Topic 7 - Planning

Question 1

give the overview of the audit strategy and planning process (flowchart- 3 items)

Answer 1

Establish the overall audit strategy
^
Develop and audit plan
^
Start to carry out audit procedures

Question 2

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Question 3

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Question 4

what does planning involve

Answer 4

It involves establishing:
* the overall audit strategy for the engagement and

• developing an audit plan

the audit strategy and audit plan should be updated and revised as necessary during the course of the audit

Question 5

Audit planning is addressed by ISA 300 Planning an Audit of Financial Statements.

what are the benefits of planning for the audit of FS

Answer 5

Planning ensures that the risk of performing a poor quality audit (and ultimately giving an inappropriate audit opinion) is reduced to an acceptable level.

▪ Helping the auditor to devote appropriate attention to important areas of the audit like risky/more material areas

▪ Helping the auditor to identify and resolve potential problems on a timely basis.

▪ Helping the auditor to properly organize and manage the audit engagement so that it is performed in an effective and efficient manner.

▪ Assisting in the selection of engagement team members with appropriate levels of capabilities and competence- Work is properly assigned to the individual team members

▪ Facilitating the direction and supervision of engagement team members and the review of their work.

▪ Effectively coordinates the work of others, such as experts and internal audit.

▪ These reduces risk of giving the wrong opinion.

Question 6

which should be developed first? audit plan or audit strategy

Answer 6

the standard states that an audit plan will be developed after the overall strategy has been established

the audit strategy and audit plan should be updated and revised as necessary during the course of the audit

Question 7

what is an audit strategy (general definition) and what does it allow the auditor to determine

Answer 7

Kate: documenting all info that auditor needs to do the audit

The audit strategy sets out in general terms how the audit is to be conducted and sets the scope, timing and direction of the audit. The audit strategy then guides the development of the audit plan, which contains the detailed responses to the auditor’s risk assessment.

It allows the auditor to determine

• resources to deploy for specific audit areas (e.g. experience level, external experts)
• the amount of resources to allocate
• When these resources are to be deployed
• how the resources are managed, directed and supervised, including the timings of meetings, debriefs and reviews

Question 8

What are the sections included in the audit strategy

LIST THEM- 10 items

and mention what does The audit strategy allows the auditor to determine:

(Think about the acowtancy video of three section
1 Understand the entity
2 Logistics
3 Approach

Answer 8

The audit strategy sets the scope and direction of the audit

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

The audit strategy allows the auditor to determine: The resources to deploy for specific audit areas (e.g. experience level, external experts). The amount of resources to allocate (i.e. number of team members). When these resources are to be deployed. How the resources are managed, directed and supervised, including the timings of meetings, debriefs and reviews.

Question 9

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 1

Answer 9

Knowledge of the business

Provides details of the industry area that the company is in along with specific information about the activities and strategies of the individual client.

Financial framework- IFRS/UK GAAP

Use of service organisation’s

Question 10

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 2

Answer 10

Details of accounting policies of the client and previous assessments of Internal control systems indicating the expected extent of reliance on those systems.

Question 11

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 3

Answer 11

The assessment of risk for the client and risk of fraud and error
and the identification of significant audit areas.

Question 12

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 4

Answer 12

This is identifying trends, expectations and seeing if the expectations have been meet, if not this would highlight a potential risk

It would also help identify risk areas

Question 13

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 5

Answer 13

The materiality level for audit planning purposes.

Question 14

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 6

Answer 14

Overall approach

Details of the focus on audit work on specific areas.

Detail on the extent of use of audit software and possible

reliance on internal audit.

Approach to the audit

Question 15

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 7

Answer 15

When is the audit going to take place

Interim

Final

Discussions with third party, and those charged with governance

Signing of the report

Question 16

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 8

Answer 16

Stating when the work has to be done by, and what resources are available to do this.

