Podcast
Questions and Answers
What is the main objective of an audit of financial statements?
What is the main objective of an audit of financial statements?
To express an opinion on the financial statements.
Audit planning is a discrete phase of an audit.
Audit planning is a discrete phase of an audit.
False (B)
Which of the following is NOT typically considered during the preliminary engagement activities?
Which of the following is NOT typically considered during the preliminary engagement activities?
What does the overall audit strategy set?
What does the overall audit strategy set?
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What is the purpose of an audit programme?
What is the purpose of an audit programme?
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An audit programme is a standalone document and does not require regular reviews.
An audit programme is a standalone document and does not require regular reviews.
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Which of the following is NOT a common advantage of using an audit programme?
Which of the following is NOT a common advantage of using an audit programme?
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In which stage of the audit process are the results of previous audits considered, including those that involved evaluating the effectiveness of internal controls?
In which stage of the audit process are the results of previous audits considered, including those that involved evaluating the effectiveness of internal controls?
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What are the main elements of planning, as described in the content?
What are the main elements of planning, as described in the content?
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The auditor is solely responsible for preparing the overall audit strategy and the audit plan.
The auditor is solely responsible for preparing the overall audit strategy and the audit plan.
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In the case study, which of the following is NOT a factor that the auditor is considering while preparing the overall audit strategy?
In the case study, which of the following is NOT a factor that the auditor is considering while preparing the overall audit strategy?
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In the provided content, which of the following is the most accurate description of an audit programme?
In the provided content, which of the following is the most accurate description of an audit programme?
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The audit programme should always be designed in a way that ensures all procedures are carried out in a predetermined sequence without any flexibility.
The audit programme should always be designed in a way that ensures all procedures are carried out in a predetermined sequence without any flexibility.
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What is the main purpose of the information gathered through documentary examination, physical examination, and statements provided by management and others, during an audit?
What is the main purpose of the information gathered through documentary examination, physical examination, and statements provided by management and others, during an audit?
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Which of the following is considered the best evidence for verifying the existence of cash in hand?
Which of the following is considered the best evidence for verifying the existence of cash in hand?
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The primary responsibility for identifying and addressing deficiencies in the audit programme lies with the audit supervisor/principal.
The primary responsibility for identifying and addressing deficiencies in the audit programme lies with the audit supervisor/principal.
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An audit programme should always be designed to be extremely detailed and specific, with a clear instruction for every potential scenario during the audit.
An audit programme should always be designed to be extremely detailed and specific, with a clear instruction for every potential scenario during the audit.
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Study Notes
Chapter 2: Audit Strategy, Audit Planning and Audit Programme
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Learning Outcomes:
- Understand audit planning and its benefits
- Learn about the planning process and its elements
- Learn about establishing overall strategy and developing audit plans in detail
- Learn about audit programmes
- Gain knowledge of quality control of audit work regarding delegation and supervision of audit work
- Practicing concepts through examples and case studies
Chapter Overview: Auditing and Ethics
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Planning an Audit involves:
- Establishing the overall audit strategy
- Developing an audit plan
- Plans are based on client's business knowledge
- Plans should be further developed and revised throughout the audit process
Audit Strategy, Audit Planning and Audit Programme
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Objective of an audit of financial statements: Express an opinion on the statements
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Systematic process: Logical and methodical process of carrying out an audit
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Planning is crucial: Necessary to perform a complex process like auditing effectively and efficiently
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Planning considerations:
- Timelines for completion for various entities
- Timely performance of audit process
- Planning for audit effectiveness
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CA Student Training: Practical training in audit work for articled students
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Audit Plan Flexibility: Plans can be adjusted if new information emerges.
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Documentation: All relevant information important for the audit.
Auditor's Responsibility to Plan an Audit of Financial Statements
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SA 300 outlines auditor's responsibility in planning audits of financial statements
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Effective manner: The objective of the auditor is to plan the audit to be performed effectively in a timely manner
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Benefits of adequate planning:
- Appropriate attention to important areas of the audit.
- Identifying and resolving potential problems in a timely manner.
- Proper organization and management of the audit engagement
- Selecting capable team members to respond to anticipated risks and properly assign work
- Facilitating direction and supervision of engagement team members and reviewing their work
- Coordinating with other experts, where needed
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Reduced audit risk: Adequate planning reduces the risk of inappropriate opinions.
Nature of Audit Planning
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Continuous and iterative process: Planning is ongoing throughout the audit life-cycle
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Timing matters: Planning activities often precede the execution of other audit steps.
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Risk assessment procedures: Establishing the scope, timing, direction of the audit.
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Risk assessment procedures: includes, for example:
- analytical procedures
- understanding legal and regulatory frameworks applicable to the entity
- determining materiality
- involving experts
- performing other risk assessment procedures
Involvement of Key Engagement Team Members
- Key engagement team members: should be involved in planning discussions
- Engagement partner involvement: Experienced engagement partners lead the audit process
- Discussion and knowledge sharing: Leads to a more efficient and effective planning process
Planning Process - Elements of Planning
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Preliminary engagement activities:
- Continuance of the client relationship
- Ethical compliance including independence
- Understanding the terms of the engagement
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Continuance of client & audit relationship procedures: Necessary steps to be taken
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Evaluating independence compliance: procedures and policies must be followed
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Establishing terms of engagement: Clarifying expectations between the auditor and the client.
Planning Activities
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Establish overall audit strategy: Scope, timing and direction
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Developing an audit plan: Detailed nature, timing and extent of procedures to carry out the audit .
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Resources required: The resources required to deploy in specific audit areas
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Specific considerations: Number and location of branch, relevant information frameworks, expected completion time.
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Reporting objectives determination: Effective planning of audit involves determining the nature and timing of communications during the audit
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Engagement team effort consideration: Important matters to be tackled and areas of greater focus.
Significant Industry Development Considerations
- Industry changes: Consider significant industry developments and changes in laws and regulations
- Reporting framework changes: Include changes in accounting standards and new reporting standards
- Other related developments: Changes in the legal environment impacting the entity
Audit Programme Considerations
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Detailed plan: Specifies the nature, timing, and extent of procedures
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Documentation: Record of decisions, procedures and key points.
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Flexibility: The audit programme should stay up-to- date and adapt to significant changes in the audit
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Audit procedures: The auditor performs procedures, sets their timing, and determines the sample size
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Steps/Procedures utility: Use only necessary steps and procedures relevant to specific situations
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Error possibilities: List all possibilities of error for each procedure
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Related items coordination: Coordinate audit procedures related to multiple transactions.
Establishing Overall Audit Strategy/Audit Plan
- Scope, timing and direction: The audit strategy outlines the plan's scope, time frame, and direction
- Audit objectives: Plan and audit activities should be directed towards achieving specific audit objectives
- Resources efficiently: Utilize resources efficiently to fulfill audit plan requirements.
Changes to Planning Decisions During an Audit
- Continual review: The audit plan should be kept up to date as new information can affect planned audit procedures.
- Flexibility: Changes may be required if unexpected circumstances arise.
- Document changes: Changes to the audit strategy/plan and their rationale need to be properly documented
- Evidence: The auditor can use different types of evidence such as internal controls, documents and inquiries to establish the evidence available with the client
Planning Supervision and Review of Engagement Team Members
- Audit Team: Plan the type and extent of audit supervisor's involvement, and the review of the engagement team members' work
- Direction and oversight: Nature, timing and extent of direction and supervision
- Areas of concern: Include the size and complexity of the entity, the area of the audit, assessed risk of misstatement along with expertise and competence of the engagement team
Documentation in Audit
- Overall audit strategy: Documenting the key decisions for planning a sound audit.
- Audit plans: Document the nature, timing and extent of risk assessment and further audit procedures.
- Important changes: Details of any significant changes in the audit strategy/plan during the course of the engagement
Audit Programme in Different Scenarios
- Evolving audit programme: An audit programme is a list of detailed, verification steps for each aspect of an audit.
- Specific guidance needed: An audit programme isn't suitable in all businesses.
- Proper planning important: A programme needs adaptation based on the entity's nature, size, and the given scope of work, internal control of the entity.
- Review for efficiency: Regular review and modification of the audit programme ensuring it reflects any changes.
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Description
This quiz covers key concepts from Chapter 2 on Audit Strategy, Audit Planning, and Audit Programmes. Participants will learn about the benefits of effective audit planning, the systematic processes involved, and how to develop detailed audit plans. Engage with case studies and examples to solidify your understanding of the material.
