Audit Ch 3 Engagement Planning

67 cards

audit


 
  
Created Nov 1, 2012
by
rothera

 

 
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1
1.Client Acceptance or Continuance 2. Communication between predecessor and prospective...
 
pre engagement activities
2
responsibilities principle
 
•principle requires auditors to comply with appropriate ethical requirements for each...
3
independence in appearance
 
•relates to perceptions of auditors’independence 
4
engagement letter
 
when a new client is accepted or when an audit engagement continues
-contract between...
5
engagement letter
 
•Serves as a means of reducing the risk of misunderstandings with the client and as...
6
obj of engagement, mgmt & auditors responsibilities, any limitations of engagement
 
engagement letter should include
7
audit plan
 
•A comprehensive list of the specific audit procedures that the audit team needs to...
8
audit plan
 
•describes the procedures to be performed to assess the risk of material misstatement...
9
audit plan
 
•plan the nature, timing and extent of control tests and substantive tests that are...
10
–Audit engagement partner –Audit manager –IT audit specialist –Tax...
 
audit engagement teams usually consist of
11
objectivity and competence
 
•Prior to using the work of internal auditors, external auditors should consider internal...
12
professional judgment
 
Internal auditors should not be delegated tasks that require extensive 
13
specialists
 
•persons skilled in fields other than accounting and auditing who are not members of...
14
•professional qualifications, experience and reputation and methods and assumptions
 
auditors must know about the specialist's
15
specialists
 
should be unrelated to the company being audited
16
specialists
 
•are not referred to in the audit report unless the findings cause the auditors’report...
17
IT auditors
 
•Specialized skills are often needed to evaluate the effect of computerized processing...
18
IT auditors
 
•are members of the audit team and are called in when the need for their skills arises
19
time budget
 
•Used to maintain control of the audit by identifying problem areas early in the engagement,...
20
interim audit work
 
refers to procedures performed several weeks or months before the balance sheet date
21
year end audit work
 
refers to procedures performed shortly before and after the balance sheet date
22
time reports
 
•Everyone who works on the audit engagement is required to report the time taken to...
23
time reports
 
help in evaluating the efficiency of the audit team member
24
time reports
 
•Compiling a record for billing the client •Compiling a record for planning the...
25
materiality
 
refers to an amount (or transaction) that would influence the decisions of users(i.e., an amount...
26
–Absolute size –Relative size –Cumulative effects
 
quantitative criteria of materiality
27
–Nature of the item or issue –Circumstances –Uncertainty
 
qualitative criteria of materiality
28
professional judgment
 
ultimately materiality is a matter of
29
using materiality on the audit as a guide to planning substantive procedures
 
•directing attention and audit work to those items or accounts that are important, uncertain,...
30
performance materiality
 
Auditors use ____________  to make sure that the aggregate of uncorrected and undetected...
31
performance materiality
 
evaluate evidence
32
decisions about the audit report
 
use materiality for (3)
33
risk assessment procedures
 
To gain an understanding of the client and the risks associated with the client 
34
test of controls
 
To test the operating effectiveness of client internal control activities 
35
substantive procedures
 
To produce evidence about management’s assertions related to the amounts and disclosures...
36
substantive audit plan
 
•Should contain a list of audit procedures for gathering evidence related to the relevant...
37
–Substantive analytical procedures –Tests of details
 
two ways to conduct substative tests
38
substantive analytical procedures
 
more efficient
39
tests of details
 
more effective
40
1.Inspection of records and documents 2.Inspection of tangible assets 3.Observation 4.Inquiry 5.Confirmation 6.Recalculation 7.Reperformance 8.Analytical...
 
types of audit procedures
41
vouching, tracing, scanning
 
3 types of inspection of records and docs
42
vouching
 
existence or occurence
(top down)
43
tracing
 
competeness
-start iwth pmt and trace up to journal entry then to finc stmts
44
completeness
 
were all shipments actually recorded as sales?
45
CAATs
-computer assisted audit tools and techniques
 
the auditor is able to access and extract client information without disrupting data processing
46
–Calculate field statistics (totals, high, low and average value) –Perform...
 
CAAT procedures
47
audit documentation
 
The written record of the basis for the auditor’s conclusions that provides the support...
48
–Improve audit quality –Enhance public confidence
 
objectives of audit documentation
49
judgement
 
CAAT cannot perform
50
judgement
 
CAAT cannot perform
51
*record of everything you have done on the engagement
•Integral part of audit...
 
purposes of audit documentation
52
*auditor pulls out each year
–Information of continuing audit significance –For...
 
permanent files (audit documentation)
53
current files
 
everything for this year
–Includes the entire engagement administration file...
54
–Understand the nature timing, extent and results of procedures, evidence obtained...
 
audit doc should be prepared to enable auditor having no previous connection to the engagement...
55
–Name, date, purpose, page number –Procedures performed and conclusions  •Evidence...
 
info on each workpaper
56
7 years, report release date
 
documentation must be retained ____ from ________
57
45 days
 
all documentation must be finalized within _____ of the audit reports realase date
58
planning materiality (materiality)
 
–Applicable to overall financial statements
59
performance materiality (tolerable error/ misstatement)
 
–Applicable  to individual populations
•The maximum error that...
60
indivdually significant items
 
–Threshold for examining individual transactions or line items
61
trivial amounts (posting scope)
 
–Errors that are ignorable
62
–An account balance –A class of transactions (e.g. purchases)
 
population
63
50-75%
 
performance materiality is usually ____________ or materiallity
64
individually significant items
 
•These are transactions or accounts that are significant due to: –Size –High...
65
trivial amounts (posting scope)
 
•A threshold at which misstatements below this amount need not be accumulated •Usually...
66
performance materiality and posting scope
 
changes to materiality will also affect
67
1.Determine the appropriate benchmark 2.Determine planning materiality 3.Determine performance...
 
steps for calculating materiality


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