Since 1977

AUDITING THEORY
AT.1808-Audit Planning-An Overview MAY 2015

LECTURE NOTES
Audit Planning The engagement partner and other key members of the
engagement team shall be involved in planning the audit,
The auditor plans the audit so that it will be performed in
including planning and participating in the discussion
an effective manner, i.e., to gain reasonable assurance
among engagement team members, to draw on their
that the FSs are free from material misstatement.
experience and insight, thereby enhancing the
effectiveness and efficiency of the planning process.
Audit planning involves:
 establishing the overall audit strategy (a general
Results of Preliminary Engagement Activities
strategy) for the engagement; and
 developing an audit plan (a detailed approach for the Please refer to the last topic “AT.1507” for the list of
expected nature, timing and extent of the audit), preliminary engagement activities.
in order to reduce audit risk (i.e., the chance that audit
opinion is inappropriate) to an acceptably low level. The results of preliminary engagement activities:
 assist the auditor in identifying and evaluating events
Main outputs of audit planning: or circumstances that may adversely affect the

m
 The overall audit strategy or audit planning auditor’s ability to plan and perform the audit

er as
memorandum engagement.

co
 The audit plan or audit programs or audit completion  enables the auditor to plan an audit engagement for
checklists
eH w which, for example:
o The auditor maintains the necessary independence

o.
Benefits of Audit Planning and ability to perform the engagement.
rs e
o There are no issues with management integrity
 Appropriate attention to important areas of the audit.
ou urc

that may affect the auditor’s willingness to

 Identify and resolve potential problems on a timely
continue the engagement.
basis.
o There is no misunderstanding with the client as to
 Organize and manage the audit engagement so that it
the terms of the engagement.
is performed in an effective and efficient manner.
o

 Assist in the proper selection of engagement team

In an initial audit, the auditor may need to expand the
aC s

members and the assignment of work to them.

planning activities because the auditor does not ordinarily
 Facilitate the direction and supervision of engagement
vi re

have the previous experience with the entity than when

team members and the review of their work.
planning recurring engagements. For an initial audit
 Assist, where applicable, in coordination of work done
engagement, additional matters the auditor may consider
by auditors of components and experts.
y

in establishing the overall audit strategy and audit plan

include the following:
ed d

Audit Planning and Risks Assessment Activities

 Arrangements to review the predecessor auditor’s
ar stu

Planning is not a discrete phase of an audit, but rather a working papers.

continual and iterative process. Planning, however,  Any major issues (including the application of
includes consideration of the timing of certain activities accounting principles or of auditing and reporting
and audit procedures that need to be completed prior to standards).
 The audit procedures necessary to obtain sufficient
is

the performance of further audit procedures (i.e., tests of

controls and substantive procedures). appropriate audit evidence regarding opening
balances.
Th

The following are the planning activities or procedures:  Other procedures required by the firm’s system of
 Determining of materiality; quality control for initial audit engagements.
 Performing risks audit procedures (RAP), including
analytical procedures, to understand the entity and its Overall Audit Strategy
sh

environment, including the entity’s internal control;

Overall audit strategy (formerly known as “Audit Planning
 Identifying material classes of transactions, account
Memorandum”) sets the scope, timing, and direction of the
balances and disclosures;
audit, and guides the development of the audit plan.
 Identifying and assessing the risks of material
misstatements of the financial statements; and
In establishing the overall audit strategy, the auditor is
 Finally, preparing the outputs of audit planning –
required to:
overall audit strategy and audit plan – containing the
a. Identify the characteristics of the engagement that
auditor’s responses to the identified risks.
define its scope
b. Ascertain the reporting objectives of the engagement
The nature and extent of the above planning activities will
to plan the timing of the audit and the nature of the
vary according to:
communications required
 the size and complexity of the entity;
c. Consider the factors that, in our professional
 the key engagement team members’ previous
judgment, are significant in directing the engagement
experience with the entity; and
team’s efforts
 the changes in circumstances that occur during the
d. Consider the results of preliminary engagement
audit engagement.
activities and, where applicable, whether knowledge
gained on other engagements performed by the
Involvement of Key Engagement Team Members
engagement partner for the entity is relevant
https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 1 of 7 www.prtc.com.ph AT.1807
 PRTC BIÑAN CENTER – HOTLINE (CONTACT) NUMBERS (0917) 849-4189

