" I halp I :D ffwftlllfn.hn EE you STUD am good ! boi good boil in " "" " EE asmrr A UD lT AND goop Bo , .gg HE " " A S S U R AN C E e÷÷0M : astronomic KEYWORDS independent > Independent examination avoidance of from expression of opinion on the financial statements of an entity a duly appointed pursuit of that appointment by 7 assurance A three 7 responsible involving matter material respect ° . Required nature , timing to pursue practitioner to question subject info should be 7 anything whether at with a set another For determining timing be extent of required to anything pursue leads him to question subject matter info should be changed some material respect in . the RESPONSIBLE PARTY assertions & INTENDED USERS person is) whom for the practitioner the assurance """%E} report you B. appropriate has to be → look in some changed person responsible for the information ° , whether the extent of procedures the responsible that determining the that leads could disagree and procedures rts for ES nature PRACTITIONER ° being taken practitioner - party of action course auditor > A. Free would prevent auditor one of ( ( f IM f N f f OF being constraints that Opinion auditor in a any correct 3 interest by a rested and being unduly influenced of subject matter appropriate identifiable , . in a way capable of consistent e.in: : ::: :iii. :::::m :::* :: me "" ÷ " Ii:::n:Yini; ::*::# et:c.io.no ' :E:/ig y ' : .am. ..④÷g C . Criteria Benchmarks used The subject to matter open To CRITERIA . evaluation 1 measurement . WITHOUT THE Frame SUITABLE TO NOTE : evaluate I measure the basis of practitioner 's own of Reference By a on any conclusion is expectations judgement & experience constitute , interpretation I individual would not individual suitable criteria MISUNDERSTANDING characteristics • Relevance criteria ? Relevant criteria contribute to • to the intended users to allow them conclusions that assist decision making by the to understand intended users CA ) has Completeness ? include that • could relevant Factors all affect the conclusions Reliability ? reliable criteria consistent allow evaluation reasonably on the subject matter • Neutrality ? criteria have to be that bias • conclusions neutral so free of are . Understandability ? criteria have to result conclusions that in clear comprehensive are , significantly interpretations and not different need to be available subject to been how the subject matter evaluated or measured . KEYWORDS D. Ennence BACKSTORY professional skepticism 1 'S kept ISI 2101Mt Practitioner engagement p r O F To ^ an ATTITUDE of with s s an i WHETHER FREE n o a sufficient obtain ABOUT IS e plans & performs appropriate IT misstatement [ sn.IE?ifoehnkIIaIe3 to error human . misunderstanding 3 etc evlbence CONSIDER : , also recognises sometimes beople . that deliberately dishonest or that aware subject be optimism mislead THINGS TO - THEREFORE : Professional → all can excess matter (B) subject THE material FROM we CRITICISM 1 is practitioner assurance is evidence SKEPTICISM required to test 1 assumptions statements . → E. REPORT A PROVIDES containing a ' quantity of enbence must be WRITTEN sufficient & appropriate ( measures HOW conclusion Reasonable > PRACTITIONER 'S In TO THE M > l T CONCLUSION POSITIVE E D IS is WORDED IN F. POSITIVE 7 Negative ) o generally . AUDITS POSITIVE assurance its Dependent INDIVIDUAL THE UNDER assurance ( limited ) stat k source and BY ITS NATURE , FORM negative FORM ( reasonable) Reliability h Influenced by WORDED assurance conclusion : determine assurance ITIS l Quality ) The by its Relevance in : L evidence ISO FICO) ht REPORT ASSURANCE PRACTITIONER suriicient ATTEMPT TO PROVIDE WHICH on The circumstances ITS OBTAINED continued 07 HOWEVER , where There some . giving assurance budget IS Practitioner M O on assumptions } FACTORS That cannot Be VERIFIED WITH certainty would not d HE led For EITHER Type There is OF The 1- that a CORRECT because depends IT + Is not . c. g Un circumstances assurance POSITIVE giving feasible are express an CONCLUSION CONCLUSION cant When : on LIMITATION THE scope FAIRLY SUBJECT INFORMATION MATTER materially misstated . STATED µ SUFFICIENT APPROPRIATE , EVIDENCE ( D) PRACTITIONER 'S WORK ASSERTION IS NOT obtain / IS corporate governance " ÷÷÷:÷n÷÷÷÷÷÷:i "' " E > : "" " ensure That are users efficiently & PRODUCTIVELY The company 's M¥1 assets ÷:÷÷÷÷÷: peen . In THE > BEST INTERESTS OF eliminate Interest . OR MITIGATE PARTICULARLY management ITS and SHAREHOLDERS CONFLICTS OF THOSE Between SHAREHOLDERS . . audit is important # ¢ # principles of coup governance . € . ✓ ( IP LE g OF ( OR POR ATE GOVERN AM CE # ACCA : ÷ : ÷ ÷÷÷÷÷÷¥ :÷÷÷÷÷÷÷÷÷:÷÷÷÷÷÷ 1- promote Transparent & FAIR MARKETS