during the initial planning phase of an audit

Legal or regulatory matters of which the company is aware; The type and extent of available evidence related to the effectiveness of the company's internal control over financial reporting; Preliminary judgments about the effectiveness of internal control over financial reporting; Public information about the company relevant to the evaluation of the likelihood of material financial statement misstatements and the effectiveness of the company's internal control over financial reporting; Knowledge about risks related to the company evaluated as part of the auditor's client acceptance and retention evaluation; and. Ask about recent developmentsin the company such as mergers and new product lines which will cause the audit to differ from earlier years. The entity is expected to review the PX draft and provide its position on any disputed facts, accompanied by all supporting evidence theaudited entity has. Evaluate the reasonableness of the The liaison. 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Real GDP growth rate and economic growth rate are always inversely related. The successor. financial statements; The degree of centralization of records or information processing; The effectiveness of the control environment, particularly with respect to management's control over the exercise of authority delegated to others and its ability to effectively supervise activities at the location or business unit; and. During the initial planning phase of an audit, a CPA most likely would a. 2022-002, SEC Release No. chapter 3 Flashcards | Chegg.com .15The auditor should modify the overall audit strategy and the audit plan as necessary if circumstances change significantly during the course of the audit, including changes due to a revised assessment of b. c. Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated. The entity is also expected to confirm that it has providedthe OAGwith all information requested or information that could significantly affect the findings or the conclusion of the audit report. d. The audit evidence gathered supports the auditor's conclusions. c. Conclude whether changes in compliance with prescribed internal controls justify reliance on them.d. When likely misstatements are greater than overall materiality, the auditor should A) Request that the auditee adjust the financial statements. |Privacy Policy and Terms of Use| Sitemap. Independence and review skills.d. During the initial planning phase of an audit, a CPA most likely would gather information about the client's business and industry, assess risks, and develop an audit It was founded in 1983 and has branches all across the State, covering all Districts and RD blocks. Evaluate the This acknowledgement also confirms that the entity will comply with any requests that the OAG makes for access to relevant documents under the control of the entity, including those documents to which solicitor-client privileges are attached. The standard as amended will be effective for audits of financial statements for fiscal years ending on or after December 15, 2024. a. inquiring of the client's legal counsel concerning pending litigation b. comparing the financial statements with anticipated results c. searching for unauthorized transactions that may aid in detecting unrecorded liabilities d. Examining computer generated exception reports to verify the effectiveness of internal activities. Supporting accounting records and files that should be readily available are not produced promptly when requested c. related party transactions take place and are audited by an other CPA firm d. senior mgmnt has excessive interest in upgrading the entity's IT capabilities, b. 5. A) The internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee, B) The risk the internal control system will not detect a material misstatement of a financial statement assertion, C) The risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion, D) The susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls. According to the text, the first step in applying materiality to an audit is A) To determine tolerable misstatement for each account balance. B) Generally involves less professional judgment for public companies. The audit team reviews the audit schedule and key milestones with entity officials to determine whether any changes are needed. Preparation & fair presentation of the financial statements in accordance w/ AFRF b. Representatives from the entitys management, investors, suppliers, and customers.d. a. 2003-2023 Chegg Inc. All rights reserved. The entity is expected to identify one of its officials as its OAG liaison for the audit. Audit committees have been identified as a major factor in promoting the independence of both internal and external auditors. Test specific internal control activities that are likely to prevent fraud. 34-95488. This standard describes the auditor's responsibilities for properly planning the audit.2. are audit procedures performed to test the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the relevant assertion level. Minutes of the board of directors meetings. Conflict-of-interest statements from management and others. For example, client-prepared schedules need to be ready when the auditor is expected to examine them, and the client needs to be informed of dates when they will be prohibited from accessing bank safe deposit boxes to ensure the integrity of counts of securities held at banks. Course Hero is not sponsored or endorsed by any college or university. D) Both a and c. What types of inquires about a prospective client should an auditor make to third parties? Seymore was recently invited to become a director of Buckley Industries, Inc. Thesteps in planningan audit include (Planning Procedures): 1. Evaluate the The team uses this knowledge to develop its audit strategy, which includes an Audit Plan Summary and audit programs. B) To determine a materiality level for the overall financial statements. An auditor has no responsibility to detect illegal acts by clients that have an indirect effect on the financial statements. Basic discussions with the clientabout the nature of the engagement and the clients business and industry are performed first, and the auditor meets the key employees, or new employees of a continuing client. during the initial planning phase of an audit, a cpa most .02The objective of the auditor is to plan the auditso that the audit is conducted effectively. Download