e. Ascertain the nature, timing and extent of resources The auditor shall document audit plan recording the
necessary to perform the engagement. planned nature, timing and extent of risk assessment
procedures and further audit procedures (tests of controls
Characteristics that define the Scope of Engagement and substantive procedures) at the assertion level in
 The applicable FRF response to the assessed risks. The auditor may use
 Industry-specific reporting requirements standard (pre-printed) audit programs, tailored as needed.
 The expected audit coverage
 The work of internal auditors Audit program is a list of procedures used to gather
 The entity’s use of service organizations sufficient appropriate audit evidence. It serves as a set of
 The effect of information technology instructions to staff involved in the audit and as a means
 The availability of client personnel and data. to control and record the proper execution of the work.

Reporting Objectives, Timing of the Audit, and Nature of Traditionally, the two types of audit programs only pertain
Communications to further audit procedures (RAP), i.e., for test of controls
 The entity’s timetable for reporting and substantive procedures, are:
 Meetings with management and TCWG to discuss the a. Compliance test audit programs – this is prepared
nature, timing and extent of the audit work. when performing tests of controls, i.e., when the
 The discussion with management and TCWG regarding auditor plans to rely on internal control that was
the expected type and timing of reports to be issued deemed to be preliminarily effective.
and other communications, both written and oral, b. Substantive test audit program – this is prepared when
including the auditor’s report, management letters and the auditor will perform substantive procedures for
communications to TCWG; and regarding the expected each material class of transactions, account balance,
communications on the status of audit work and disclosure.
throughout the engagement.

m
er as
 Communication with auditors of components. Thus, the timing of preparing audit programs depend on
 Communications among engagement team members, the following circumstances:

co
including the nature and timing of team meetings and
eH w  Initial audit – prepared until the completion of review
timing of the review of work performed. and documentation of the entity’s internal control.
 Any other expected communications with third parties,  Continuing audit – can be prepared in advance of

o.
including any statutory or contractual reporting testing, since the auditor has prior knowledge of the
rs e
responsibilities arising from the audit. entity’s internal control and previous risks assessment.
ou urc

Significant Factors, Preliminary Engagement Activities, and Audit program (audit plan) for risks assessment
Knowledge Gained on Other Engagements procedures is normally prepared in a separate
 The determination of materiality and identification of documentation.
o

material classes of transactions, account balances and

disclosures Changes to Planning Decisions during the Course of
aC s

 Preliminary identification of risk areas the Audit

vi re

 The impact of the assessed ROMM at the FSs level

The auditor shall update and change the overall audit
 Exercise of professional skepticism
strategy and the audit plan as necessary during the course
 Internal control of the entity
y

of the audit.
 Significant business developments and the industry
ed d

 Legal and regulatory development and framework

The establishment of the overall audit strategy and the
ar stu

detailed audit plan are not necessarily discrete or

Nature, Timing and Extent of Necessary Resources
sequential processes, but are closely inter-related since
 The selection of the engagement team (including,
changes in one may result in consequential changes to the
where necessary, the engagement quality control
other.
reviewer) and the assignment of audit.
is

 Engagement budgeting and timetable.

Other Planning Considerations
Th

The auditor shall document the overall audit strategy Other planning considerations made by the auditor include
commonly in the form of a memorandum. the following:
 Seeking assistance from the entity
Audit Plan  Considering the work perform by others
 Ensuring direction, supervision and review throughout
sh

Audit plan (a.k.a., “audit program or audit completion

the audit.
checklist”) is more detailed than the overall audit strategy
in that it includes the nature, timing and extent of audit
Entity Assistance to the Auditor
procedures to be performed by engagement team
members required to implement the overall audit strategy The auditor may decide to discuss elements of planning
into a comprehensive description of the work to be with the entity’s management to facilitate the conduct and
performed. management of the audit engagement (for example, to
coordinate some of the planned audit procedures with the
The auditor shall develop an audit plan that shall include a work of the entity's personnel), but not so detailed to
description of: compromise the effectiveness of the audit or making the
a. The nature, timing, and extent of planned risk audit procedures too predictable.
assessment procedures (RAP)
b. The nature, timing, and extent of planned further audit Consideration of the Work Performed by Others
procedures (FAP), which include tests of controls and
substantive procedures, at the assertion level Considering work of others in an audit involved the
c. Other planned audit procedures that are required to be following:
carried out  Relevance of the work of internal auditors
 Need for the work of experts (specialist)

https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 2 of 7 www.prtc.com.ph AT.1807
 PRTC BIÑAN CENTER – HOTLINE (CONTACT) NUMBERS (0917) 849-4189

 Work of component auditors in a group financial  Employed by the auditor.

statements audit
The auditor considers the following when using the work
Work of Internal Auditors (assistance) of an expert:
 Materiality of an item being considered
Internal auditing is an appraisal activity established within
 Risk of misstatement (nature and complexity)
an entity as a service to the entity. The work of internal
 Quality and quantity of other audit evidence available
auditors assists the external auditor in planning and
performing an effective audit.
When using the work of an expert, the auditor should
assess and evaluate the expert’s
Considering the work of internal auditors involve the
 Professional competence – Professional qualification,
following two phases:
experience and reputation
 Preliminary assessment of client’s internal auditing
 Objectivity – expert’s relationship to the entity
function
 Scope of work – objective and source of data (inputs),
 Evaluation and testing the work of internal auditing
methods, models and assumptions used by the expert
function
After the above assessment and evaluation of the expert,
Preliminary assessment of internal auditing function
the external auditor shall test whether or not the result of
includes determining whether or not internal audit function
work of expert is consistent with auditor’s knowledge. The
appears relevant to specific areas of financial statements
external auditor may rely on the work of the expert if
audit. When the internal audit function appears relevant,
deemed consistent. Otherwise, the inconsistency must be
external auditors shall consider the internal auditor’s:
resolved first before reliance can be made.
 Competence – professional qualifications and
experience
Work of Component Auditors

m
 Objectivity (organizational status) – line of reporting

er as
results of internal audit normally directly to BOD’s Key definitions

co
audit committee  Group financial statements – Financial statements that

documentation of work
eH w
Due professional care – planning, supervision and include the financial information of more than one
component.

o.
 Scope of function – nature and extent of work  Component – An entity or business activity for which
rs e
group or component management prepares financial
The table below summarizes the external auditor’s information that should be included in the group
ou urc

responses depending in the result of assessment: financial statements.

Result Response  Group engagement team – Partners, including the
Rely on the work of Evaluate and test the internal group engagement partner, and staff who establish the
overall group audit strategy, communicate with
o

internal auditor auditor’s work to confirm its

adequacy for external audit component auditors, perform work on the
aC s

Not relying on the work Need not evaluate and test the consolidation process, and evaluate the conclusions
vi re

of internal auditor internal auditor’s work drawn from the audit evidence as the basis for forming
an opinion on the group financial statements.
The external auditor may request assistance from internal  Group engagement partner – The partner or other
y

auditors in performing routine or mechanical audit person in the firm who is responsible for the group
procedures provided the external auditor supervises and audit engagement and its performance, and for the
ed d

reviews internal auditors work auditor’s report on the group financial statements that
ar stu

is issued on behalf of the firm.

The use of internal auditor’s work does not change the  Component auditor – An auditor who, at the request of
external auditor’s responsibility for audit opinion; thus, no the group engagement team, performs work on
reference is made in audit report financial information related to a component for the
group audit.
is

Work of Experts (Specialist)

Direction, Supervision and Review
Th

Expert or specialist refers to a person or firm possessing

special skill, knowledge and experience in a particular field The auditor shall plan the nature, timing and extent of
other than accounting and auditing. direction and supervision of engagement team members
An expert may be and the review of their work.
sh

 Engaged by the entity;

 Engaged by the auditor; - done -
 Employed by the entity; or

MULTIPLE CHOICE
Audit Planning audit procedures to be performed by engagement
1. This involves establishing the overall audit strategy for team members in order to obtain sufficient appropriate
the engagement and developing an audit plan, in order audit evidence to reduce audit risk to an acceptably
to reduce audit risk to an acceptably low level. low level.
a. Audit procedures c. Audit program a. True, True c. False, False
b. Audit planning d. Audit working papers b. True, False d. False, True
2. The overall audit strategy sets the scope, timing and 3. The overall audit strategy should be updated and
direction of the audit, and guides the development of changed as necessary during the course of the audit.
the more detailed audit plan.
The overall audit plan should be updated and changed
The audit plan is more detailed than the overall audit as necessary during the course of the audit.
strategy and includes the nature, timing and extent of a. True, True c. False, False

https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 3 of 7 www.prtc.com.ph AT.1807
EXCEL PROFESSIONAL SERVICES, INC.

