Week 7

• What does the audit fee reflect?

  Time spent, skills, and experience
• Why should outstanding fees be paid before new audit work?

  To ensure no disagreements affect the audit
• What should the engagement partner consider if fees are overdue?

  Whether the firm can accept the audit engagement
• What must be recorded in the audit engagement letter?

  Terms of the audit engagement
• What are the auditor's responsibilities according to ISA(UK) 210?

  Conduct the audit in accordance with ISAs
• How should the auditor assess risks of material misstatement?

  By identifying and assessing risks due to fraud or error
• Why is the risk of fraud higher than error?

  Fraud may involve collusion and forgery
• What should the auditor evaluate regarding management's accounting policies?

  Appropriateness and reasonableness
• What is the purpose of understanding internal control in an audit?

  To design appropriate audit procedures
• What must the auditor communicate to the client in writing?

  Significant deficiencies in internal control
• What should the auditor conclude about going concern?

  Whether a material uncertainty exists
• What is an inherent limitation of an audit?

  Some material misstatements may not be detected
• When should the engagement letter be sent?

  Before the audit commences
• Why might firms choose to send a new engagement letter each year?

  To emphasize its importance to clients
• What circumstances require revising the engagement letter?

  Misunderstanding of audit objectives or changes
• What are the first two questions asked if accountants are sued?

  Indemnity insurance and engagement letter
• What is the benefit of adequate planning in an audit?

  Helps identify and resolve potential problems
• How does planning differ between new and recurring audits?

  More planning is needed for new audits
• What is included in audit documentation?

  Audit procedures, evidence, and conclusions
• What is the purpose of assembling audit documentation?

  Enhance audit quality and facilitate review
• What is the time limit for assembling the final audit file in the UK?

  60 days from the auditor's report
• Why is timely documentation important?

  It enhances accuracy and quality of audit
• What basic information should working papers include?

  Client name, financial year end, and objectives
• What are the relevant ISAs mentioned in the lecture?

  ISA(UK) 210, 230, and 300
• Why complete working papers?

  For opinion, standards, review, and quality control
• What advantages do automated working paper packages provide?

  Neater papers, easy adjustments, and electronic transmission
• What is the overall objective of the auditor according to ISA(UK) 200?

  To obtain reasonable assurance on financial statements
• What are assertions in auditing?

  Representations regarding financial statement information
• What types of assertions are related to transactions and events?

  Occurrence, completeness, accuracy, cut-off, classification, presentation
• What assertion relates to the existence of assets and liabilities?

  Existence
• What does the rights and obligations assertion entail?

  Entity controls rights to assets and liabilities
• What is the completeness assertion for account balances?

  All assets and liabilities should be recorded
• What is the accuracy assertion related to?

  Assets and liabilities included at appropriate amounts
• What does the classification assertion ensure?

  Transactions are recorded in proper accounts
• What is the presentation assertion about?

  Transactions are appropriately aggregated and described
• Why is the audit fee important in relation to market competition?

  It reflects the competitive situation in the market
• What is the engagement partner's role in understanding disagreements?

  To comprehend the nature of any disagreement
• Why is obtaining sufficient and appropriate audit evidence crucial?

  It provides a basis for the auditor's opinion
• Why must the auditor maintain professional skepticism?

  To ensure thoroughness and objectivity in the audit
• What are the implications of material uncertainty on going concern?

  It may require modifying the audit opinion