LEARNING CHECK

6-11 Staffing and Supervising a. What is meant by the auditors decisions about staffing and supervising the audit? Staffing and supervising means how the auditor assigning his/her staff to supervising as the respond of level of risk of material misstatement. The higher the risk, the more experience auditor must be included or increases the level of supervising. b. Provide an example of these decision in the context of the revenue cycle c. Identify the factors that influence an auditors decision about staffing and supervision? Auditors decision about staffing and supervision depends on the level of material misstatement. d. Explain how decision about staffing and supervision are influence when the clients accounting records corroborating evidence are available only in electronic form! The auditor must include computer audit specialist in his/her team. This specialists are trained to understand the audit implications of clients EDP system and know the issues that are related to hardware and software. They used to assigning important aspects of understanding entitys environment, performing test of control or maybe substantive tests.

6-12 Nature of Audit Procedure a. What is meant by the auditors decisions about Nature of Audit Procedure the audit? Substantive procedures generally provide persuasive evidence when they are designed and performed to obtain evidence that is relevant and reliable. Also, some types of substantive procedures, by their nature, produce more persuasive evidence than others. Inquiry alone does not provide sufficient appropriate evidence to support a conclusion about a relevant assertion. b. Provide an example of these decision in the context of the revenue cycle in relation to revenue, tests of controls may be most responsive to the assessed risk of misstatement of the completeness assertion, whereas substantive procedures may be most responsive to the assessed risk of misstatement of the occurrence assertion c. Identify the factors that influence an auditors decision about Nature of Audit Procedure? In determining the audit procedures to be performed, the auditor should consider the reasons for the assessment of the risk of material misstatement at the relevant assertion level for each class of transactions, account balance, and disclosure. This includes considering both the particular characteristics of each class of transactions, account balance, or disclosure (that is, the inherent risks) and whether the auditor's risk assessment takes account of the entity's

controls (that is, the control risk). For example, if the auditor considers that there is a lower risk that a material misstatement may occur because of the particular characteristics of a class of transactions (without consideration of the related controls), the auditor may determine that substantive analytical procedures alone may provide sufficient appropriate audit evidence. On the other hand, if the auditor expects that there is a lower risk that a material misstatement may occur because an entity has effective controls and the auditor intends to design substantive procedures based on the effective operation of those controls, then the auditor should perform tests of controls to obtain audit evidence about their operating effectiveness. This may be the case for a class of transactions of reasonably uniform, noncomplex characteristics that are routinely processed and controlled by the entity's information syste d. Explain how decision about Nature of Audit Procedure are influence when the clients accounting records corroborating evidence are available only in electronic form! The auditor will usually consider controls related to the origination, transmission, and receipt of faxed information in assesing the reliability of the evidence. Auditor can use CAAT and directly access and test records maintained only in electronic form.

6-13 Timing of Audit Procedures a. What is meant by the auditors decisions about Timing of Audit Procedures the audit? A decision about timing of audit procedure means auditors decision to start performing audit, whether in the interim date or fiscal year-end. b. Provide an example of these decision in the context of the revenue cycle c. Identify the factors that influence an auditors decision about Timing of Audit Procedures? Auditor will perform audit in balance sheet date if the entitys internal control is low that can lead to higher risk of material misstatement when performing substantive test. Auditor will perform audit in interim date if the entitys internal control is high that can lead to lower risk of material misstatement when performing substantive test. d. Explain how decision about Timing of Audit Procedures are influence when the clients accounting records corroborating evidence are available only in electronic form! If a client uses an image processing system to scan documents and original documents are not retained the auditor will want to consider the implications for the timing procedures related to tests of transactions. If it is important to inspect original documentary evidence, then the auditor must plan the timing of tests consistent with te existence of appropriate documentary evidence.

6-14 Extent of Audit Procedures a. What is meant by the auditors decisions about Extent of Audit Procedures the audit? Extent refers to the quantity of a specific audit procedure to be performed, for example, a sample size or the number of observations of a control activity. b. Provide an example of these decision in the context of the revenue cycle c. Identify the factors that influence an auditors decision about Extent of Audit Procedures? The extent of an audit procedure is determined by the judgment of the auditor after considering the tolerable misstatement, the assessed risk of material misstatement, and the degree of assurance the auditor plans to obtain.In particular, the auditor may increase the extent of audit procedures as the risk of material misstatement increase d. Explain how decision about Extent of Audit Procedures are influence when the clients accounting records corroborating evidence are available only in electronic form! An auditor may use techniques such as computer-assisted audit techniques (CAATs) to enable him or her to extensively test electronic transactions and account files. Such techniques can be used to select sample transactions from key electronic files, to identify transactions with specific characteristics, or to test an entire population instead of a sample.