Chapter 6 - Planning Flashcards
(10 cards)
What are the benefits of planning an audit?
Attention is given to important areas, namely those with high risk of material misstatement
Potential problems are identified and resolved in a timely basis
The audit is organised to ensure it is performed in an effective and efficient way
Staff with an appropriate level of competence can be selected
Facilitates direction, supervision and review of audit work
Coordinates the work of others such as experts and internal audit
What is the audit plan?
Detailed plan of the audit procedure. The plan fills in the operational details of how the strategy will be achieved. Should include:
- the planned direction and supervision of the engagement team and review of their work
- Risk assessment procedures
- further audit procedures
- any other procedures necessary to conform to auditing standards
What are the two types of fraud?
Fraudulent financial reporting - deliberately cooking the books
Misappropriation - the theft of company assets (cash and inventory)
Difference between fraud and error
Fraud is intentional and error is unintentional
Director’s responsibilities in respect of fraud and error
- Prevention and detection of fraud
- Implementing effective internal controls
- Creating a culture of honesty, ethical behaviour and active governance oversight
- Consider the need for an internal audit function
Auditor’s responsibilities in respect of fraud and error
- obtain reasonable assurance that the FS are free from material misstatement as a result of fraud or error
- Identify and assess the risk of a material misstatement
- maintain an attitude of professional scepticism
-Discuss findings with the engagement team - Consider any incentives or opportunities to commit fraud
A written representation from management states that they?
- acknowledge their responsibility for internal controls to prevent and detect
- have disclosed to the auditor the results of management’s fraud risk assessment
- Have disclosed to the auditor any known or suspected fraud
- have disclosed any allegations of fraud
Auditor’s responsibilities when it comes to the client’s legal compliance
- obtain sufficient evidence of compliance that has a direct effect on the FS
- Perform specified procedures to help identify instances of non-compliance
- Respond appropriately if non-compliance is identified or suspected
To maintain quality management throughout the audit, auditors must
Relevant Ethical Requirements - ensure compliance with relevant ethical codes, remain alert to any possible ethical threats, take appropriate action where ethical requirements have not been fulfilled, and prior to dating the audit report determine whether ethical requirements were met.
Engagement resources - It is the responsibility of the engagement manager to manage the human resources, technological resources, and intellectual resources during the audit.
Engagement performance - this involves notifying the engagement team of the direction of the audit, supervising its execution and reviewing results where needed.
Engagement quality review (EQR) - This review is usually carried out by an audit partner who was not involved with the audit engagement. It is important that the reviewer does not form part of the engagement team and is provided with full visibility to the results, observations and conditions of the audit. Significant matter must be brought to the reviewer’s attention.
Monitoring and remediation - assess whether the firm’s policies and procedures were implemented during an engagement and identify any deficiencies therein
Audit files content (audit strategy, audit planning, and completion activities)
Audit strategy - materiality assessment, deadlines, staffing and budget
Audit planning - procedure performed, audit evidence obtained, and conclusions drawn
Completion activities - going concern review, subsequent events review, final analytical procedures, summary of unjustified misstatements and final version of FS
