Practice Questions: Planning, Programme and Working Papers
Chapter Thirty
Syllabus topic 1, 2, 3, "Audit Planning – Meaning, Objectives, Factors to be considered, Sources of obtaining information, Discussion with Client, Overall Audit Approach"; "Audit Program – Meaning, Factors, Advantages and Disadvantages, Overcoming Disadvantages, Methods of Work, Instruction before commencing Work, Overall Audit Approach."; "Audit Working Papers – Meaning, importance, Factors determining Form and Contents, Main Functions / Importance, Features, Contents of Permanent Audit File, Temporary Audit File, Ownership, Custody, Access of Other Parties to Audit Working Papers, Auditors Lien on Working Papers, Auditors Lien on Client’s Books."
Pages 77 to 81 of 98
Question 1 (8 + 7 marks)
(a) What is audit planning? State its objectives and the factors an auditor considers when planning an audit. (8)
(b) Distinguish between the audit plan and the audit programme, and set out what a line of an audit programme should contain. (7)
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Question 2 (10 + 5 marks)
(a) State the advantages and the disadvantages of an audit programme, and explain how the disadvantages may be overcome. (10)
(b) State the two kinds of audit procedure and explain how the auditor's assessment of internal control decides the mix between them. (5)
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Question 3 (8 + 7 marks)
(a) What are audit working papers? State their functions and give the features of a good working paper. (8)
(b) Give the contents of the permanent audit file and of the current audit file, and state the test that decides which file a paper belongs in. (7)
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Question 4 (15 marks)
Answer each of the following, giving your reasons.
- A client demands that the auditor hand over his working papers, saying that he paid for the audit. Advise.
- The auditor's fee for the previous year is unpaid. He proposes to retain the company's books of account until it is paid. Advise.
- An incoming auditor asks the outgoing auditor for access to his file. On what basis, if any, may he have it, and why does he want it?
- A court issues a summons requiring the auditor to produce his working papers. Must he?
- The client's finance director asks the audit assistant not to attend the stock count because it will disturb the warehouse. Advise.
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Answers
Answer 1
(a) Audit planning
Audit planning is developing an overall strategy for the expected conduct and scope of the audit before the detailed work begins. It produces the overall audit plan, and the audit programme follows from it. Planning is continuous: the plan is revised whenever the work reveals something it did not anticipate.
The objectives.
| 1 | Appropriate attention is devoted to important areas |
| 2 | Potential problems are identified and resolved promptly |
| 3 | The work is completed expeditiously |
| 4 | Work is properly assigned to assistants |
| 5 | The work of other auditors and experts is coordinated |
The factors considered.
| 1 | The terms of the engagement and any statutory responsibilities |
| 2 | The nature and timing of the reports to be issued |
| 3 | The applicable legal and reporting framework |
| 4 | Knowledge of the entity's business |
| 5 | The accounting policies and any change in them |
| 6 | New pronouncements applying for the first time |
| 7 | The identification of significant audit areas |
| 8 | The setting of materiality |
| 9 | The internal control system and the extent to which it can be relied on |
| 10 | The existence of an internal audit department, other auditors and experts, and the staff and budget available |
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