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Audit Planning Answers

The document discusses audit planning procedures. It defines key terms like audit strategy, audit plan, and audit program. The main objectives of planning are to determine the scope of audit procedures and obtain an understanding of the entity. Analytical procedures are used during planning to identify potential risks. The audit plan outlines the nature, timing, and extent of risk assessment and further audit procedures. Planning is an ongoing process rather than a discrete phase due to changing conditions. The work of internal auditors may be used if it is adequate for audit purposes.

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Kathlene Balico
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528 views3 pages

Audit Planning Answers

The document discusses audit planning procedures. It defines key terms like audit strategy, audit plan, and audit program. The main objectives of planning are to determine the scope of audit procedures and obtain an understanding of the entity. Analytical procedures are used during planning to identify potential risks. The audit plan outlines the nature, timing, and extent of risk assessment and further audit procedures. Planning is an ongoing process rather than a discrete phase due to changing conditions. The work of internal auditors may be used if it is adequate for audit purposes.

Uploaded by

Kathlene Balico
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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AUDIT PLANNING

1. What is the general objective of planning for an audit?


 The auditor’s main objective in planning the audit is to determine the scope of
the audit procedures to be performed.

2. Contrast the following terms:


a) Audit strategy - sets the scope, timing and direction of the audit, and guides the
development of more detailed audit plan.
b) Audit plan - is an overview of the expected scope and conduct of the audit. It
sets out in broad terms the nature, timing and extent of the audit procedures to
be performed.
c) Audit program - serves as a set of instructions to assistants involved in the audit
and as a means to control and record the proper execution of the work. It
executes the audit strategy. It sets out in detail the audit procedures to be
performed in each segment of the audit.

3. Enumerate the different planning procedures. Explain each one briefly.

1. Obtaining an understanding of the entity and its environment. - The auditor should
obtain a sufficient knowledge of the entity’s business to identify and understand the
events, transactions and practices that may have a significant effect on the financial
statements.
2. Performing analytical procedures -To obtain a more detailed understanding and to
identify areas of potential risk. Involve a study and comparison of relationships among
data to identify expected or unexpected fluctuations and other unusual items.
3. Consideration of fraud in audit planning - The auditor is required to consider the risks
of material misstatements in the financial statements due to fraud.
4. Identifying and assessing the risks of material misstatements through understanding
the entity and its environment. - The risk of material misstatement may be separated into
two components.

4. What is the purpose of analytical procedures performed during audit planning?

 To assist in understanding the business and in identifying areas of potential risk.

5. What are the contents of the audit plan?

The audit plan includes the following:

a) A description of the nature, timing and extent of planned risk assessment


procedures sufficient to assess the risks of material misstatements.
b) A description of the nature, timing and extent of planned further audit
procedures at the assertion level for each material class of transactions, account
balances and disclosures.
c) Such other procedures required to be carried out for the engagements to comply
with PSAs.

6. What are the two types of audit programs? Explain each type briefly.
1) Fixed Audit Program - A fixed audit program includes all possible audit
procedures, although all of them may not be applicable in a situation. Its
attempts to take care of every possible audit situation, therefore, it prescribes
procedure to be followed in each situation.
2) Flexible Audit Program - A flexible audit program does not prescribe the exact
audit procedure to be followed. It does not predetermine the nature of work to
be performed by each person of the audit staff. Most of the things are decided as
the work proceeds and the reliability of procedures and internal control system
becomes known to the auditor.

7. Planning is a discrete phase of the audit. Is this statement correct? Explain.

 No. The planning is continuous throughout the engagement because of changes in


conditions or unexpected results of audit procedures.

8. May an external auditor use the work of internal auditor? Explain.

 Yes but there are many factors in determining whether and to what extent to use the
external auditor may use the work of internal auditor such as: (1) Whether the work
of the internal auditors is likely to be adequate for purposes of the audit; (2) Planned
effect of the work of the internal auditors on the nature, timing or extent of the
external auditor’s procedures

9. Give examples of other planning considerations.

 Understanding the financial instruments to which the entity is exposed, and their
purpose and risks;
 Determining whether specialized skills and knowledge are needed in the audit.
 Assessing and responding to the risk of material misstatement.

10. Which of following audit team members may perform supervision duties?
a) Partner or sole proprietor
b) Manager
c) Senior associate
d) Audit associate
 The auditor associate shall plans the nature, timing and extent of direction and
supervision of engagement team members.  Accordingly, the engagement partner is
responsible for proper supervision of the work of engagement team members and for
compliance with PCAOB standards, including standards regarding using the work of
specialists, other auditors, internal auditors, and others who are involved in testing
controls

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