b. False, True d. True, False c. Other planned audit procedures that are required
to be carried out so that the engagement complies
4. In planning an audit engagement, the auditor is
with our audit approach
required to develop and document a(an)
d. All of the above
I. Overall Audit Plan
II. Flowchart 12. A listing of all the things which the auditor will do to
III. Overall Audit Strategy gather sufficient, competent evidence is the:
a. Both II and III c. Both I and III a. Audit strategy
b. Both I and II d. I, II and III b. Audit program
c. Audit procedure
5. The nature and extent of planning will vary according
d. Audit risk model
the following, except
a. Size of the auditing firm 13. Which item would not be contained in an audit
b. Complexity of the entity program?
c. Auditor’s experience with the entity a. Staff assigned to the audit.
d. Changes in circumstances that occur during the b. List of specific procedures (tasks) to be performed
audit engagement and the objectives to be met that relate primarily
to financial statements assertions.
Benefit of Audit Planning
c. Documentation of system being reviewed.
6. Adequate audit planning helps ensure that appropriate
d. Estimated time required to perform each task.
attention is devoted:
a. b. c. d. 14. Those procedures specifically outlined in an audit
To important areas of the audit Yes Yes Yes Yes program are primarily designed to
So that potential problems are a. Gather evidence.
promptly identified and b. Detect errors or irregularities.

m
resolved Yes Yes No No c. Test internal systems.

er as
So that the work is performed d. Protect the auditor in the event of litigation

co
in an effective and efficient
eH w 15. An audit should design the written audit program so
manner No Yes No Yes
that
7. Which of the following is not one of the three main a. all material transactions will be selected for

o.
reasons why the auditor should properly plan substantive testing.
rs e
engagements? b. substantive tests prior to the balance sheet date
ou urc

a. To enable proper on-the-job training of employees. will be minimized.

b. To enable the auditor to obtain sufficient c. the audit procedures selected will achieve specific
appropriate evidence. objectives.
c. To avoid misunderstandings with the client. d. each account balance will be tested under either
o

d. To help keep audit costs reasonable. tests of controls or tests of transactions.

aC s

8. Overall audit plan should 16. The audit program usually cannot be finalized until the
vi re

a b c d a. consideration of the entity’s internal control

Precede action Yes No Yes No structure has been completed.
Be flexible Yes No Yes Yes b. engagement letter has been signed by the auditor
y

Be cost beneficial Yes Yes No Yes and the client.

c. reportable conditions have been communicated to
ed d

Overall Audit Strategy

the audit committee of the board of directors.
9. The following are the matters to be considered by the
ar stu

d. search for unrecorded liabilities has been

auditor in establishing the overall audit strategy,
performed and documented.
except
a. Defining the scope of the examination Audit Planning Activities
b. Assess risk and materiality 17. Which of the following parties would normally attend a
is

c. Computation of audit fees planning meeting held before the beginning of an audit
d. Ascertaining the reporting objectives of the engagement to discuss relevant client information and
Th

engagement the audit approach to be taken in performing the

engagement?
10. In developing the overall audit strategy for a new
a. Engagement partner and the client’s chief financial
client, factor not be considered is:
officer
a. The terms of the engagement and any statutory
sh

b. Engagement partner and audit manager

responsibilities.
c. Engagement partner, audit manager, and senior
b. The client’s business, including the structure of the
auditor
organization and accounting system used.
d. Engagement partner, audit manager, senior
c. The specific procedures to be performed to gather
auditor, and junior audit staff members
audit evidence.
d. The audit risk, and procedures to be performed to 18. Which of the following would be least likely to be
achieve audit objectives. considered an audit planning procedure?
a. Use an engagement letter.
Audit Plan b. Develop the overall audit strategy.
11. The audit plan includes: c. Perform risk assessment.
a. a description of the nature, timing and extent of d. Develop the audit plan.
planned risk assessment procedures sufficient to
19. In planning an examination, the auditor would consider
assess the risk of material misstatement
all of the following matters, except
b. a description of the nature, timing and extent of
a. Anticipated reliance on internal controls.
planned further audit procedures at the assertion
b. Preliminary judgment about materiality levels for
level for each material class of transactions,
audit purposes.
account balances and disclosures
c. Financial statement items likely to require
adjustment.
https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 4 of 7 www.prtc.com.ph AT.1808
EXCEL PROFESSIONAL SERVICES, INC.

