Audit Planning

This refers to the development of a general strategy and a detailed approach for the expected nature, timing and extent of audit refers to:

• Supervision

• Direction

• Audit Planning

• Pre-engagement

Proper planning assures that (select the exception)

• Appropriate attention is devoted to important areas of the audit

• Potential problems are identified

• Work is completed expeditiously

• An unqualified opinion is expressed

The outputs of audit planning are:

• An overall audit strategy that sets out the direction, scope and focus of the audit team’s effort.

• A detailed audit plan containing the nature, extent, and timing of risk assessment procedures and planned further audit procedures at the assertion level.

• Audit programs, tailored as needed to reflect the particular engagement circumstances.

• All of the answers.

An audit plan contains the nature, extent, and timing of procedures for gathering evidence. Regarding audit procedures, which of the following best describes risk assessment procedures?

• This category of procedures is used to obtain an understanding of the entity and its environment, including its internal control, to assess the risks of material misstatement at the financial statement and assertion levels.

• This category of procedures is used to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

• This category of procedures is used to detect material misstatements at the assertion level.

• All of these statements describe risk assessment procedures.

The extent of planning will vary according to the following:

• Size of the audit client

• Auditor’s experience with the entity and knowledge of the business.

• The nature and complexity of the audit engagement.

• All of these affect the extent of planning

A person or firm possessing special skill, knowledge and experience in a particular field including accounting and auditing

• Expert

• Quality control reviewer

• Multi-skilled

• Taxation specialist

In which of the following situations would an expert be least likely contracted by a CPA?

• Application of accounting methods in computing inventory balances

• Determination of fair values using specialized statistical techniques

• Legal opinions concerning interpretations of engagements, statutes and regulations.

• a. Valuations of certain types of assets like land and buildings.

Religious Corp. has a few large accounts receivable that total P 1,000,000. Pilgrim Corp, has a large number of small accounts receivable that also total P 1,000,000. The importance of an error in any one account is, therefore, greater for Religious Corp. than for Pilgrem Corp. This is an example of the auditor’s concept of:

• Materiality

• Comparative analysis

• Reasonable assurance

• Relative risk

When the auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as:

• The error range

• The materiality range

• Tolerable misstatement

• Tolerable materiality

Regardless of how the allocation of the preliminary judgment about materiality was done, when the audit is complete the auditor must be confident that the combined errors in all accounts are:

• Less than the preliminary judgment

• Equal to the preliminary judgment

• More than the preliminary judgment

• Less than or equal to the preliminary judgment