SUPERVISION A enforcement t Recognise THE t ensure Timely DISCLOSURE OF ' Effective ; SUPPORT for stakeholders RIGHTS ' & Accurate all MATERIAL matters t strategic guidance of entity , effective monitoring ensure THE BOARD management BY THE THE BOARD 's accountability ENTITY and THEIR of & TO THE SHAREHOLDERS EVERY COMPANY SHOULD BY effective an IS COLLECTIVELY Be HEADED BOARD WHICH THE LONG TERM DIVISION B/W Running OF THE BOARD \ VS f ° RUNNING OF THE B12 THE CHAIR a . IS RESPONSIBLE FOR LEADERSHIP OF THE BOARD & SHOULD \ t SUCCESS OF THE - } i FOR RESPONSIBLE THERE SHOULD Be a clear ° I Be INDEPENDENT APPT ON . I company I . SHOULD , " I ALL DIRECTORS o iii.i'in , OF EXEC DIRECTORS - INDEPENDENT l . E E#s: : o acoans. s . i : i : i i a i e . n . n 't Rema ' * l - , " nern-tionumrsestruc.ru . ok iii. in:÷:::::n:::n: ( PROFIT RELATED I T' Rko SHOULD Be & TRANSPARENT Developing a FORMAL PROCEDURE Of KK REMUNERATION R PACK AGES OF INDIVIDUAL DIRECTORS ill DIRECTOR ( NO il SHOULD bellmen HIS OWN RCMUNE " I - RATION ) 11 / d ' " ' p ( l 0 ABLE l ' ' I ' I I ' - 11 ill I ' it pl • ' ill " c " II . PROCEDURES AUDIT " ' u n i' niiiiiiiiiiii siioii:* s t ' y s @ , , & TRANSPARENT t O Ef a FORMAL RIGOROUS 8 s o s y PROCEDURE LED BY A NOMINATION COM , cow ypo OF f SHOULD INTEGRITY OF THE - r AND r - e YRS I UNDERSTAND company 's - BOARD SHOULD UNDERTAKE ' r formal & RIGOROUS r POSITION & of going CONCERN Basis VALUATION FOR MANAGE I RISK , INTERNAL OVERSEE ° ALL DIRECTORS SHOULD BE SUBMITTED FOR RISKS Re ELECTION ° ESTABLISH ANNUAL OF PERFORMANCE CONTROLS & DETERMINE THE NATURE & EXTENT OF THE PRINCIPAL LONG A { COMMITTEES -1 INDIVIDUAL ) AT APPROVAL OF FS ) PROCEDURES TO TO ACHIEVE SHOULD CONSIDERED ) I OF FS KNOW OF SERVICE OF THE BOARD AS A WHOLE THE INDEPENDENCE I BE -1 / ( ON THE - TERM . HAVE A COMBI SKILLS , EXPERIENCE F LEDGE ( THE length SHOULD ESTABLISH TO ENSURE ° . r ASSESSMENT ESTABLISH " " " , PRESENT A FAIR , BALANCED & PROSPECTS g l y & Effectiveness of INTERNAL & external t . AUDIT R , gk I §§ NTERNAL BOARD O " fr ¥ FORMAL & TRANSPARENT POLICIES KAST 12 MONTHS FROM • q' FOR FIXING REMUNERATION THE .. " FOR 11 Mt¥ .. = executive ON policy . " e % THERE SHOULD PROVIDE . . . ° MEDS ↳ " . A-NCE executive WHO ARE .**y¥ e.gwww.pteshs r??!*Mltrnh?Nd7qqag ' " proportion - PERSHIP ! WITH INTEGRITY " CANT ' ACT MUST Non Be DIRECTORS t / 501 OF THE BOARD AT least ⑨ STRATEGIC AUDIT COMMITTEE OBJECTIVES OF - . INDEPENDENT MEDS . ANNUALLY I n O_O NED # 1 NED # 3 audit committee REQUIREMENTS 3 O MIN 0 CHAIR ¥ ° 1 MEMBER - MEMBERS MEMBER MUST HAVE RECENT & RELEVANT ° FINANCIAL EXPERIENCE COMM MUST HAVE competence IN THE . relevant NOT Biz . ° REQUIRED TO Have an INTERNAL AUDIT DEPT c- MONITOR AND REVIEW THE EFFECTIVENESS OF INTERNAL AUDIT BUT THE . NEED FOR ONE REVIEWED ROL @ Smd RESPONSIBILITY sector ° MUST Be ANNUALLY . ° MONITOR THE FINANCIAL REPORTING REVIEW INTEGRITY INTERNAL OF REVIEW FS ; JUDGEMENTS A CONTROLS SIGNIFICANT . RISK MANAGEMENT systems ° RECOMMEND TO THE BOARD REAPPOINTMENT CONFIRM THERE self - Are OF THE APPOINTMENT THE . EXTERNAL AUDITORS THAT No ← ° independence) ANNUALLY 0 ACT AS ° Develop A FORUM & OF EXTERNAL THE ASSESS EFFECTIVENESS THE interest 1 FAMILIARITY Issues ( ensure & REMOVAL ABOUT INDEPENDENCE EXTERNAL TO IMPLEMENT LINK AUDITORS TO supply objectivity & AUDITORS DIRECTORS POLICY , ON Now THE - & AUDITORS engagement AUDIT SERVICES AUDITOR 'S AUMTORS.net# REMOVAL , IN GENERAL t¥h% desianattionn - AN AUDITOR , in:*:: :*:O: :O :c:*:*:*:c:* ' . . OF ALL - TRANSACTIONS Receive NOTICE Nl @ ET INGS , ATTEND & general about . AUDITORS APPOINTMENT ' = F- AUDITORS AT EVERY AGM THE INCUMBENT HAVE TO Be REAPPOINTED l NOT AUTOMATIC , TO PREVENT AUDITORS FROM SIMPLY STAYING IN OFFICE ) - fortanagers mation :ir" "" no AUDITORS ' " AUDITORS RESIGNATION ' EE AUDITORS can resign BY GIVING war emns.in Yes :O : atoms: 'm: . " . ÷÷÷÷÷÷÷÷÷ REMOVAL :÷ " AUDITORS ' REGULATION FAUDITORS FRC ' CTC are regulators BY ACCA , HAC , PIE ④ if 8551110 All ethics CONFIDENTIALITY AUDITORS SHOULD Respect HAVE a SHOULD . CONFIDENTIAL INFORMATION WITH TREAT PIC DISCLOSE NOT legal 1 PROFESSIONAL UNLESS INFO DUTY TO DO SO THEY ' One-way AUDITORS SHOULD NOT JUDGEMENTS THEY MUST UNDUE DISCREDIT law and THE COMPLY WITH WHICH THE PROFESSION avoid . MUST PROFESSIONAL AUDITORS CONFLICT OF INTEREST , BEHAVIOUR SHOULD ANY ACTIONS AVOID Bti . INFLUENCE PROFESSIONAL AUDITORS PROFESSIONAL 1 B12 : . AND COMPROMISE competence & due keep up TO DATE MUST LEGISLATION & RECENT Themselves - - j7Qualifiers care AUDIT Developments INTEGRITY Have TO BE HONEST PROFESSIONAL & B12 RELATIONSHIPS . EYE . & STRAIGHTFORWARD SHOULD NOT -10 PERFORM THE WITH - AUDITORS Be IN TURN A BLIND O -2 µ¥÷w! • • SELF AT the Tonn: tonnes " key a auditor ÷÷:÷÷:÷÷÷÷÷:÷:i :c . Af Is ! - man audit FIRM SHOULD WEIGH up ÷÷÷÷::÷÷:÷÷:: ÷÷÷÷÷÷ THE RISKS advocacy promotes assurance view to a TO ITS OBJECTIVITY , INTEGRITY and INDEPENDENCE point of - FIRMS Have earlier UNDER cake - ( such services include ; internal audit, tax ÷i÷÷÷÷÷÷÷:÷÷ : bookkeeping , calculations , etc) subsequent audit : . :÷÷÷:÷÷÷÷÷÷¥¥÷ i n T l M l DA T ⇐ auditors litigation could be INTIMIDATION blackmail , threatened or . NOT OBJECTIVE anymore . physical :# self-interest enxamptohe " ÷÷' n'III:#Itn::*:::# remains:* Lama : eine :# : 'm :*: :: :* compromise. " CERTAIN FACTORS . 