Sharon Brown has recently been employed to the Auditing firm XYZ Ltd; and is assigned to the
Question:
Sharon Brown has recently been employed to the Auditing firm XYZ Ltd; and is assigned to the team that will be auditing the financial statements of Nation News Ltd. for the year ending 31 December 2021.
At the planning meeting, attended by all members of the audit team, the Audit Manager confirmed that the firm would adopt a risk-based approach to the audit, and for the benefit of the junior members of the team, he explained the use of the audit risk model comprising inherent risk, control risk and detection risk.
The manager also explained in depth, the purpose and objective of working papers and the importance of preparing good working papers.
He emphasized that the working papers need to be properly completed, to include the appropriate headers.
Required:
(a) Discuss what is meant by the term 'a risk-based approach' to an audit. In your answer explain the full details of the audit risk model.
(b) Working papers are used by Auditors in conducting their field work. Briefly explain the purpose of working papers and comment on the matters to be considered generally, in assessing the extent of working papers to be prepared.
(c) Working papers are prepared in connection with every audit. List and explain the purpose of FOUR (4) items that should be included on the header in connection with the audit of the financial statements of Nation News Ltd for the year ending 31 December 2021.
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen