Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

What is the purpose of planning and supervision in an audit engagement?

1. To minimize costs of the audit.

2. To ensure proper execution of procedures.

3. To ensure the financial statements are accurate.

4. To document every step of the audit process.

The correct answer is: To ensure proper execution of procedures.

The purpose of planning and supervision in an audit engagement primarily focuses on ensuring the proper execution of audit procedures. Planning is essential in establishing a structured approach to the audit, which includes developing an understanding of the client's business, assessing risks, and determining the appropriate audit strategies and procedures. This initial phase sets the stage for an effective audit that is tailored to the specific circumstances of the entity being audited. Supervision comes into play as the audit progresses, where it involves overseeing the work of the audit team to make sure that the audit procedures are carried out effectively and efficiently. This includes reviewing work performed by team members, ensuring adherence to the firm’s standards and audit methodology, and addressing any issues that may arise during the engagement. Proper planning and supervision help in achieving the audit objective and increase the likelihood that the audit will be conducted in accordance with professional standards. While cost minimization, financial statement accuracy, and documentation are important aspects of an audit, they are not the primary objectives of planning and supervision. Planning and supervision are fundamentally about ensuring that the audit work is executed correctly and that the procedures align with the overall audit goals.