Question

Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit?

A. Perform detailed testing of the individual balance sheet accounts.
B. Examining documents to detect illegal acts having a material effect on the financial statements.
C. Considering whether the client's accounting estimates are reasonable in the circumstances.
D. Determining the extent of involvement of the client's internal auditors.

Answer 1

During the initial planning of a financial statement audit, an auditor would include procedures such as examining documents to detect illegal acts, considering the reasonableness of accounting estimates, and determining the extent of involvement of the client's internal auditors.

Step-by-step explanation:

The auditor would most likely include the procedure of examining documents to detect illegal acts having a material effect on the financial statements in the initial planning of a financial statement audit. This is because identifying illegal acts can help ensure the accuracy and reliability of the financial statements.

Additionally, considering whether the client's accounting estimates are reasonable in the circumstances would also be included in the initial planning. This helps to assess the reasonableness of the client's financial statements and identify any potential risks or uncertainties.

The extent of involvement of the client's internal auditors is another procedure that the auditor would determine during the initial planning. This helps to understand the level of reliance that can be placed on the client's internal controls and the need for additional audit procedures.

correct option C. Considering whether the client's accounting estimates are reasonable in the circumstances.