47 if auditor owns shares in the auditor client, accused of wanting The client 'S PORTFOLIO TO GOOD . Close business relationships in The Quality of the might be QUESTIONED it audit There's a close biz 4, - Be COULD LOOK :# " ' Contingent fees 47 NIT relationship is present especially it a member of the audit team gains From The close biz relationship ( employment) permitted for audit engagements . 47 feel that calculated based are on reported . ↳ an ex - WITH a should partner client FOR AT NIT least take 2 revenue / profit . up Years appointment an AFTER THE last engagement . High percentage fees Close family & personal relationships 47 auditor 's by the auditor earns a high percentage objectivity and independence may be one ↳ guarantees and acceptable if the lending terms are normal 47 " special entice " the team to → - Entity ( PIE) of the firm 's total Fees 15 't for z consecutive years . arrangements ) arrangements can be opinion client on that one Total fees from a public Interest should not exceed ↳ ( no special auditor will rely afford to lose them & can't QUESTIONED loans client , the From pass a ' used to low clean audit ' compromise auditor 's - balling ID quoting a objectivity very low audit fee to win a client the nope op gaining more lucrative non - , in audit work Overdue fees 47 puts the H H's auditor at risk because there's a possibility that client will never pay those Feet ? Lp this could lead to has not the likelihood that accusations that the auditor modified the audit a worried the company 's liquidation opinion to reduce creditor trigger 's legal to have low audit fees but it raises the question as to whether the is done proper work . Recruiting staff on behalf of a client ↳ auditors might be reluctant to criticise the performance of the staff recruited by - the auditors b recruiting services to a non PIE client is - not prohibited the client's , ultimately the decision is ¥4100 TOO : Tackle threats TO PRINCIP LEFT iehicminen9e nioIe oat.iIgtnreaI7@actions.mdi IF There's an identified threat apply safeguards . safeguard , dually or in combination taken by the professional accountant that effectively eliminate threats to compliance with the fundamental principles ri or reduce , them to an acceptable egg samples level : ⑤ assigning additional time a qualified personnel → tackles self review - ⑤ have an appropriate reviewer to review the work → performed tackles self review - D use ① diff engagement teams with separate reporting lines for the provision of non - assurance services to an audit client → tackles self review - or advocacy familiarity D O separate teams when dealing with confidential information -7 , tackles self - interest i÷ auditor 's report Independent auditor 's report Material uncertainty key audit matters page 112 - AO - Audit opinion - ④ Independent auditor 's report States to WHOM The < shareholders of the ④ - ④ Fateh's:÷ :.in?.:nancias.. men..na.. ④ Types of opinions include ; Include used to draw refers to independence complied with auditor 's & that modified in this , been opinion explanation would be the section has been material related to the going concern not a attention to a disclosed in the modification of the opinion it will state that the If modification not KAM ⑤ there's , the emphasis of matter paragraph may follow ( depending on their relative importance ) uncertainty of the company of the opinion opinion is , . ⑦ key audit matters matters that were the most significant during the audit in a ' . it's concern required if there's a it's not Disclaimer of opinion users properly that section . ⑦ Material uncertainty related to going matter modified . audit Adverse opinion assertion of the an other ethical matters have It an Qualified opinion ④ Emphasis of matter paragraph FS auditor 's ° o ° responsibilities MUST opinion ° ② Basis for opinion ° o - , company > : - compliance with ISAs report is addressed accordance with ISA 701 : : :i: : auditor 's report Other matter paragraph - ① ④ other matter paragraph To communicate :¥÷ ÷÷÷:÷÷÷÷:÷÷÷÷÷÷÷÷i÷÷÷ no Auditor's