Concept Introduction:
Audit planning is the crucial phase of the audit where auditor determines the nature, timing and extent of the
To indicate:The reason of dividing the financial statement into components.
Explanation of Solution
Financial statements are summary of the financial transactions entered during the entire period of the financial statement. Hence, it is not possible for the auditor to check the management assertion at the financial statement level. To perform the audit to the assertion level, the auditor needs to divide the financial statement into components or segments. The auditor also allocates the responsibilities of each segment of financial statement to its team members during the planning stage.
Want to see more full solutions like this?
Chapter 5 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
- Define materiality risk. How do auditors quantify RMM in financial statements? Describe the RMM audit process. So, what is RMM's function in real-worldarrow_forwardWhich is not a Risk Assessment Procedure? a. Ratio Analysis b. Observation of Activities c. Account Receivable confirmations d. Inspection of Documents e. Inquiry of Internal Auditorsarrow_forwardWhen auditing account balances of liabilities, auditors are most concerned with management’s assertion abouta. Existence.b. Rights and obligations.c. Completeness.d. Valuation and allocation.arrow_forward
- Explain the concept of “Reasonable Assurance” in the context of financial statement audit.arrow_forwardDiscuss the theories to auditor independencearrow_forwardDefine the concept of materiality in the context of financial reporting. What is thedifference between how the auditor uses materiality at the planning stage and at the finalreview stage of the audit?arrow_forward
- Explain why determination of materiality is a matter of auditor judgment. Refer to both qualitative and quantitative materiality assessments.arrow_forwardDefine and contrast financial statement auditing, attestation, and assurance services.arrow_forwardDescribe and define the assertions that management makes about the recognition, measurement, presentation, and disclosure of the financial statements and explain why auditors use them as the focal point of theaudit.arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningAuditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub