Professional Documents
Culture Documents
ANSWER 2
The substantive procedures to confirm plant and equipment additions are:
Observe the period-end physical inventory count.
Confirm the validity of inventory valuation calculations.
ANSWER 3
The four ethical threats which may affect the independence of Bertram’s audit of Rooster
are:
1. Self-review- If the auditor is assessing his or her own work or the work of others in the
same business, there is a risk of self-review.
2. Intimidation- A danger of intimidation arises if management or directors intimidate an
auditor to the degree that they are preveted from operating objectively.
3. Self-interest- Having a financial stake in the business or relying on the client for a
significant fee is a potential conflict of interest for auditors.
4. Familiarity- If the auditor is too close to or acquainted with the client company's
workers, officials, or directors, there is a familiarity danger.
ANSWER 4
The stakeholders of a business depend on auditors' judgments to make choices about their
connection with the firm, which makes it critical for auditors to manage and understand
audit risk. In the event that the auditors misjudge the situation, they might wind up making
the incorrect conclusion.
Three types of Audit Risks are:
Inherent Risk- Prior to considering any controls, there is a risk that a company's financial
statements include serious misstatements. Risks exist in audits owing to the auditee
company's nature and are not impacted by internal controls or audit processes done by the
auditor, despite what they may seem to be.
Control Risk- A company's internal controls provide an audit risk of this kind. When the
company's internal controls fail to prevent or discover errors in its financial statements,
there is a risk of control.
Detection Risk- In contrast to inherent and control risk, detection risk is a direct result of
the auditing process itself. Auditors have a risk of failing to uncover existing major
misstatements in a company's accounting records, known as detection risk. When auditors
are unable to find substantial misstatements, this sort of audit risk arises.
ANSWER 5
The benefits of Audit Planning are:
It guarantees that the task is done on schedule and that no essential areas are left
unattended. Ensuring the focus on all critical areas of management is another
advantage of this approach.
Coordination between auditors and other professionals is made easier using this
tool.
It helps in enhancing the quality of audit work and ensures that audits are
completed on time and accurately.
ANSWER 6
The four matters to be included in audit engagement letter are:
Withdrawal provisions.
Intellectual property, ownership of data and data protection.
Alternative dispute resolution.
Limitations of liability.
ANSWER 7
The two financial statement assertions related to transactions are:
Occurrence and Existence
Rights and Obligations