Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 61

Performance Principle. Identify how each of the following statements relates to the performance principle by considering which element(s) of the principle are related to that statement. (A statement may be related to more than one element.) Use the following elements in providing your response:
• Reasonable assurance
• Planning and supervision
• Materiality
• Risk assessment
• Audit evidence
a. Evaluating the effectiveness of the client's internal control in preventing or detecting misstatements.
b. Obtaining an understanding of the client's business and industry.
c. Acknowledging that the risk of failing to detect a material misstatement cannot be reduced to zero.
d. Obtaining confirmations from the client's customers as to the ending balances in accounts receivable.
e. Preparing a written audit plan.
f. Designing audit procedures to identify misstatements that would have a significant effect on financial statement users' decisions.
g. Considering the likelihood that the account balance contains a material misstatement.
h. Failing to detect material misstatements because of audit team mistakes and misinterpretations in evaluating evidence.