Module 15 - Audit Process: Planning Questions and verified answers

Questions and verified answers What does planning an audit allow? - Correct Answer 1) ensure that sufficient and appropriate attention is directed to the important areas 2) ensure that potential problems are identified and resolved early 3) selection of appropriate engagement staff 4) complete work effectively and efficiently 5) facilitating direction and supervision What does the overall audit strategy do? - Correct Answer sets out the scope, timing and direction of the audit What is the detailed audit plan? - Correct Answer Derived from the overall audit strategy describing the approach for the expected nature, timing and extent of the audit procedures to be performed What is included within the 'understanding the entity'? - Correct Answer 1) Organisational structure, ownership and governance 2) Industry, regulatory and other external factors 3) Internal performance indicators 4) Application of financial reporting framework 5) Inherent risk factors identified 6) Internal controls What are the 4 risk assessment procedures used to gather information? - Correct Answer 1) Analytical Procedures 2) Enquiry 3) Inspection 4) Observation What are the key documents that may be inspected to gather more information about the entity to assess inherent risks? - Correct Answer 1) PY financial statements 2) PY audit file 3) internal control files 4) business plans 5) industry publications 6) analyst reports 7) entity website What is the definition of an analytical procedure? - Correct Answer the evaluation of financial information through analysis of plausible relationships among both financial and non-financial data What is the purpose of analytical procedures at planning? - Correct Answer 1) to identify any areas of the financial statements which appear unusual 2) help to enhance the auditor's understanding of the entity When are analytical procedures required be carried out per the ISAs? - Correct Answer ISA315 + ISA520 = as part of risk assessment procedures at planning and when forming an overall conclusion at completion What are the key comparisons used in analytical procedures? - Correct Answer 1) Prior period 2) Expectations 3) Compatible entity What are the key techniques used as analytical procedures? - Correct Answer 1) Comparison - planning + completion 2) Ratio analysis - planning 3) Reasonableness tests - planning + fieldwork 4) Trend analysis - fieldwork 5) Large and unusual items review - fieldwork