Question 17

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 9

Answer 17

Ensuring that the appropriate staff are available for the audit, right experience, skills and knowledge

Question 18

The following are sections of the audit strategy:

1 Understanding the entity’s
environment

2 Understand the accounting and
internal control systems

3 Risk

4 Analytical procedures

5 Materiality

6 Consequent nature, and extent of
audit procedures

7 Timing

8 Deadlines and budgets

9 Team

10 Co-ordination, supervision and review of audit work

Q- What is included in 10

Answer 18

Details the extent of involvement of experts, client locations and
staffing requirements for the audit.

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Question 25

what is audit plan

Answer 25

The audit strategy sets the overall approach/scope and direction of the audit and determines it's development WHEREAS the audit plan fills in the operational details of how the strategy is will be implemented ▪ the nature, timing and extent of risk assessment procedure ▪ the nature timing and extent of further audit procedures, including: - WHAT audit procedures are to be carried out - WHO should do them - HOW much work should be done (sample sizes etc) - WHEN the work should be done (interim vs Final) * other necessary procedures

Question 26

what is included in an audit plan.. detailed

Answer 26

The following are examples of matters that would be included in the audit plan: ✓ A description of the nature, timing and extent of planned risk assessment procedures (to assess the risks of material misstatement) ✓ This would include assessment of inherent risk and control risk at both the entity and assertion level. An important element of the plan would be the understanding and assessment of the control environment of the organization. ✓ A description of the nature, timing and extent of planned further procedures at the assertion level for each material class of transactions, account balance, and disclosure. ✓ This would include an explanation of the decision ▪ whether to test the operating effectiveness of controls (an important decision is whether reliance is to be placed on controls). ▪ on the nature, timing and extent of planned substantive procedures (this would depend on the decision as to the level of control risk). ✓ Audit procedures required to be carried out for the engagement in order to comply with ISAs, for example, the use of external confirmations to obtain sufficient appropriate evidence at the assertion level. ✓ Materiality ✓ Timetable of detailed audit work ✓ Allocation of work to team members.

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Question 30

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Question 31

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Question 32

what is an interim audit

Answer 32

It is VOLUNTARY, conducted in between two final audits (during an accounting period) 2/3 months before year end

Question 33

what is the purpose of an interim audit

Answer 33

Allows the auditor to spread out their procedures. Useful when there is increased detection risk due to a right reporting deadline

Question 34

what is a final audit

Answer 34

Done after the end of the accounting period, and focuses on confirming amounts in the financial statements

Question 35

what is the purpose of an final audit

Answer 35

to obtain sufficient appropriate evidence in respect of the financial statements. The auditor's report will be issued once the final audit is complete.

Question 36

with regard to the timing, when is interim audit performed

Answer 36

▪ Before the year end ▪ Early enough not to interfere with year end procedures ▪ Early enough to give adequate warding of specific problems ▪ Late enough to ease the pressure on the final audit

Question 37

with regard to the timing, when is final audit performed

Answer 37

performed after the year end

Question 38

what are the work carried out for the interim audit

Answer 38

▪ Recording the system of internal control. ▪ Carrying out tests of control on the company’s internal control system and evaluating its effectiveness to determine the level of control risk. ▪ attending perpetual inventory counts ▪ Performing sufficient substantive testing of transactions and balances to be satisfied that the books and records are a reliable basis for the preparation of financial statements. - -> transactions for the year to date - -> material transactions e.g. purchase of new non current assets ▪ Identification of potential problems/risks that may affect the final audit work.

Question 39

what are the work carried out for the final audit

Answer 39

▪ Follow up of items noted at the inventory count. ▪ Obtaining confirmations from third parties, such as bankers and lawyers. ▪ Obtaining evidence that the controls tested at the interim audit have continued to operate during the period since the interim audit ▪ Analytical procedures of figures in the financial statements. - SOFP Balance - SOPL Transactions - Year end journals ▪ Completion activities - going concern status of the organisation. - review of events after the reporting period - communication misstatements to client - overall review of the financial statements + testing SoFP items at year end

Question 40

what are the advantages of an interim audit

Answer 40

Errors and Fraud are discovered at an early stage Books and records of client are always up to date Reduces workload for final audit

Question 41

what are the disadvantages of an interim audit

Answer 41

Audited figures may be altered Not relevant for small entities High cost

Question 42

what are the advantages of an FINAL audit

Answer 42

Allocation of work to staff becomes easier Costs are lower No duplication of work

Question 43

what are the disadvantages of an FINAL audit

Answer 43

Delay in presentation of final accounts and completion work May overlook some detailed aspects

Question 44

What are the main three differences between interim and final

Answer 44

Voluntary/compulsory carried out during the accounting period vs at end suitable for large organisations vs for smaller

Question 45

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Question 48

What is the definition of fraud

Answer 48

= Intentional and deliberate "an intentional act involving the use of deception to obtain an unjust or illegal advantage ." Dishonestly obtaining an advantage, avoiding an obligation or causing a loss to another party

Question 49

what is an error definition

Answer 49

an Unintentional mistake

Question 50

what is professional scepticism

Answer 50

an attitude that includes a questioning mind, being alert to the risk of fraud, and a critical assessment of evidence.

Question 51

what are the two types of fraud

Answer 51

fradulent financial reporting Misappropriation of assets

Question 52

what is fraudulent financial reporting

Answer 52

deliberately misstating the accounts to make the company results better / worse than the actual results