d. The kind of opinion (unqualified, qualified, classify and report such information and specific
disclaimer, or adverse), likely to be given. inquiry into individual items including detailed
testing of transactions and recommending
20. Which of the following is not typically included in initial
improvements thereto.
audit planning?
d. Establishment of adequate accounting and internal
a. Client acceptance/continuation decisions.
control systems.
b. Determination of the purpose of the audit.
c. Obtain an understanding with the client. 26. The independent auditor should acquire an
d. Perform analytical procedures as substantive tests. understanding of a client’s internal audit function to
determine whether the work of internal auditors will be
21. A CPA is conducting the first examination of a client’s
a factor in determining the nature, timing and extent
financial statements. The CPA hopes to reduce the
of the independent auditor’s procedures. The work
audit work by consulting with the predecessor auditor
performed by internal auditors might be such a factor
and reviewing the predecessor’s working papers. This
when the internal auditor’s work includes
procedure is
a. Verification of the mathematical accuracy of
a. Acceptable if the CPA refers in the audit report the
invoices
reliance upon the predecessor auditor’s work.
b. Review of administrative practices to improve
b. Required if the CPA is to render an unqualified
efficiency and achieve management objectives
opinion.
c. Study and evaluation of internal accounting control
c. Acceptable if the client and the predecessor auditor
d. Preparation of internal financial reports for
agree to it.
management purposes/
d. Unacceptable because the CPA should bring an
independent viewpoint to a new engagement. 27. The work of internal auditors may affect the
independent’s auditor’s
22. An initial audit requires more audit time to complete
I. Procedures performed in obtaining an

m
than a recurring audit. One of the reasons for this is

er as
understanding of internal control
that
II. Procedures performed in assessing the risk of

co
a. new auditors are usually assigned to an initial
eH w material misstatement
audit.
III. Substantive procedures performed in gathering
b. predecessor auditors need to be consumed.
direct evidence

o.
c. the client's business, industry and internal control
a. I and III only
rs e
are unfamiliar to the auditor and need to be
b. I and II only
carefully studied.
ou urc

c. II and III only

d. a larger proportion of customer accounts
d. I, II and III
receivable need to be confirmed on an initial audit.
28. Which of the following statements in relation to the
Other Planning Considerations
o

preliminary assessment of internal auditing is false?

Entity Assistance to the Auditor
a. During the course of planning the audit, the
aC s

23. Which of the following is an effective audit planning

external auditor should perform a preliminary
procedure that helps prevent misunderstandings and
vi re

assessment of the internal audit function when it

inefficient use of audit personnel?
appears that internal auditing is relevant to the
a. Arrange to make copies, for inclusion in the audit
external audit of the financial statements in
files, of those client supporting documents
y

specific audit areas.

examined by the auditor.
b. The external auditor should obtain a sufficient
ed d

b. Arrange to provide the client with copies of the

understanding of internal audit activities to assist
audit programs to be used during the audit.
ar stu

in planning the audit and developing an effective

c. Arrange a preliminary conference with the client to
audit approach.
discuss audit objectives, fees, timing, and other
c. Effective internal auditing will often allow a
information.
modification in the nature, timing, reduction in the
d. Arrange to have the auditor prepare and post any
extent and even eliminate in its entire some
is

necessary adjusting or reclassification entries prior

procedures performed by the external auditor.
to final closing.
d. In some cases, after having considered the
Th

Work of Internal Auditor activities of internal auditing, the external auditor

24. Which of the following is most correct regarding may decide that internal auditing will have no
external auditors use of internal auditors directly on effect on external audit procedures.
the audit engagement?
29. To assess the objectivity of the internal auditors, an
sh

a. Discourage
independent auditor would most likely
b. Prohibit
a. Consider the professional qualifications and
c. Encourage
experience of the internal auditors.
d. Permit
b. Consider the proper planning, supervision and
25. The scope and objectives of internal auditing vary documentation of internal auditor’s work.
widely and depend on the size and structure of the c. Consider the nature and extent of the internal
entity and the requirements of its management auditors’ assignment.
(engagement objectives). Ordinarily, internal auditing d. Consider the organizational level to which the
activities include one or more of the following, except internal auditors report the results of their work.
a. Review of the economy, efficiency and
30. To maximize independence, the internal auditors
effectiveness of operations including non-financial
should report to the
controls of an entity.
a. Audit committee of the board of directors
b. Review of compliance with laws, regulations and
b. CEO/President
other external requirements and with management
c. Controller
policies and directives and other internal
d. Chief Financial Officer
requirements.
c. Examination of financial and operating information 31. To operate effectively, an internal auditor must be
including review of the means to identify, measure, independent of
https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 5 of 7 www.prtc.com.ph AT.1808
EXCEL PROFESSIONAL SERVICES, INC.

