Questions and Answers of Auditing A Practical Approach

List three procedures the auditor is required to perform with respect to contingent liabilities.
Describe the two types of subsequent events that are required to be considered as part of the audit of the financial statements.
Provide two types of procedures an auditor may perform to identify a subsequent event.
What should an auditor do when, after the discovery of a subsequent event, the client does not take appropriate action?
What does an auditor do when misstatements identified during the audit are not corrected by the client?
Why is it important to consider the prior-year unadjusted misstatements?
Name two qualitative considerations that may be taken into account when assessing misstatements.
Name two factors included in the description of management's responsibility for the financial statements, as included in the audit report.
Name five components of the audit report.
What is the auditor’s responsibility for the financial statements, as included in the audit report?
Provide an example of a common emphasis of matter included in audit reports.
Does the inclusion of an emphasis of matter in the audit report result in the report being qualified?
Describe one situation in which scope limitation may be appropriate in the audit report.
Name five items of governance interest that would be communicated to those charged with governance.
Is communication with those charged with governance always in the form of a letter?
If communication is not always in the form of a letter, what other forms of communication could the auditor use?
Provide three examples of when an auditor may issue an audit report on a special purpose framework.
What is a report on a component of the financial statements?
Does the auditor provide any assurance when he or she performs agreed-upon procedures relating to the entity’s financial information other than the financial statements?
List the assertions for classes of transactions and account balances.
What does the accuracy assertion mean?
What is the auditor trying to ensure when conducting cut-off tests?
What is a bank confirmation?
List three things that may be included in a management representation letter.
Which assertion is tested when an auditor traces details of tangible assets on hand back to the recorded amount?
What are the three board categories of corroborating evidence?
What is the risk when using evidence that is held by the client?
Which is the least persuasive evidence?
What factors may influence an auditor's decision on the need to use an expert?
How might an auditor assess the capacity of an expert?
Why is it important that an expert’s report include details of data sources used?
Who is the group engagement partner?
What are some of the factors that a group engagement partner will consider when assigning work to a component auditor?
If the group engagement partner believes that the component auditor has not gathered sufficient appropriate audit evidence, what kind of audit report may be issued?
Why might an auditor inspect documents when testing controls?
Provide some examples of how an auditor might use observation as part of their-evidence-gathering procedures.
At which stage(s) of an audit will an auditor utilize a re-performance procedure?Explain.
How does an auditor decide how much evidence is sufficient?
What will an auditor do if they believe that a client has internal controls that can reduce the likelihood of a material misstatement?
What will an auditor do if they decide that a client does not have in place appropriate controls for the identified risk?
What is a current file?
What is a permanent file?
What will an auditor document during the planning stage of the audit?
What is audit sampling?
When is it appropriate to use audit sampling?
How does audit sampling relate to audit risk?
How does sampling risk relate to tests of controls and substantive testing?
What is non-sampling risk?
What is statistical sampling?
What is non-statistical sampling?
What are the-advantages and disadvantages of statistical and non-statistical sampling?
What is the difference between random and haphazard sample selection?
What is the risk in using systematic sample selection?
What factors should be considered when selecting a sample?
What are the factors that influence sample size when testing controls?
What is the relationship between the tolerable rate of deviation and sample size?
How is the auditor's required confidence level influenced by control risk?
What are the factors that influence sample size when conducting substantive procedures?
What influences an increase in the auditor’s assessment of the risk of material misstatement?
Describe variables estimation sampling.
What will an auditor consider when evaluating test results?
What is the rate of deviation and when will an auditor calculate this?
What will an auditor do if the rate of deviation exceeds the tolerable rate?
What will be an auditor’s strategy when control risk is assessed as high?
What are the two broad purposes of tests of controls?
What are the main objectives when conducting substantive tests of account balances?
What are the three main categories of substantive procedures?
What are the two most common types of testing that can be started during the interim audit?
What does the extent of audit testing refer to?
What is an internal control?
Why is it important to understand (and assess) internal controls?
Name a generally accepted framework used to describe internal controls.
What are the seven generally accepted objectives of internal controls as related to the recording of transactions?
Why are internal controls important to an organization?
Why are internal controls important to an auditor?
Why is segregation of duties important when understanding internal control?
How does management's attitude and control consciousness affect the internal control environment of an organization?
What are the different types of controls?
What is the difference between an application control and an IT general control?
Which type of control, preventive or detective, is usually a more efficient control type to test?
Name three factors to consider when deciding the extent of testing to be performed.
When would testing application controls warrant performing a test of more than one?
Why does the auditor update the interim evaluation of controls at year end?
Explain the different techniques used to document internal controls.
When would it be more appropriate to use a flowchart instead of a narrative to document internal controls?
Name the four different techniques for testing controls.
What does the auditor do when they identify control exceptions?
Why does the auditor consider the entity’s overall control environment when performing controls testing?
Why does the auditor always investigate control exceptions?
What level of detail does the auditor need to include in the audit working papers when documenting the results of their controls testing?
Which auditing standard sets the minimum level of documentation required in the working papers stored in the audit files?
What is the impact on the extent of required substantive testing if inherent risk is high and no assurance has been obtained from controls testing
Why is it important to identify both the strengths and weaknesses in a system of internal controls?
Does the auditor provide feedback on strengths in internal controls or just; weaknesses? Explain.
What obligations does the auditor have regarding communicating strengths or weaknesses in internal controls?
Do we always communicate weaknesses in internal controls to those charged with governance? Explain your answer.
Can the content ordinarily included in a management letter be delivered verbally to those charged with governance? Explain your answer.
Why is it preferred that most communications with those charged with governance be done in writing?
What are two examples of assurance providers?
What might an assurance provider express a conclusion about?

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