Question 53

what is misappropriation of assets

Answer 53

the theft of the company's assets

Question 54

what are some indicators of fraud

Answer 54

``` ✓ Only having photocopied documents ✓ Inconsistent responses ✓ Denied access to records ✓ Delay of information being given ✓ Unknown transactions ```

Question 55

what are the responsibilities of the directors with regards to fraud

Answer 55

those charged with governance of the entity and management have responsibility to Prevent and detect fraud and error by ▪ Establishing/Implementing systems that prevent and detect fraud and error. ▪ Monitoring systems to prevent and detect fraud and error.

Question 56

what are the responsibilities of the auditors with regards to fraud and error

Answer 56

An auditor conducting an audit in accordance with ISA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements is- is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. In order to fulfil this responsibility auditors are required to: ▪ to identify and assess the risks of material misstatement of the financial statements due to fraud. ▪ Auditor must respond appropriately to fraud or suspected fraud identified during Audit ▪ When obtaining reasonable assurance, responsible Maintaing an attitude of professional scepticism throughout the audit considering the potential for management override of controls and recognising the fact that audit procedures that are effective in detecting error may not be effective in detecting fraud DISCUSSION AMONG THE TEAM To ensure that the whole engagement team is aware of the risks and responsibilities for fraud and error, ISA 240 requires that a discussion is held within the team. For members not present at the meeting, audit engagement partner should determine which matters should be communicated to them. IDENTIFICATION OF FRAUD n situations where the external auditor does detect fraud, then the auditor will need to consider the implications for the entire audit. In other words, the external auditor has a responsibility to extend testing into other areas because the risk of providing an incorrect audit opinion will have increased.

Question 57

who is fraud reported to

Answer 57

The matter would have to be reported to ✓ Management ✓ Those charged with governance ✓ External (may need to seek legal advice)

Question 58

.with regards to laws and regulations (ISA 250) This is part of the Understanding your client. what are the key responsibilities of an auditor with respect to laws and regulation

Answer 58

. ✓ They have a responsibility to obtain reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. ✓ The auditor must obtain sufficient, appropriate evidence regarding compliance with laws and regulations generally recognised to have a direct effect on the determination of material amounts and disclosures in the financial statements (e.g. completeness of a tax provision in accordance with tax law, or the presentation of the financial statements in accordance with the applicable financial reporting framework). [ISA250,6a] ✓ The auditor must perform audit procedures to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements (e.g. data protection, environmental legislation, public health and safety). ✓ Responsibility to remain alert to possible instances of non compliance, by maintaining professional scepticism, to the possibility that other audit procedures may bring instances of identified or suspected non-compliance with laws and regulations. . ✓ If non-compliance is identified, report to the management and those who are charged with governance. ✓ Consider whether non-compliance was deliberate and casts doubt over management's integrity. Non-compliance in respect of such matters could affect the company’s ability to continue as a going concern or could result in the need for material liabilities to be recognised or disclosed. [ISA250,6b]

Question 59

with regards to laws and regulations (ISA 250) what are the auditors NOT responsible for?

Answer 59

✓ Auditors are not responsible for preventing non-compliance with laws and regulations, and cannot be expected to detect non-compliance with all laws and regulations ✓ Laws and regulations which DO NOT HAVE A DIRECT EFFECT on the determination of material amounts and disclosures in financial statements, but may impact the entity’s ability to continue to trade ✓ Here the auditor’s responsibility is limited to specified audit procedures to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements

Question 60

with regards to laws and regulations (ISA 250) This is part of the Understanding your client. what are the audit procedures to identify instances of non-compliance

Answer 60

✓ Obtaining a general understanding of the client's legal and regulatory environment ✓ Inspecting correspondence with relevant licensing and regulatory authorities ✓ Enquiring of management and those charged with governance as to whether the entity is compliant with laws and regulations ✓ Remaining alert to possible instances of noncompliance; and ✓ Obtaining written representations that the directors have disclosed all instances of known and possible noncompliance to the auditor.

Question 61

with regards to laws and regulations (ISA 250) what are the managements responsibility? This is part of the Understanding your client.

Answer 61

✓ To ensure that the operations are conducted in accordance with the provisions of laws and regulations. This includes compliance with laws and regulations that determine amounts and disclosures in financial statements, including tax liabilities and charges

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Question 66

with regards to laws and regulations (ISA 250) what are the key responsibilities of an auditor/ audit procedures that could be completed with respect to laws and regulation

Answer 66

✓ obtain an understanding of the legal and regulatory framework governing the client. ✓ Inspecting correspondence with Relevant licensing and regulatory authorities ✓ Enquiring of management and those charged with governance as to whether the entity is compliant with laws and regulations ✓ Remaining alert to possible instances of noncompliance; and ✓ Obtaining written representations that the directors have disclosed all instances of known and possible noncompliance to the auditor.

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Question 69

what does ISQC 1 Quality control provide

