Question

Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?

1) Determining the materiality level for the audit
2) Assessing the risk of material misstatement
3) Developing an audit plan
4) All of the above

Answer 1

The correct answer is option 4, 'All of the above,' because auditors typically determine materiality levels, assess risks of material misstatement, and develop an audit plan during the initial planning of a financial statement examination.

Step-by-step explanation:

The auditor in the initial planning of a financial statement examination would most likely include several key procedures to ensure a thorough audit. These procedures would include:

1. Determining the materiality level for the audit, which involves establishing a threshold for misstatements that would be considered significant to users of financial statements.
2. Assessing the risk of material misstatement, which is an evaluation of the likelihood that the financial statements may be materially incorrect before considering any internal controls.
3. Developing an audit plan, where the auditor outlines the strategy and resources necessary to conduct the audit effectively.

Thus, the correct answer to the question would be option 4, 'All of the above.'