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• The audit program is a list of procedures used
to gather sufficient and appropriate audit

evidence.
Tests of controls generally consist of

combination of procedures such as inquiry of
client personnel, inspection and observation,
and recalculation
• The objective of performing analytical procedures in
planning an audit is to obtain an understanding of the
transactions and events that are reflected in the financial
statements, and determining unusual items which could
indicate possible misstatements in the financial
statements.
For financial reporting purposes, an entity’s risk

assessment process is its identification, analysis, and
management of risks relevant to the preparation of
financial statements following GAAP.
• Noncompliance includes transactions entered by
the entity’s employees and management in their
personal capacity.
The preliminary judgment or estimate about

materiality represents the maximum amount by
which a set of financial statements could be
misstated and still not cause the auditor to believe
that the decisions of reasonable users would be
affected.
• The auditor will only test the controls on
which the auditor intends to rely.
• The overall audit strategy sets the scope,
timing, and direction of the audit, and guides
the development of the more detailed audit
plan.
• The auditor shall plan the audit so that in can
be performed effectively.
The auditor shall study and evaluate the

internal control system of the client to express
an opinion about the operating effectiveness
of such internal control system
• Studying the relationship of financial
information with another information,
whether financial or non-financial, is an
example of an analytical procedure.
To reduce audit risk to an acceptable low level,

the auditor should determine overall
responses to assessed risks at the assertion
level.
• A related party transaction is a transfer of
resources, services, or obligations between
related parties when no consideration is
involved.
The auditor assesses control risk as high or at

the maximum level when the internal controls
of the client have not been effectively
designed or have not operated effectively.
• Generally, the more reliable internal controls
are, the lesser the substantive test procedures
the auditor would need to perform in auditing
year-end account balances.
The industry in which the client operates may

give rise to specific risks of material
misstatements arising from the nature of the
business or the degree of regulations.
• Toward the end of an engagement, after all audit evidence
has been gathered by the auditor, the auditor again
considers materiality by comparing the combined
misstatements with the preliminary or revised estimate for
the entire set of the financial statements as a whole.
Changes in the regulatory or operating environment can

result in changes in competitive pressures and significantly
different risks.
• Group of answer choices
• The lower the materiality level, the higher the
amount of required evidence from substantive
procedures to compensate for increased risk.
Further audit procedures include risk

assessment procedures, test of controls and
substantive tests.
• Supervision and review are essential parts of
managing an engagement.
When the auditor obtains audit evidence

about the operating effectiveness of controls
during an interim period, that is enough to
support reliance to reduce substantive
procedures to be performed at year-end.
• It is necessary for the audit team members to
have a collective knowledge needed to carry
out the engagement.
An important responsibility of an auditor is

the establishment and maintenance of
internal control on an ongoing basis.
• In first time audits, the audit program is
completed during the planning phase of the
audit.
The auditor’s primary consideration regarding

client’s internal controls is the provision of
constructive suggestions to management
regarding the company’s internal controls.
• Regarding materiality, both amount and
nature of misstatements should be
considered.
One of the inherent limitations of internal

control is the lack of segregation of duties.

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• The audit program is a list of procedures used

to gather sufficient and appropriate audit

Tests of controls generally consist of

For financial reporting purposes, an entity’s risk

The preliminary judgment or estimate about

The auditor shall study and evaluate the

To reduce audit risk to an acceptable low level,

The auditor assesses control risk as high or at

The industry in which the client operates may

Changes in the regulatory or operating environment can

Further audit procedures include risk

When the auditor obtains audit evidence

An important responsibility of an auditor is

The auditor’s primary consideration regarding

One of the inherent limitations of internal

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