Answer 69

it provides a guidance on how ALL Engagement should be carried - Covers the statutory audit work - assurance work

Question 70

what does ISA 220 Quality Control for an Audit of Financial Statements requires the firm to establish ? and what is the purpose of ISQC

Answer 70

ISA 220 Quality Control for an Audit of Financial Statements requires the firm to * establish a system of quality control to ensure the firm complies with professional standards and * issues reports that are appropriate in the circumstances. THE PURPOSE OF ISQC 1 is: * To provide reasonable assurance the audit firm and employees are complying with professional standards, laws and regulations. * This will also reduce the possibility of litigation being successful.

Question 71

who takes overall responsibility for the overall quality of the engagement

Answer 71

The engagement partner takes overall responsibility includingn the 1) direction 2) supervision 3) performance of the engagement

Question 72

The engagement partner takes overall responsibility for the overall quality of the engagement including what 3 things

Answer 72

1) direction 2) supervision 3) performance

Question 73

a firm's quality control processes must be monitored to ensure what

Answer 73

they are relevant adequate and operating effectively

Question 74

engagement quality control reviewer must be assigned for what kind of entiries

Answer 74

* For listed entities | * High risk engagements focusing on significant matters and areas involving significant judgement

Question 75

ISA 220 Quality Control for an Audit of Financial Statements Policies and procedures should be established which address: 6 things what are they i.e. list

Answer 75

 Leadership  Human resources  Engagement performance  Monitoring. Relevant ethical requirements Acceptance and continuance of client relationships

Question 76

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what is under leadership

Answer 76

The engagement partner takes responsibility for the overall quality of the engagement. [ISA220,8] The engagement partner should emphasize the importance of: Performing work that complies with professional standards. Complying with the firm’s quality control policies and procedures. Issuing auditor’s reports that are appropriate in the circumstances. The engagement team’s ability to raise concerns without fear of reprisal. ✓ Appropriate training has been implemented ✓ Set the internal culture ✓ Board set up to oversee the quality ✓ Client acceptance procedures

Question 77

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what is under Human resources

Answer 77

The engagement partner should ensure that the engagement team collectively have the competence and capabilities to perform the audit in accordance with professional standards. This includes ✓ knowledge of professional standards, and regulatory and legal requirements. ✓ knowledge of relevant industries in which the client operates, / experience of audit engagements of a similar nature and complexity ✓ the ability to apply judgment ✓ and an understanding of the firm's quality control policies and procedures. ``` ✓ Recruitment ✓ Career development ✓ Performance evaluation ✓ Competence ✓ Promotion ```

Question 78

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what does Engagement performance comprise of

Answer 78

1) direction 2) supervision 3) performance

Question 79

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what does Engagement performance DIRECTION comprise of

Answer 79

The engagement team should be directed by the engagement partner. Procedures such as an engagement planning meeting should be undertaken to ensure that the team understands:  Their responsibilities Objectives of the work to be performed The nature of the business  Risks related issues  how to deal with problems that may arise The detailed approach to the performance of the engagement. The planning meeting should be led by the partner and should include all people involved with the audit. There should be a discussion of the key issues identified at the planning stage.

Question 80

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what does Engagement performance SUPERVISION comprise of

Answer 80

Supervision should be continuous during the engagement. The audit supervior: Any problems that arise during the audit should be rectified as soon as possible. Attention should be focused on ensuring that members of the audit team are carrying out their work in accordance with the planned approach to the engagement. Significant matters should be brought to the attention of senior members of the audit team and modifying the planned approach accordingly Documentation should be made of key decisions made during the audit engagement. Tracking the progress of the audit to ensure the timetable can be met Considering the competence of the team Identifying matters for consultation. Consultation will be required where the team doesn't have the necessary expertise- audit supervisor should identify any areas where consultation with expert is required and make arrangements for such consultation whether within audit or external expert.

Question 81

Policies and procedures should be established which address: 6 things 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships what does Engagement performance Review comprise of

Answer 81

The review process is one of the key quality control procedures. All work performed must be reviewed by a more senior member of the audit team. Reviewers should consider for example whether: The work has been performed in accordance with professional standards The objectives of the engagement procedures have been achieved. The work performed supports the conclusions reached Appropriate consultations have taken place The evidence obtained is sufficient and appropriate to support the auditor's report.

Question 82

Policies and procedures should be established which address: 6 things ``` 1 Leadership 2 Human resources 3 Engagement performance 4 Monitoring. 5 Relevant ethical requirements 6 Acceptance and continuance of client relationships ``` what does Monitoring include

Answer 82

Quality control policies alone do not ensure good quality work. Firms should carry out post-issuance or 'cold' reviews to ensure that good quality control procedures are adequate, relevant and operating effectively Post‐issuance reviews are performed after the file has been archived and as such no further amendments should be made. A post‐issuance review is part of the firm’s monitoring procedures. If issues are identified it may result in the firm’s policies and procedures being revised

Question 83

what is the purpose of cold review when is it completed which files and conducted by matters considered

Answer 83

To assess whether the firms policies and procedures were implemented during an engagement and to identify any deficiencies therein After the auditor's report has been signed a selection of completed audit files a dedicated compliance or quality department / a qualified external consultant / an independent partner working papers should demonstrate that * Sufficient appropriate evidence has been obtained * All matters were resolved before issuing the auditor's report All working papers should be - On file - completed - signed as completed - reviewed

Question 84

what is a hot review

Answer 84

before the audit opinion is signed therefore minimizing the risk of giving an inappropriate opinion

Question 85

EQCR what are some Engagement Quality control review procedures

Answer 85

.✓ The audit engagement partner shall discuss significant matters arising during the audit engagement with the engagement quality control reviewer and its impact on the auditor’s report should be discussed. ✓ The engagement quality control reviewer must review the financial statements and the proposed auditor’s report, in particular focusing on the conclusions reached in formulating the auditor’s report and consideration of whether the proposed auditor’s opinion is appropriate. ✓ Once the engagement quality control reviewer has considered the necessity of a modification, they should consider whether a qualified or disclaimer of opinion is appropriate. This is an important issue, given that it is a matter of judgement whether the matters would be material or pervasive to the financial statements. ✓ The engagement quality control reviewer should ensure that there is adequate documentation regarding the judgements used in forming the audit opinion, and that all necessary matters have been brought to the attention of those charged with governance. ✓ The auditor’s report may not be signed and dated until the completion of the engagement quality control review.

Question 86

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Question 87

what is audit documentation / working paper

Answer 87

it is written evidence that a test has been approved ISA 230 Audit Documentation requires auditors to prepare and retain written documentation that: Provides evidence of the auditor’s basis for their report. Provides evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements.

Question 88

what is the purpose of a audit documentation / working paper

Answer 88

▪ Provides evidence of the auditor’s basis for a conclusion about the achievement of the overall objective of the audit. ▪ Provides evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements. ▪ Assists the engagement team to plan and perform the audit. ▪ Assists members of the engagement team responsible for supervision to direct, supervise and review the audit work. ▪ Enables the engagement team to be accountable for its work. ▪ Retains a record of matters of continuing significance to future audits. Enables the quality control reviews to be performed. Enables the external quality inspections to be performed.

Question 89

what are the contents of working paper i.e. must have enough evidence to pass the experienced auditor's test - an unrelated auditor should be able to pick up the paper and see what you've done and why

Answer 89

▪ Name of client – identifies the client being audited. ▪ Year-end date – identifies the year end to which the audit working papers relate. ▪ Subject – identifies the area of the financial statements that is being audited, the topic area of the working paper, such as receivables circularisation. ▪ Working paper reference – provides a clear reference to identify the number of the working paper, for example, R12 being the 12th working paper in the audit of receivables. ▪ Preparer – identifies the name of the audit team member who prepared the working paper, so any queries can be directed to the relevant person. ▪ Date prepared – the date that the audit work was performed by the team member; this helps to identify what was known at the time and what issues may have occurred subsequently. ▪ Objective/work performed/results/conclusions ▪ Reviewer – the name of the audit team member who reviewed the working paper; this provides evidence that the audit work was reviewed by an appropriate member of the team. ▪ Date of review – the date the audit work was reviewed by the senior member of the team; this should be prior to the date that the audit report was signed.

Question 90

what are some examples of keeping working papers safe

Answer 90

``` ▪ Locked away ▪ Passwords ▪ Restricted access ▪ Filled away if not required ▪ Not to take home ▪ Back up ```

Question 91

what is ECQR

Answer 91

An engagement quality control review will be necessary for listed clients and other high risk clients, for example to provide an additional safeguard for clients where independence issues have been identified. The engagement quality control reviewer should be someone independent of the audit team who has no prior knowledge of the client and is able to assess the judgmental areas of the audit with an objective mind. The EQCR will review opinion and assess whether there is sufficient appropriate evidence to support that opinion before it is issued.

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Question 94

what is a cold issuance review

Answer 94

A post‐issuance review is known as a cold review. Firms should carry out post-issuance or 'cold' reviews to ensure that good quality control procedures are adequate, relevant and operating effectively Post‐issuance reviews are performed after the file has been archived and as such no further amendments should be made. A post‐issuance review is part of the firm’s monitoring procedures. If issues are identified it may result in the firm’s policies and procedures being revised

Question 95

what is a hotissuance review

Answer 95

A pre‐issuance review is also known as a ‘hot’ review. A review of significant judgments affecting the audit is performed in a pre‐issuance review.