Factors to consider include:The nature, scope, intended use and purpose of the service.The degree of reliance that will be placed on the outcome of the service in the audit.The legal and regulatory environment in which the service is provided.Whether the client is a public interest entity.Whether it is material;The degree of subjectivity involved.The client’s level of expertise concerning the type of service provided.Whether the outcome will affect the accounting records or matters reflected in the financial statements, and, if so:Whether it is material;The degree of subjectivity involved.The extent of the client’s involvement in determining significant matters of judgment.The degree of reliance that will be placed on the outcome of the service in the audit.Whether the client is a public interest entity.The fee for the NAS.

.Question 3How is auditing related to accounting?

For the following independent and material situations, assume you are the audit partner on different engagements.  For each situation, analyse and explain how the situation would affect your audit report. (A)  A former IT staff of the audit client accidentally deleted a lot of accounting data and there was no backup copy of the data. (2.5 marks)  (B)  The auditor thinks the audit client has over-valued its land and buildings. The audit client refuses to make corrections. (3 marks)(C)  The audit client has issued a new version of the annual report due to several subsequent events. (0.5 mark)(D)  Your audit client has reported a substantial loss this year due to rising costs and strong competition. There are also concerns about the audit client's ability to pay its current liabilities. The audit client's managers are negotiating with banks to raise additional funding to help cover the cash flow shortage. After evaluating the audit client’s situation, you believe the going concern assumption is still appropriate. How does this affect your audit report? (4 marks)

When the auditor considers that the service organization activities are significant to the client and relevant to the audit and he concludes that it would be efficient to obtain audit evidence from tests of control to support an assessment of control risk at a lower level. Such evidence may be obtained by, exceptSelect one:a.Performing tests of the client's controls over activities of the service organization.b.Review the service contract between the client and the service organization.c.Obtaining a service organization auditor's report that expresses an opinion as to the operating effectiveness of the service organization's accounting and internal control systems for the processing applications relevant to the auditd.Visiting the service organization and performing tests of control.Clear my choice

Working papers that record the procedures used by the auditor to gather evidence should beSelect one:a.Viewed as the connecting link between the books of accounts and the financial statements.b.Designed to meet the circumstances of the particular engagement.c.Destroyed when the audited entity ceases to be a client.d.Considered the primary support for the financial statements being audited.

Analytical procedures used in planning an audit should focus onSelect one:a.Providing assurance that potential material misstatements will be identified.b.Assessing the adequacy of the available evidential matter.c.Enhancing the auditor's understanding of the client's business.d.Reducing the scope of tests of controls and substantive tests.