a. The entity II. Experience and reputation in the field in which the
b. The audit committee of the board of directors auditor is seeking audit evidence.
c. The employer-employee relationship which exists III. Relationship to the entity.
for other employees a. I, II, III c. I and III
d. The line functions of the organization b. I and II d. III only
32. Which of the following in relation to the relationship 36. The risk that an expert’s objectivity will be impaired
between internal auditing and the external auditor is increases when the expert is related in some other
false? manner to the entity (e.g., by being financially
a. All judgments relating to the audit of the financial dependent upon or having an investment in the entity)
statements are those of the external auditor. and the expert is
b. Internal auditors should exercise the same degree a. Engaged by the entity
of independence as required of the external b. Employed by the entity
auditor. c. Engaged by the auditor
c. The role of internal auditing is determined by d. Employed by the auditor
management and its objectives differ from those of
37. Each of the following procedures requires the
the external auditor who is appointed to report
assistance of an expert, except
independently on the financial statements.
a. Determining the physical condition or quantity of
d. The external auditor has the sole responsibility for
underground mineral.
the audit opinion expressed and that responsibility
b. Determining the value of works of art.
is not reduced by any use mane of internal
c. Determining the adequacy of disclosure in the
auditing.
notes to the financial statements.
33. For which of the following judgments may an d. Interpreting major contracts.
independent auditor share responsibility with an

m
38. During an audit, the auditor may need the assistance

er as
entity’s internal auditor who is assessed to be both
of an expert in obtaining sufficient appropriate
competent and objective?

co
evidence. A common example is
a. b.
eH w c. d.
a. Determining the sufficiency and appropriateness of
Materiality of
evidential matter obtained.
misstatements Yes No No Yes

o.
b. Evaluating the potential financial statements effect
Evaluation of accounting
rs e
of an employee fraud.
estimates No Yes No Yes
c. Evaluating the integrity of management.
ou urc

Work of Expert d. Determination of amounts using actuarial

34. Which statement is incorrect regarding the auditor’s computations.
use of the work of an expert?
39. When determining the need to use the work of an
o

a. When using the work performed by an expert, the

expert, the auditor would consider the following,
auditor should obtain sufficient appropriate audit
aC s

except
evidence that such work is adequate for the
a. The professional certification or licensing by, or
vi re

purposes of the audit.

membership in, an appropriate professional body.
b. “Expert” means a person or firm possessing special
b. The quantity and quality of other audit evidence
skill, knowledge and experience in a particular field
available.
y

other than accounting and auditing.

c. The materiality of the financial statement item
c. The auditor's education and experience enable the
ed d

being considered.
auditor to be knowledgeable about business
d. The risk of misstatement based on the nature and
ar stu

matters in general, but the auditor is not expected

complexity of the matter being considered.
to have the expertise of a person trained for or
qualified to engage in the practice of another Work of Component Auditors
profession or occupation. 40. An auditor who, at the request of the group
d. When the auditor uses the work of an expert
is

engagement team, performs work on financial

employed by the auditor, that work is used in the information related to a component for the group audit
employee's capacity as an assistant on the audit. is a
Th

a. Group Auditor
35. When planning to use the work of an expert, the
b. Component Auditor
auditor should assess the objectivity of the expert.
c. Group Engagement Team
This will involve considering the expert's:
d. Component Engagement Team
I. Professional certification or licensing by, or
sh

membership in, an appropriate professional

- now do your STD-
body.

SELF-TEST DRILL (STD)

1. When planning an examination, an auditor should ordinarily perform during an audit planning?
a. Consider whether the extent of substantive tests a. Review the client’s bank reconciliation
may be reduced based on the results of the b. Obtain client’s representation letter
internal control questionnaire. c. Obtain understanding of the client’s business and
b. Make preliminary judgments about materiality industry
levels for audit purposes. d. Review and evaluate client’s internal control
c. Conclude whether changes in compliance with
3. Which of the following statements is incorrect about
prescribed control procedures justifies reliance on
audit planning documentation?
them
a. Although the precise form and content of the
d. Prepare a preliminary draft of the management
overall audit plan (overall audit strategy) may
representation letter.
vary, it should sufficiently detailed to guide the
development of an audit program.
2. Which of the following procedures would an auditor
https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 6 of 7 www.prtc.com.ph AT.1808
 EXCEL PROFESSIONAL SERVICES, INC.

