You are on page 1of 2

224 CPA EXAMINATION REVIEWER: AUOITING THt'.-i;;;.

Q~'t' stantive tests are performed to accumulate


sufficient ap priate audit evidence, not to plan the audit. Pro. Answers B, C, and Dare all planning
procedures. 29. The establishment of·an overall audit strategy involves I. Determining the characteristics
of the engagement that define its scope. II. Ascertaining the. reporting obje~ives of the engagement to
plan the timing of the audit and the nature of the communications required. III. Considering the
important factors that will determine the focus of the engagement team's efforts. A. I and II only B. II and
III only C. I and III only D. I, II, and III PSA 300 (Planning an Audit of Financial Statements) requires the
auditor to establish an overall audit strategy that sets the scope, timing and direction of the audit, and
that guides the development of the audit plan. In establishing the overall audit strategy, the auditor i~
required to: a) Identify the characteristics of the engagement that define its scope; b) Ascertain the
reporting objectives of the engagement to plan the timing of the audit and the nature of the
communications required; CHAPTER 4 The Financial Statement Audit: Client Acceptance and Planning
225 c) Consider the factors that, in the auditor's professional judgment, are significant in directing the
engagement team's efforts; d) Consider the results of preliminary engagement activities and, where
applicable, whether knowledge gained on other engagements performed by the engagement partner for
the entity is relevant; and e) Ascertain the nature, timing and extent of resources necessary to perform
the engagement. 30. Which of the following should be included in the audit plan? I. The nature, timing
and extent of planned risk assessment procedures. II. The nature, timing and extent of planned further
audit procedures at the assertion level. A. I only B. II only C. Both I and II D. Neither I nor II The audit plan
shall include a description of: a) The nature, timing and extent of planned risk assessment procedures, as
determined under PSA 315 (Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and its Environment) b) The nature, timing and extent of planned further audit
procedures at the assertion level, as determined under PSA 330 (The Auditor's Responses to Assessed
Risks): 31. Which of the following matters would an auditor least likely consider when setting the
direction of the audit? 226 CPA EXAMINATION REVIEWER: AUDITING iH~ ~O~y A. The selection of the
engagemen~ team and the assign. ment of audit work to the team members. B. The engagement budget
which includes consideration Of the appropriate amount of time to allot for areas Wh · k f t · I ·t ere
there may be higher ns so ma ena miss atement. c. The availability of client personnel and data. o. The
manner in which the auditor emphasizes to en . d . gagement team members ~he nee t~ maintain a
questioning mind and to exercise professional skepticism . the gathering and evaluation of audit
evidence. in The availability of client personnel and data is a matter to consider when establishing the
scope of the audit. 32. Which of the following matters would an auditor most likely consider when
establishing the scope of the audit? A. The expected audit coverage, including the number and locations
of the entity's components to be included. · B. The entity's timetable for reporting, such as at interim and
final stages. C. The discussion with the entity's management concerning the expected communications
on the status of audit work throughout the engagement and the expected de· liverables resulting from
the audit procedures. D. Audit areas where there is a higher risk of material mis· statement. Answers
Band Care matters to consider when determining the reporting objectives of the engagement, the timing
of the audit, and the nature of communications required. Answer D is a matter to consider when setting
the direction of the audit. CHAPTER 4 The. Financial Statemenl Audit: Client Acceptance and Planning
227 33. In the planning stage of an audit engagement, the auditor is required to perform audit
procedures to obtain an understanding of the entity and its environment, including its internal control.
These procedures are called A. Risk assessment procedures B. Substantive tests C. Tests of controls D.
Dual-purpose tests The audit procedures to obtain an understanding of the entity and its environment,
including its internal control are referred to as "risk assessment procedures" because some of the
information obtained through these procedures may be used as audit evidence to support assessments
of the risks of material misstatement. 34. In planning the audit engagement, the auditor should consider
each of the following, except A. The type of opinion that is likely to be expressed. B. The entity's
accounting policies and procedures. C. Matters relating to the entity's business and the industry in which
it operates. D. Materiality level and audit risk. The nature of the report expected to be issued (e.g., a
report on consolidated financial.statements) should be considered in planning an audit engagement. The
type of opinion to be rendered is determined after the performance of audit procedures. 35. Audit
programs are modified to suit the circu.mstances of particular engagements. A compiete audit program
usually should be developed A. When the engagement letter is prepared. 228 CPA EXAMINATION
REVIEWER: AUDITING iHi::---.o~y

You might also like