Question

What is the first step in an audit?

1) Determining the requirements for the engagement
2) Collecting evidence
3) Analyzing financial statements
4) Preparing the audit report

Answer 1

The first step in an audit is determining the requirements for the engagement, which sets the foundation for the auditing process.

Step-by-step explanation:

The first step in an audit is determining the requirements for the engagement. This initial phase involves understanding the scope of the audit, the objectives, and any specific criteria relevant to the entity being audited. It sets the foundation for the entire auditing process.

Before diving into collecting evidence or analyzing financial statements, auditors must establish what is expected from the audit to ensure that their work aligns with the needs of stakeholders.