responsibilities Date , address - - . page 212 ④ Possible circumstances O ① That ( e.g the is . not o where the that the auditor 's for the intended audit scope o report) and conflicts with to state report is solely users auditor unable to withdraw from on - modification of the ⑨ Management's points . prepared management imposed limitation on . a been engagement even though a opinion not have for a specific purpose the audit IT'S FS information covered in the Director 's of FS reports on 2 Sets purpose frameworks ⑧ Other information paragraph other auditor include : prepared under different general - TO communicate . : signature - not required that is a matter out FS pervasive responsibilities that its to prepare the opinion is management's responsibility in accordance with the IFRS , consider of the company going maintain the system of internal control , concern → ⑤ Date ④ Auditor 's responsibilities to from material misstatements whether due to fraud or error to issue auditor 's report includes their opinion whether receivables are being paid , etc ) and that after the date a level of assurance , high not a passive duty lit any events affects the and fairness of the will detect FS is brought to misstatement attention , he might have always to act ) when it exists or auditor has truth a material individually , guarantee that an audit material → it . l this includes . reasonable assurance → duty investigating still has an active , . in the aggregate , they could be expected to influence the economic decisions basis of these TRUE and fair -7 of users taken the information is factually and not fair on FS True : - correct materially misstated information presented is not misleading I concealed that would affect the decision of the making stakeholders Other reporting responsibilities → in some jurisdictions , auditor may have responsibilities to report on matters such as the adequacy of accounting books & additional records the auditor , free are signature and before the signing date obtain reasonable assurance abt whether the FS as a whole address , his ④ ISA 701 - 'M communicating key audit matters o only applicable ° The auditor significant → to entities listed shall determine attention areas of required shall take into account the following ; , higher the matters that assessed risk of material misstatement 1 significant risks → judgements relating to areas in the FS that involved significant management judgment l accounting estimates ) → effect on the audit of significant events 1 transactions significant occurred that HOW TO during the period : Determine KA Ms i÷÷÷÷÷÷ MATTERS communicated with TCWG auditor ;÷÷÷÷:÷ :÷÷÷÷e: i÷÷÷÷÷÷ . gums'm . ÷÷÷÷÷:÷ " . a- ÷ . ¥ ' . → Determine which ones require .attention → MOST significant are KA Ms • • • se ④ µ # yay MIMI #④ RR H e**⇐$ O 51 to 11 Of NEW ⑧ o ' im 1¥35 - . M . . the nature of the on , 1 / to 21 o 5 't to 101 Off proof# . of . " amount work is . less than misstatements the risk that aggregate in identified misstatements : ÷÷÷÷÷:÷÷÷÷÷ ::c:S . of uncorrected assess the i:÷÷÷÷÷÷÷÷÷÷ o materiality statements & obtain written representations from mgmt to state that the . uncorrected ( if Mgmt refuses . ! !! : there no auditor must exceed the NOTE TAKE in " thumbs the rules of FS materiality ) all . the performance important in set should be ( reduce " . financing volatility of the benchmark . materiality that audit IT ¢ entity its ownership - . materiality performance of the structure @ #§ o uuaatiitaatiive N'xnsonwoieidgeiaiewnmiionaiomintinini i saiioi:c ee ' - & attire ④ want errors are ( STATUTORY misstatements auditor will issue amounts in are tolerable a . director disclose accuracy) w/ absolute DUTY TO remuneration are the FS where Not / material modified . ( except for ) o " " . audct.it opinion's unmodified opinion modified opinion unmodified opinion FS show * * a and true may include; " " fair view emphasis of + draws attention t c'9 " matters t draws attention -1 generally ( this to paragraph some to draw attention ' other " matter Note properly disclosed already to the X in the FS FS, which describes nor should be . . . paragraph matter to after comes does not matter FS ' the FS , opinion basis of the that mean in the not are paragraph qualified ' or wrong , criticised ) + comes i " concern going generally than 12 material uncertainty related + attention to disclosure not less months Draw would company ( the continue can o evaluate Vr the o o concern & the of any additional facts 1 into since the date become available request written representations , of from management actions & that the . Fs) determine if the company to support) the company → evaluate the determine for prepared has a forecast : reliability underlying data , uncertainty a flow have assessment regarding their plans for future feasibility to → whether . concern whether cash plan consider TCWG feasibility o " going concern is adequately disclosed on the going evidence mgmt's plans for future actions going to I find : a material on as responsibility as going concern to continue disclosure auditor 's t not evidence ( if applicable) KAM after the of the used it there 's assumptions adequate support modified opinion * reasons for modified opinion : + ":÷ifi÷ Nature of material pervasive one or o e.g are opinion : " materially misstated Except for o '' obtain to a qualified opinion : " except for way the figure is presented 1 misstated are . paragraph it: : ::::: :*:::: :::p:c:::c:::::* opinion " €in{|×p|P) unable figure I the the disclosures " f- s . FS material misstatements in the more O adverse > Disclaimer opinion misstatements FS Ot , t unable a FS the to obtain " o as , except for > " significant → renders the are whole , useless do not show true a and fair view sufficient evidence paragraph is material → auditor missing information not been get able to all the has information required to draw conclusions o a disclaimer of opinion > missing information is so auditors have it the FS showed & no idea significant fair view > auditors unable to form an opinion that a the true Atayal#EEEti an :÷: : ÷: appointment t plan the audit t understand entity t assess risk of material misstatement t :÷÷÷÷÷÷÷÷÷:÷:÷i÷: ÷ " reduced substantive procedures ↳ full substantive procedures overall view of ES ↳ auditor 's report # report to management appointment of auditor key considerations 0 professionally qualified O availability adequate resources 0 Investigate the management 0 communicate legal and ethical) ( staff, time, expertise) client and , with ( to act directors present the auditors n.g #anitoryesmtoramoaegYigeiYmnoy. accept I reject proceed to ask for old auditor does client , No I agree ? preconditions - according to an ° audit The ' of Agreeing the Terms of Audit Engagements be only audit an ISA 210 can reject accepted preconditions for audit an the financial > of the ES > is These an a present : acceptable that FS the ( must formally engagement must acknowledges control ) & understands its & provide responsibilities information necessary . understanding be it including internal common matters audit are ' if : , reporting framework for the preparation for the audit there is continued) management agrees for O ( or , be > management 7 preconditions of the terms documented declined or in an impose not present a engagement engagement letter ( discontinued ) TCWG are of the audit , tf : limitation on the scope of audit eeenmgggaagggeeemmmeeennn.tt#**eerrrooo ? Set out LOE f Bob IAC to the auditor & client between should : o ) define auditor 's 07 provide written 07 identify any should be sent to relationship contractual Prior engagement D Typical responsibilities evidence reports to of auditor 's be acceptance provide any updates in regards to addition in produced changes of the appointment to the auditor 's report that made - client ltherls affect contents of an LOE ; ) O opinion ( express ) o objective of an audit description of → prepare FS , → audit FS ) auditor o ) reference to 07 emphasis that I can A all applicable audits auditors will company 's records state that the certain ( 07 depend show & on internal a true & fair view) sampling not , guarantee a assurance ) report auditor 's about control reporting framework unrestricted full explanation auditor 's matters up they expect that state set financial only give reasonable addressees of the 07 the FS define responsibilities ( management 07 whether or not on to any is a matter to the access queries that they between them report ( members of the & have the company ) planning the audit arranging interim audit & final audit , counts, organising external internal audit attending the inventory confirmation of receivables should estimate , liaison with department ) fees ( Should not be absolute, be an but subject to proviso ) ) description of expected relationship o ( work of internal auditors) audit b/w external may be reviewed he auditor a internal audit relied on by external 777 LLAAUUDDHTT PPKAANN MMM IS A 300 Planning an Importance of audit : Audit of Financial Statements planning ] ability to carry the audit effectively o ability to ° [ objectives of o up with come and a detailed give appropriate : identify leg attention to more important areas high volume of cash transactions are debtors particularly significant?) , potential problems changes in accounting system) . ° carry out the work expeditiously → efficiently r quickly ° ensure that the ° coordinate ( e.g - ° approach adequate planning ) ( for example o general strategy right numbers a right skills are in the team with other parties with internal audit department I facilitate the direction a supervision I work done by trainees → of staff that's → seniors why it's important to review the work review the work of the audit team and -7 managers → partner) to schedule , so there is enough time . Mom urdershandingtanhng • l l l l l l , thee antitype , - - - a. . " l l - l y Nature of the entity → r Which sector does the biz operate in e ? Regulations → what regulations are to be met by the company ? Accounting policies → we need → to understand to allow the the entity 's accounting policies assurance that provide reasonable entity is operating efficiently us to Nature of business risks → inherent risks → ( unavoidable , most businesses have this financial consequences → affect the FS Internal controls → whether they exist to , what extent they are expected to operate control environment → context in which the internal controls operate Financial performance → performance assists pressure on of material the auditors in considering management to act in any way misstatements that whether increases they put the risks iuat.net#a* example of an audit timetable 1 January 31 planning visit December Year end - t procedures # T interim T audit Final audit ( more direct checking of balances ) Planning visit a client audit team would visit 0 agree with 0 enquire on changes that may have taken place after the previous audit a when the . Interim audit o typically o auditor to carry out happens in July → ensure ° might send tests that the - for FY ended 31 December ) of controls internal system of management a August control letter to report as any they understand it weaknesses I deticiencie Year end procedures - 0 carry out the → Value physical count of inventory inventory included of in the FS will be based on physical quantities Final audit o client should have o auditor will → be express prepared the FS concentrating a conclusions on obtaining sufficient appropriate on the FS audit evidence v I audience risks N . L an cannot be reduced to zero as audit cannot i provide absolute 27 GO.AUyd.lt risk o o opinion on the FS IT IS ° A gives an inappropriate that the draft contain a audit procedures are detect it, involve suagement designed to so audit needs to be conducted reasonable time frame examine ( ROMM ) - \ fail to that the FS are published with the misstatements present not to fraud deliberately concealed reasonable cost -7 FS , at within a impossible to everything exhaustively . material risk that the auditors still usually a misstatements o 0 . actually accounting estimates which detect FUNCTION OF 2 RISKS : risk FS should include gather audit evidence ✓ the auditor To : inherent limitations ( only reasonable assurances assurance DUE ( detection risk) risk that the error in the first place risk that occurs inherent) the client 's don't pick own procedures up and correct the error ( control ) AAAs & O IF ⇐ Eng Ggg O E Sg Q Isis . G q • ⇐ &&o I EEE E S - t f . . .⇐÷ . it 5 s EEE s s s Gott Es Fo a £8 SO E of % I Z SF . - S ° - - OS E. 5g E # 88 Sg S IIe § S - . § S S • o S Is § g- • s a 8 s - E I. SS s Qs s @ If §I§× ⇐ SI ⇐ § g • • . I § n @ In • O I . O 88.8 S §§§ I Is q I S - S § a I F- I IS E @ • -- as So I . + S § € I . I Is ? E Eg g g s 1- Es . IS § F 80 =3 . f t = a ET - 35 In 3 Eg s S x s ← I f F s . I . ± . -. S ↳ - s S s ← I F . , n s § S S t a o § a S EE s EE E ES 8£ § S to E so 5 I §§ SAE . . to - - +08 I . I . - ' Bt EX 083 of I 9- I f n -1 & b S I Is 0 is SEE SOS + ↳ - I. I. , EX - SO I - I. 88 =. g I . % BEE - 3€ a S 8 + • BE . & If 9- Ap n u - - ⇐ E I I o . - e . s S f - § So I • E - + § - IS 1- s - 5 > + § - + S s • . . + g O - - - = a • a- - 3 I s 9 I - y s g- I no . @ - s 80 E - a § o s a S o - IE S n s s - S - 8 I . I @ . s s - ↳ s o IS QI In OSS - I S O u S - • e s S 3 s t & - 3 II o E I @ o S - e 1- E I O s S . I S g - o t - S Sy 9Q s E § - . - S @ as a I. Ss =D 35505 3 - - IS Ss 5€ - GQ I 1- S II @ I. • so ↳ - → f g- 08 - E- En Is ok g g - S d s So - s is 5. S o I . O 53.89 s is s a # s D - Ms x SS • n - B n # S a 3 I . S * ¥: 88nF I . 88×8 u ↳ S I - . I . a s - as - O O t if l - ± s T - a c' • § ÷ g G & g - T E I O • S - F - -1 E a . S - S I → X g y XX - ng b 's = - o S S 83 M - . S I & S 1- • o n § 4 I. E o i • O O ' o S S - . I 38 • S a * & a I so to - O I n a- so g It § O s S - I @ = - E o 3 . . 1- use o 1O ↳ . 