis to:

Answer 13

• industry data

- internal data

Question 14

Analytical procedures based on what accounting:

Answer 14

Accrual

Question 15

Audit Strategies:

Answer 15

• Lower level of control risk approach

- Substantive approach