ICAEW Audit planning and cyber security Questions and Answers 2023/2024

ICAEW Audit planning and cyber security Questions and Answers 2023/2024 Audit strategy - correct answer background information required to an effective audit- formulation of general strategy which considers materiality risk audit approach experts timing team budgets and deadlines of audit - guides the development of audit plan Audit plan - correct answer detailed than strategy - sets out specific nature, timing, extends of audit procedures to be performed by engagement team to obtain sufficient and appropriate evidence Materiality isa320 - correct answer items material by quantity or quality Revenue: 1/2% - 1% Profit before tax: 5% - 10% Gross assets: 1% - 2% Balance sheet/assets Sales error/revenue Error/ profit If high risk - lower bound of materiality - more transactions scrutinised Material by nature (quality) - correct answer misstatement which affect complainers with regulatory requirement Impact debt covenants Obscure a change in earnings or affect ratios to evaluate entity Misstatement which affect management compensation Performance materiality - correct answer overall risk of material misstatement based on fs as a whole may be low leading to planning materiality set as high Riskier assertions- under auditing Auditor should use a figure lower than planning materiality or audit these riskier assertions to ensure appropriate auditing Analytical procedures isa315 - correct answer auditor must use analytical procedures in risk assessment in order to obtain an understanding of the entity and its environment Benefits ap - correct answer allows auditors to identify risk areas/material areas requiring further work Identifies items which look odd in relation to accounts as a whole May highlight errors not identified by detailed testing Uses information outside of accounting records which the preparer may have less scope over Assists in understanding clients business Limitation of ap - correct answer good knowledge of business is required to understand results Consistency of results may conceal a material error May be a tendency to carry out procedures mechanically without professional scepticism Reliable data may not be available