Share
Explore BrainMass

The Third Standard: Audit Field Work

1. What is the purpose of engagement planning? What critical information should the auditor consider during engagement planning? How will this information affect the scope of the audit?

2. What are the components of the audit risk model? How does the audit risk model affect an audit plan?

3. The third generally accepted standard of audit fieldwork requires that auditors obtain sufficient, competent audit evidence to afford a reasonable basis for an opinion regarding the financial statements under examination. In considering what constitutes sufficient, competent audit evidence, a distinction should be made between underlying accounting data and all corroborating information available to the auditor. What presumptions can be made about the following?

- The relative competence of evidence obtained from external and internal sources.
- The role of internal control with respect to internal evidence produced by a client's data processing system.
- The relative persuasiveness of auditor observation and recalculation evidence compared to external, external-internal, and internal documentary evidence.

Solution Preview

1. What is the purpose of engagement planning? What critical information should the auditor consider during engagement planning? How will this information affect the scope of the audit?
The purpose of engagement planning is to develop an understanding of the business whose accounts have to be audited, the methods used in the business, the problems with those methods, and the controls used by the business. This inspection and evaluation of the business enables the auditor to set up auditing objectives and correctly prepare the audit program.
During the engagement planning the auditor should ascertain the needs of the report users, the importance of the programs to be audited, the potential for fraud, the potential for violations of laws and regulations, the results of previous audits, and the accessibility of data that can be used as evidence.
Scope of audit: During the engagement planning stage the audit objectives are set and responsibility assigned to different members of the audit team. This information helps determine the range of activities that will be performed by the auditor and the period of records that are to be used for making audit examination.

2. What are the components of the audit risk model? How does the audit risk model affect an audit plan?
The components of the audit risk model are the inherent risk, which is the ...

Solution Summary

This answer offers cogent arguments relating to engagement planning in approximately 800 words.

$2.19