b. The audit plan and related audit program are not the important criteria include organizational status,
connected and should no longer be changed once scope of function, technical competence and due
the audit has started. professional care. Which of the following relates to the
c. The audit program should set out the nature, criteria of due professional care?
timing and extent of planned audit procedures a. Policies for hiring and training the internal auditing
required to implement the overall audit plan. staff and their experience and professional
d. In preparing audit program, the auditor should qualifications.
consider the specific assessments of inherent and b. Existence of adequate audit manuals, work
control risks and the required level of assurance to programs and working papers.
be provided by substantive tests. c. The internal auditor will need to be free to
communicate fully with the external auditor
4. Which of the following procedures would an auditor
d. Whether management acts on internal audit
least likely perform in planning a financial statement
recommendations and how this is evidenced.
audit?
a. Selecting a sample of vendor’s invoices for 10. Which of the following is not an expert upon whose
comparison to receiving reports work an auditor may rely on?
b. Reading the current year’s interim financial a. Internal auditor
statements b. Appraiser
c. Coordinating the assistance of the entity personnel c. Engineer
in data preparation d. Actuary
d. Discussing matters that may affect the audit with
11. Which of the following least likely requires the services
firm personnel responsible for non-audit services
of an expert?
to the entity
a. Valuations of certain types of assets like land and
5. Early appointment of the independent auditor will buildings.

m
er as
enable: b. Legal opinions concerning interpretations of
a. a more thorough examination to be performed. engagements, statutes and regulations.

co
b. a proper study and evaluation of internal control to
eH w c. Determination of amounts using specialized
be performed. techniques.
c. sufficient competent evidential matter to be d. Application of accounting methods in computing

o.
obtained. inventory balances.
rs e
d. a more efficient examination to be planned.
12. The preparation of audit program and audit planning
ou urc

6. When obtaining an understanding and performing a memo is the responsibility of the client’s
preliminary assessment of the internal audit function, a. Management
the auditor should consider the internal auditors’ b. Independent auditor
o

Organiza- Scope of Technical competence c. Internal auditor

tional status functions and due care d. Expert
aC s

a. Yes Yes Yes

13. The principal reason for developing a written audit
vi re

b. Yes No Yes
program is to help ensure that the
c. Yes No No a. audit work is properly supervised
d. No Yes No b. audit work is properly planned and documented
y

7. You have been asked to assess the organizational c. audit report contains only significant findings
ed d

independence of an internal audit activity. You should d. work of different auditors is properly coordinated
ar stu

consider all of the following factors except 14. Avoiding misunderstandings with the client is
a. functional reporting to the board and important for:
administrative reporting to the chief executive Good client Facilitating high-quality work
officer. relations at a reasonable cost
b. the criteria of education and experience considered
is

a. Yes Yes
necessary when filling vacant positions on the
b. No No
internal audit staff.
Th

c. Yes No
c. the degree to which internal auditors assume
d. No Yes
operational responsibilities.
d. a limitation on the scope of objectives for the 15. Sue is conducting an external audit of ABC Company’s
engagements included in the review. financial statements. Joel is an internal auditor working
sh

for ABC. Which of the following should Sue consider

8. During the initial planning phase of an audit, a CPA
when deciding whether she can rely on Joel’s findings
most likely would
in her audit?
a. Identify specific internal control activities that are
a. Whether Joel has ever worked as an external
likely to prevent fraud.
auditor of financial statements
b. Evaluate the reasonableness of the client’s ac-
b. Whether Joel owns any shares in the company that
counting estimates.
he works for
c. Discuss the timing of the audit procedures with the
c. Joel’s level of education and the number of years
client’s management.
of experience Joel has as an internal auditor
d. Inquire of the client’s attorney as to whether any
d. Whether or not Joel will agree to let Sue have
unrecorded claims are probable of assertion.
access to his working papers
9. When obtaining an understanding and performing a
preliminary assessment of the internal audit function,  - end of AT.1808 - 

https://www.coursehero.com/file/14402589/AT1808-Audit-Planning/
Page 7 of 7 www.prtc.com.ph AT.1808

Powered by TCPDF (www.tcpdf.org)