A major part of audit planning is selecting an appropriate audit strategy for obtaining sufficient competent evidence for each significant financial statement assertion. These strategies are based on the interrelationships among evidence, materiality, and the components of audit risk.

Required

a. Define the term preliminary audit strategy.

b. What components should be specified in developing a preliminary audit strategy?

c. Identify two alternative strategies. Contrast the specification of the four strategy com¬
ponents under the two strategies.

d. State the circumstances that favor the use of each strategy including how cost considerations affect the choice of a strategy.