our free eBook now! In a financial statement audit, inherent risk is evaluated to help an auditor asses which of the following? Planning Phase Which of the following actions by the auditor is most appropriate? AS 2101: Audit Planning | PCAOB Multiple Choice The UN mode, a) For the year 2016, P marketing managers project quarterly sales of 100,000 product A and 50,000 p. Internal control letter.b. Browse over 1 million classes created by top students, professors, publishers, and experts. Which of these statements concerning illegal acts by clients is correct? and that the audit may not detect all material errors and fraud. Please select a current browser such as Chrome, Edge, or Firefox. What is a primary difference between the OECD and UN model tax treaties? Name: __________________________ Date: _____________ PLEASE WebDuring the initial planning phase of an audit, a CPA most likely would. terms are used in theFASBAccounting Standards Codification, Contingencies Topic, paragraph 450-20-25-1. The team informs the audited entity, in writing, of any significant changes made to the APS and, if needed, issues a revised version to the entity. d. Understand the events and transactions that may have an effect on the clients financial statements. Evaluate the reasonableness of the clients b. The existence of audit risk is recognized by the statement in the auditors standard report that the a. Solved 1. Which of the following factors most likely would - Chegg all of the following are acceptable sources for this except for a. AICPA b. other practitioners c. the service auditors published vita d. bankers and other creditors. What is Materiality Planning 3. The audit team makes various inquiries as part of the planning phase, to obtain a good understanding of the subject being audited. What type of information should be requested from the predecessor? The element of the audit planning process most likely to, be agreed upon with the client before implementation of, the audit strategy is the determination of the, An initial audit requires more audit time to complete. WebDuring the initial planning phase of an audit, a CPA most likely would a. to formalize the arrangement reached between the auditor and client. Note:When performing an audit of internal control over financial reporting, refer to Appendix B, Special Topics, of AS 220117for considerations when a This section is written in the context of recurring The objective of the auditor is to plan the audit so that the audit is conducted effectively. WebDuring the initial planning phase of an audit, a CPA most likely would a. Which of the following best characterizes the mind-set that the audit team should maintain during this discussion? Audit process: Step 2, the planning phase. The overall audit strategy or the timing of the audit may be discussed, but dont discuss specific audit procedures. 3. Copyright 2003-2023 Public Company Accounting Oversight Board. Identify specific internal control activities that are likely to prevent fraud. An engagement letter should ordinarily include, information on the objectives of the engagement and, Arrangements concerning which of the following are. help resolve any problems or barriers to completing the audit. WebDuring the first phase of an audit, a CPA most likely would A. during the initial planning phase of an audit. They usually use financial and nonfinancial data aggregated at a high level. reporting and, if so, how they will affect the auditor's procedures: The relative complexity of the company's operations. An auditor obtains knowledge about a new clients business and its industry to a. 2The term, "auditor," as used in this standard, encompasses both the engagement partner and the engagement team members who assist the engagement partner in planning the audit. For example, internal control testing needs to be performed early in the engagement, inventory counts need to be performed at or near the balance sheet date and the client representation letter cannot be obtained until the end of the audit fieldwork. Audit programs should be designed so that. Training and supervisory skills, During the initial planning phase of an audit, a CPA most likely would, a. d. Determining the extent of internal auditor involvement. The entities are expected to. The OAG will provide the entity with an opportunity to discuss theproposed audit plan. a. C) To aggregate the misstatements found in each account and determine their overall affect on the financial statements. The team alsoasks fordraft responses to the recommendations (modified, as appropriate, to reflect discussions). a.is neutral B) Ensure that the audit team is independent. Analytical Procedures Some sections of the draft are highlighted, marking text to be reproduced or repurposed in the OAGs report communications products. Answer (a) is incorrect because the timing The mnemonicBRAINSTOPSreminds you that an auditorsbrain stopsif they dontplan out the audit carefullybefore beginning the detailed testing of client records. a. Materiality for the income statement as a whole.d. , period? 3Paragraphs .14-.16 ofQCsec. b.Determine overall materiality for audit purposes. C) They communicate and clarify the expectations and responsibilities of both the auditee and the auditor. c. The entity's financial statements of the prior year. the auditor should perform the procedures in paragraphs .11-.13 of this standard to determine the locations or business units at which audit procedures should be performed. Audit Ch.1-5 Review Flashcards | Quizlet b. B. The auditor determines that the errors are not material in the aggregate. They usually involve the comparison of assertions developed by management to ratios calculated by an auditor. .13In determining the locations or business units at which to perform audit procedures, the auditor may take into account relevant activities performed by internal audit, as described in AS 2605,Consideration of the Internal Audit Function, 1Terms defined in Appendix A,Definitions, are set inboldface typethe first time they appear. 4. The factors that are significant in directing the activities of the engagement team, The results of preliminary engagement activities. All audited entities receive the full PX draft if they all agree to this approach. consider necessary to complete the engagement. .05Planning the audit includes establishing the overall audit strategy for the engagement and developing an audit plan, which includes, in particular, planned risk assessment procedures and planned responses to When developing the audit strategy and audit plan, as discussed in paragraphs .08-.10, the auditor should evaluate whether the following matters are important to the company's financial statements and internal control over financial Identify specific internal control activities that are likely to prevent fraud. Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting a. large amounts of liquid assets that are easily convertible into cash b. low growth/profitability as compared to other entities in the same industry c. financial management's participation in the initial selection of accounting principles d. an overly complex organizational structure involving unusual lines of authority, d. an overly complex organizational structure involving unusual lines of authority, Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements a. the entity's management places no emphasis on meeting publicized earnings projections b. significant difference between physical inventory count and accounting records are not investigated c. monthly bank reconciliations ordinarily include several large outstanding checks d. cash transactions are electronically processed and recorded leaving no paper trail, b. significant difference between physical inventory count and accounting records are not investigated, If the business environment is experiencing a recession, the auditor most likely would locus increased attention on which of the following accounts a. purchase returns and allowances b. allowance for doubtful accounts c. common stock d. non controlling interest of a subsidiary purchased during the year, which of the following circumstances would an auditor most likely consider a risk factor relating to misstatements arising from fraudulent financial reporting a. several members of management have recently purchased additional shares of the entity's stock b. several members of the board of directors have recently sold shares of the entity's stock c. the entity distributes financial forecasts to financial analysts that predict conservative operating results d. management is interested in maintaining the entity's earnings trend by using aggressive accounting practices, d. management is interested in maintaining the entity's earnings trend by using aggressive accounting practices, which of the following statements reflects an auditors responsibility for detecting errors/fraud a. an auditor is resonsible for detecting employee errors and simple fraud, but not for discovering fraud involving employee collusion or management override b. auditor should plan the audit to detect errors and fraud that are caused by a departure from GAAP c. an auditor is not responsible for detecting errors and fraud unless the application of BAAS would result in such detection d. an auditor should design the audit to provide reasonable assurance of detecting errors/fraud that are material to the financial statements, d. an auditor should design the audit to provide reasonable assurance of detecting errors/fraud that are material to the financial statements, Which of the following circumstances most likely would cause an auditor to suspect that there are material misstatements in an entity's financial statements a. senior financial mgmnt participation in the selection of accounting principles and the determination of significant estimates b. 1) During the initial planning phase of audit, a CPA most likely would Ans:- C. Discuss the timing . Objective 2. While validating facts, entity management (including senior entity officials) is expected to examine all statements of fact and provide corrections with appropriate supporting evidence if it identifies. necessary to establish an appropriate audit strategy and audit plan, including determining the audit procedures necessary to obtain sufficient appropriate audit evidence regarding the opening balances.19. AUDIT PLANNING Mizoram Rural Bank is a regional rural bank jointly owned by the Government of India, State Bank of India and Government of Mizoram. Although audit plan is the first stage in the audit process, the planning can take place at any point of the audit process. Issues may apply to more than one federal department or agency. audit in accordance with generally accepted auditing standards? 7See, e.g., AS 1301. Pronouncementson accounting principles and audit guides should be read or reviewed to assist in the development of complete audit programs fitting the unique needs of clients business and industry. Competence and objectivity.b. B) Issue an unqualified opinion. c. Discuss the timing of the audit procedures with the clients management. B) To determine a materiality level for the overall financial statements. WebDuring the initial planning phase of an audit, the auditor most likely would discuss the timing of the audit procedures with the client's management Analytical procedures used If Seymore accepts and becomes a director, he along with the other direc A corporate director commits a breach of duty if. When establishing an understanding with the entity regarding the terms of the engagement, all of the following should be discussed, except: A) The engagement letter. This process may require a series of meetings with entity officials to ensure they agree on the facts gathered during the audit examination andfield work. Perform procedures regarding the continuance of the client relationship and the specific audit engagement. Which is not a factor in A director of a corporation is best characterized as a(n). At the end of the planning phase, the OAG provides entities with an AuditPlan Summary (APS), a document that shows. d. Proper project planning is one of the most important steps in ensuring everything is delivered on-time and on-budget. d. Inquire of the clients attorney as to whether any unrecorded claims are probably of assertion. Web5. If changes are needed, the parties are expected to discuss how best to adjust deadlines to ensure the quality of reports within the OAGs report production schedule. The OAG team meets to discuss the audit objective(s), scope and approach, and criteria asstated in the APS. d.Members of the board of directors who are not officers or employees. The entity is expected to make every effort to ensure that the appropriate entity officials attend this meeting. Develop an attitude of professional skepticism concerning managements financial statement assertions.
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