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Answers: (a) Plans should be further developed and revised as necessary during the course of the audit. SA-300, “Planning an Audit of Financial Statements” further expounds this principle. According to it, planning is not a discrete phase of an audit, but rather a continual and iterative process that often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement. The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and that guides the development of the audit plan. (b) Overall audit strategy sets the scope, timing and direction of the audit, and guides the development of the more detailed audit plan. The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and that guides the development of the audit plan. The process of establishing the overall audit strategy assists the auditor to determine, subject to the completion of the auditor’s risk assessment procedures, such matters as: 1. The resources to deploy for specific audit areas, such as the use of appropriately experienced team members for high risk areas or the involvement of experts on complex matters; 2. The amount of resources to allocate to specific audit areas, such as the number of team members assigned to observe the inventory count at material locations, the extent of review of other auditors’ work in the case of group audits, or the audit budget in hours to allocate to high risk areas; 3. When these resources are to be deployed, such as whether at an interim audit stage or at key cut-off dates; and 4. How such resources are managed, directed and supervised, such as when team briefing and debriefing meetings are expected to be held, how engagement partner and manager reviews are expected to take place (for example, on-site or off-site), and whether to complete engagement quality control reviews.

Today's Audit questions : (a) Plans should be further developed and revised as necessary during the course of the audit. Explain. (b) Overall audit strategy sets the scope, timing and direction of the audit, and guides the development of the more detailed audit plan. The process of establishing the overall

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1. (a) “An audit is independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon.” Analysis of the Definition 1. Audit is Independent examination of Financial information. 2. of any entity – that entity may be profit oriented or not and irrespective of its size or legal form. For example – Profit oriented – Audit of Listed company engaged in business. On the other hand, Audit of NGO – not profit oriented. 3. The objective of the audit is to express an opinion on the financial statements. The person conducting this task should take care to ensure that financial statements would not mislead anybody. This he can do honestly by satisfying himself that: (i) the accounts have been drawn up with reference to entries in the books of account; (ii) the entries in the books of account are adequately supported by sufficient and appropriate evidence; (iii) none of the entries in the books of account has been omitted in the process of compilation and nothing which is not in the books of account has found place in the statements; (iv) the information conveyed by the statements is clear and unambiguous; (v) the financial statement amounts are properly classified, described and disclosed in conformity with accounting standards; and (vi) the statement of accounts present a true and fair picture of the operational results and of the assets and liabilities. (b) As per SA-200 “Overall Objectives of the Independent Auditor”, in conducting an audit of financial statements, the overall objectives of the auditor are: (a) To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement; and (b) To report on the financial statements, and communicate as required by the SAs, in accordance with the auditor’s findings. 2. (a) The Nature of Audit Procedures: There are practical and legal limitations on the auditor’s ability to obtain audit evidence. For example: 1. There is the possibility that management or others may not provide, intentionally or unintentionally, the complete information that is relevant to the preparation and presentation of the financial statements or that has been requested by the auditor. 2. Fraud may involve sophisticated and carefully organised schemes designed to conceal it. Therefore, audit procedures used to gather audit evidence may be ineffective for detecting an intentional misstatement that involves, for example, collusion to falsify documentation which may cause the auditor to believe that audit evidence is valid when it is not. The auditor is neither trained as nor expected to be an expert in the authentication of documents. 3. An audit is not an official investigation into alleged wrongdoing. Accordingly, the auditor is not given specific legal powers, such as the power of search, which may be necessary for such an investigation. (b) Other Matters that Affect the Limitations of an Audit: In the case of certain subject matters, limitations on the auditor’s ability to detect material misstatements are particularly significant. Such assertions or subject matters include: - Fraud, particularly fraud involving senior management or collusion. - The existence and completeness of related party relationships and transactions. - The occurrence of non-compliance with laws and regulations. - Future events or conditions that may cause an entity to cease to continue as a going concern.

Audit Questions 1. (a) The person conducting audit should take care to ensure that financial statements would not mislead anybody. Explain stating clearly the meaning of Auditing. (b) Explain the objectives of an Audit as per SA 200. 2. (a) There are practical and legal limitations on the auditor’s ability to obtain audit evidence. Explain with examples. (b) In case of certain subject matters, limitations on the auditor’s ability to detect material misstatements are particularly significant. Explain such assertions or subject matters.

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