M3 Planning of Assurance Engagement

Question 1

What sections are relevant to the planning of an Audit?

Answer 1

• ISA 200 - Assessing the Audit Risk
• ISA 300 - planning of an Audit
• ISA 315R - identifying and assessing the risk of material misstatement through understanding the entity and its environment
• ISA 320 - materiality in planning and performing an Audit
• ISA 330 - Auditors Reponses to assessed risk

Question 2

What is the Audit risk and how do we calculate it?

Answer 2

In terms of ISA 200
- Audit risk = the risk that the auditor expresses an inappropriate opinion on the financial statements
- AR = IR X CR X DR
* IR = inherent risk
* CR = control risk
* DR = detection risk

Question 3

What risk assessment procedures can you perform?

Answer 3

In terms of ISA 315R,

Question 4

When must the auditor consider materiality?

Answer 4

In terms of ISA 320,
- In planning
* performance materiality
* overall materiality
- in final evaluation (deciding on audit opinion)

Question 5

What is performance materiality?

Answer 5

It is a materiality figure set at below the overall materiality figure in order to reduce the probability of the aggregate of undetected misstatements exceeding the materiality figure

Question 6

What are your overall responses as an auditor going to be to address the risks at financial statement level?

Answer 6

• ISA 330, just gives guidance
• the specific procedures you can do, would be relevant to the situation(make cards about possible situations)

Question 7

What are your reponses to assessed risks at assertion level?

Answer 7

• ISA 330, just gives guidance
• nature
• extent
• timing
• the specific procedures you can do, would be relevant to the situation(make cards about possible situations)