You Are a New Employee at the Accounting Firm Murray

Essay

You are a new employee at the accounting firm Murray & Murray, CPAs. Before you are assigned to your first audit, your supervisor tests your knowledge and asks you to explain the term "scope" in the context of a financial statement audit.
Required:
A. Provide a definition of scope.
A. The scope of an audit is the type and amount of audit work to be performed.
B. Describe what influences an auditor's determination of scope.
B. The auditor's assessments of risk and materiality influence the scope of the audit. For instance, if an auditor sets a lower materiality amount or would like to substantially reduce audit risk, the scope of the audit would be increased. In establishing the scope of an audit, the auditor must make decisions about the nature, extent, and timing of evidence to be gathered in order to evaluate management's assertions.