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Chapter 8 Discussion Questions

The document discusses audit planning, procedures, and considerations. It explains that the main objective of audit planning is to ensure appropriate attention is given to all areas of the audit, with more focus on high risk areas. The audit plan sets the scope, timing, and direction of the audit. It also describes substantive and analytical audit procedures that auditors perform to gather evidence. Key considerations in planning include risk assessment, materiality, expertise needed, and supervision of audit work.

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157 views3 pages

Chapter 8 Discussion Questions

The document discusses audit planning, procedures, and considerations. It explains that the main objective of audit planning is to ensure appropriate attention is given to all areas of the audit, with more focus on high risk areas. The audit plan sets the scope, timing, and direction of the audit. It also describes substantive and analytical audit procedures that auditors perform to gather evidence. Key considerations in planning include risk assessment, materiality, expertise needed, and supervision of audit work.

Uploaded by

Juliana Cheng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Discussion Questions

1. The main objective of audit planning is to ensure appropriate attention is given to all
areas of the audit. More attention should be devoted in auditing high risk of the entity.
Low risk areas should be given less time to conserve resources.

2. Audit Strategy – Sets the scope, timing and direction of the audit, and guides the
development of the more detailed audit plan

Audit Plan – includes the description of the nature, timing and extent of risk assessment
procedures, further audit procedures (tests of controls and substantive tests) and other
audit procedures required to be carried out for the engagement in order to comply with
PSAs.

Audit Program – list of procedures (tests of controls and substantive tests) used to gather
sufficient appropriate evidence.

3. #1 – Substantive Audit Procedures


Substantive procedures are processes, steps, tests performed by auditors, which creates
conclusive evidence regarding accuracy, completeness, existence, disclosure, rights, or
valuation of assets/ liability, books of accounts, or financial statements. For any
procedure to be concluded, the auditor should collect enough audit evidence so that
another competent auditor, when applies the same procedure on the same documents,
makes the same conclusion. It can be regarded as complete checking. Auditor usually
uses this procedure when he is of opinion audit area includes a high frequency of risk.

#2 – Analytical Audit Procedures


Analytical procedures can be defined as tests/ study/ evaluations of financial information
through analysis of plausible relationships among both financial and non-financial data.
In simple language, certain checks/tests conducted by auditors based on study/
knowledge/ previous year figures to check and form an opinion on financial statements.
Depending on the audit area, the analytical audit procedure may differ. For example, the
auditor may compare two sets of financial statements of the same entity about two
different financial years or sometimes may compare two separate entities’ financial data
for obtaining audit evidence.

4. Auditors perform analytical procedures in various stages of the audit for three main
purposes:
 To use as risk assessment procedures to obtain an understanding of the client and
the risks that the client exposes to
 To assess the risks of material misstatements that could occur on the financial
statements at the planning stage of the audit
 To obtain audit evidence as substantive analytical procedures at the evidence-
gathering stage of the audit
 To form an overall conclusion whether the financial statements are consistent
with auditors’ understanding of the client at the end of the audit

5.
 Description of the nature, timing and extent of risk assessment procedures, further
audit procedures and other audit procedures required.
 Documentation of the audit plan

6. Test of controls audit program (compliance test audit program) – prepared when the
auditor has identified controls when he/she plans to rely on (reliance approach).

Substantive test audit program – prepared regardless of the approach taken by the auditor
(reliance or no reliance).

7. Planning is not a discrete phase of an audit, but rather a continual and iterative process
that often begins shortly after (or in connection with) the completion of the previous audit
and continues until the completion of the current audit engagement. Planning, however,
includes consideration of the timing of certain activities and audit procedures that need to
be completed prior to the performance of further audit procedures. For example, planning
includes the need to consider, prior to the auditor’s identification and assessment of the
risks of material misstatement, such matters as:
 The analytical procedures to be applied as risk assessment procedures.
 Obtaining a general understanding of the legal and regulatory framework
applicable to the entity and how the entity is complying with that framework.
 The determination of materiality.
 The involvement of experts.
 The performance of other risk assessment procedures.

8. External Auditor may use the work that is conducted in the internal audit if he thinks fit.
Still, it will not reduce the scope and the responsibility of the external auditor. Internal
Audit acts as a check on the process and the activities of the business and aids by
advising on different matters to gain operational efficiency.

9. Other Planning Considerations


 Arrangements for Company Assistance
 Consider the work of Internal Auditor
 Direction, Supervision and Review
o Coordinating Staff assignments and ascertaining that staff with appropriate
capabilities is performing the work
o Assigning work to assistants
o Reviewing fieldwork to conclude that the engagement is satisfactorily
completed
o Conducting on the job training
o Resolving significant accounting, auditing and similar matters relative to
the engagement, including necessary consultation thereon

10. The manager or other experienced individual is usually responsible for supervising and
monitoring the work done to ensure that it is in accordance with the audit-testing plan.

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