Question

Identify and define the two components of audit quality.

Briefly discuss the determinants of the audit fee level.

Answer 1

A. Following are two components of audit quality:-

1. The audit should be organized to cover adequately all aspects of the enterprise relevant to the financial statements being audited.

2. The auditor must assesses the reliability and sufficiency of the information contained in the underlying accounting records and other source data by:-

A. Making a study and evaluation of accounting system and internal control.

B. Carrying out such other tests, enquires and other verification procedures of accounting transaction and account balance as he considers appropriate in the particular circumstance.

B. Determinants of Audit free level are:-

1. Competence of interanl audit department.

2. Size of internal audit department.

3. Relationship between internal and external auditors of the organization.