3 s < @ Is t §§ a S I gs . → SEE 8 - IS E SIO ES - E @ § Is ± 0 8 o - J S on - g C p D as - . ' G -08 f , - - 1- o - t s n s ± o sp EG g • 85858 a O S @ = - Sg s S § d is no - n - g- SE - g . o 8 s s Q - SIG I I - SIS 33 • × S @ Eg Is 7- O - D of S • WHERE TO FIND ROMM ? Assertion level Any single figure which appears in the FS ! ! nature , timing extent and of audit l that meet the objectives 's - procedures must be designed A , E , c , co pro , , to the to respond PAD assessed risks financial statement level risks that relate to the Financial statements as a whole a potentially affect many assertions (risk arising from fraud 1 deficient control environment significant doubts about going concern) , Auditor 's response may include; assigning more experienced audit staff 07 07 07 designing audit exercising greater supervision procedures Ahuuddiit Evidence EVIDENCE Analytical procedures * used → to evaluate Sufficient Appropriate an - - - ' Ethel go calculating o last * 0 evidence ° Written > oral o originals > is better conclusion comparing the procedure the when Financial statements . financial & non financial data b/w - amounts a ratios to : overtime g. ( ISA 3004315 ) → planning , ÷,÷÷÷÷÷,÷÷÷ , ; .ge . final review on entity 's records directly 7 passed on by client when there's good internal photocopies on any 's Financial statements quality of audit evidence ( relevance & reliability ) with respect to reliability ; evidence obtained as a overall maeyxgm.in/ygaYka!%7ena!Ian:!:Igg:{ inainaei.com → > review performed an → quantity of audit evidence ° be Forming year results audit opinion external evidence ~ Budgets ° reasonable conclusions o * must plausible relationships ratios → , which work & re performance SUFFICIENT APPROPRIATE AUDIT EVIDENCE LISA 500) to base predictable l inspection |§gggg, able to draw audit less Observation Recalculation to be over b Enquiry & confirmation GATHERING are raising d Analytical procedures The vowels of that control USA 5207 , . . .. .. .. . . . . . . . . .. . . . . . . .. . . .{¥ ⇐ a is E = § O o o 0 S * ⇐ g 3 . s n ⇐ s S I S , s ± . a 3 a = D X S I t ± . I g g - § = . - E ooo O o s a e E E S g o 0 - § S D . e . A 8 I . ↳ a ¥ s § S C s . M IS I % I ¥ § I I Breakdown IS A " ^ ( assertions of 315 : management . . balances and fall the Into . disclosures EF s § E age v ) Completeness THE → all Assertions transactions (TIE ) cut off → transactions ( Balances ) , ~ , and that events recognition measurement the auditor to the consider presentation of and , by used the different types classes of and of transactions misstatements potential events , account occur may that " appropriately recorded been have amounts . following two categories Accuracy HIE ) → regarding assertions makes should been properly measured and described too ALOE items to applicable disclosures have related a been have recorded I disclosed have been recorded ' disclosed - events and been have recorded T Balances ) valuation ( Allocated → → → , accuracy . and assets , liabilities any resulting valuation related disclosures Classification and → transactions and → transactions and → relevant Occurrence → equity events the adjustments allocation measured the correct at in recorded are correct the to are are relevant and and events liabilities and entity holds or recorded . recorded , ° actually ( or disaggregated) and clearly described , occurred and pertain to the entity ( Balances ) rights to assets , and liabilities are the obligations of the entity o - . • equity interests exist controls the Cut Ott • understandable have Balances Occurrence AWE "em ' accounts appropriately aggregated events TIE and described and applicable amounts , appropriately are " accounting period appropriate ( Tre ) Rights n obligations → included Present disclosures transactions assets , are appropriately are ) Existence ( Balances → or interests in Both Existence • Rights h obligations . Valuation Allocation Accuracy completeness classist ' o - cation . presentation AAUUDDHTTSSAAMMPPLUMN involves : process sample 0 sample o design ( specific population ) risk) SIZE ( sufficient enough to reduce sampling method) sample selection ( test of controls I test of details) o performing audit procedures I choose O o evaluate a sample results ( investigate " errors " , conclude on the population ) Ithaca sampling o o regarded as random use probability theory to evaluate must be sample results including , sampling selection Random * remove * o o bias obtain a representative ( interval 's Systematic approximation to * convenient * risk OF bias * not a * # 1 o to a OF samples - - amount : monetary amounts 51001 $1,25015250 $3.105 intervals, :{so $605 - $1.855 x * increase the 4 4 random $4,355 3rd sample 2nd sample sample chance of 4th sample selecting higher value transactions → direct testing to where there's appear in statistical , characteristics each ' sub sub - populations ' - greatest