Assignment 2-2 Audit Plan Procedures

Topics: Auditing, Audit, Financial audit Pages: 2 (501 words) Published: June 30, 2015
3-3 What is the purpose of an engagement letter? List the important information that the engagement letter should contain. The purpose of an engagement letter is to formalize the arrangement and act as a contract between the entity and the auditor team. The letter outlines the services, responsibilities and limitations of both parties. It also, outlines timing of the audit, fees that will be charged, and access to necessary documents. Another important information that may be included is the arrangement of the use of internal auditors, limitation of liabilities of the auditor, additional services, and their arrangements. 3-6 List the matters an auditor should consider when developing an audit plan. The matters an auditor should consider when developing an audit plan include a description of the nature, timing, and extent of the audit producers. These items will be affected by the size and complexity of the entity. The auditor must also consider how to conduct the audit effectively and efficiently while maintaining auditing standards. 3-10 What are the three general types of audit tests? Define each type of audit test and give two examples. The three general types of audit test include risk assessment procedures, a test of controls, and substantive procedures. The risk assessment procedures test is used to understand the entity and its environment. The auditor will use the risk assessment test to make inquiries of management and analytical procedures. One example of risk assessment procedure is to evaluating the quality of management. The auditor will determine if management is enforcing internal controls and policies. Another example of a risk assessment procedure is observation. The auditor will observe the employees of the entity at work. This allows the auditor to observe the internal operation of the entity. The test of controls is used to test the operating effectiveness of internal controls. One example of test controls is the inspections of the internal...
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