potential of * value any invoice is sampling sequence of samples testing evaluated separately results of 1St Stratification into different * divide population * - interval interval # 20) with similar interval selection based on selection sample representative sample ( blocking sampling monetary unit no selection Block monetary unit sampling example Total receivables : $5,000 invoices ( consciously I unconsciously pick less work correct to → be Which cannot be used selection weighted : Haphazard selection to do ) 0 th - * uses pure random 1000 ( selecting every 0 o , selection ' value * used in sample 120 randomly selected samples represents a population of 200,000) * of methods selection ° measurement risk population must be misstatement . which exceeds the interval, guaranteed to be selected evaluate o sample results controls performs test of For each → binary outcome k x deviation effective applied) ( control not applied ) ( control selected item ? acceptable ? → develop an expectation performing test of before controls deviations consider the reasons for anomalous → some might be . - IF excluding the anomalous errors , increase sample > expectation the deviation rate deviation rate is : → new sample size , lower than → new sample higher rely expected → size , Ok deviation rate than expected → can control → perform on the substantive procedures of details , concerned with monetary amounts be quantified) can Found ( any misstatements selected items → test of example : Total purchases sample deviation rate errors IF , error > deviation rate to between threshold amount -7 remaining test a → = need to decide larger sample 16 . ooo 12% OF population ) $ 5, 600 , = - : x Wahoo may 4 , too of which $1,500 $4, 100 - - anomaly overpricing x Imaekeanoo"maY - sample ( 800,000 → portion - 1,500 ) - 270 , 000 12, 125 potential → - - $ Actual error whether to accept or extend the on - $270 , 000 population ' & - $800 , 000 projection : adjust IF there's some difference we need - misstatement is less than $16,000 = $13 625 1$12, 125 t . conclude that the Fsu $1.500 ) is Not materially misstated not add . internal control Recording the client's accounting system → provide basis for evaluating → 3 ways o recording the system of Narrative NOTES explain 47 design of internal controls the process of certain things the etc ) invoices are prepared relatively quick to I prepare by observing enquiring (e.g 4, : . how , client cows Tack of structure or discipline in ( documents may be mentioned but Flowcharts • shows that diagram Lp CONS = slower to produce & • Questionnaires record the naps to up what happens to these documents ? tiles calculations are recorded as system as well accounting YES " preferably → answers (e g ' . are suppliers invoices cancelled when they're → seek out specific - paid ) ? internal " → Internal control Of The control environment with which o essentially the regard o the ethics and the culture of trained recruited , are now people c. g structure of the responsibility → r management ° how o estimate the → The significance controls → risks risks of those invoices be ' twice ? I ended flexible objectives a → address internal control requires greater skill set → - ? go wrong " ? How do i prevent it from happening system whether is held . internal control is observed by management a staff which o the use of journal entries might arise and the likelihood that are occurring ? electronic procedures manual a the risks identified ? a records that initiate , record process , and report transactions estimates Information needed for accounting so Control activities policies Monitoring o answers suppliers what could information system o → material would address o ° " more open and organisation No → the internal control process assesses 47 what to do about it ↳ what 27 " organisation accountability of the STAFF risk assessment The can . paid controls Components controls design of internal the evaluate Internal control evaluation Questionnaire ( ICE Q) control Questionnaire ( ICQ) ( e.g establish l Internal " to difficult to amend more preferably performed and checks that are control risks tip helps reduce where checks are performed l → ) , systems on now rules to show → has specific - the documents , the Imposes great discipline 47 gathering evidence not used in the the narrative notes can be and see next page procedures that help ensure that management directives are carried out controls monitored by supervisors → managers → Finance directors → audit committee control activities segregation of duties → separating the responsibilities for authorising transactions , recording transactions and having custody of assets → segregation of duties → checks a Mgmt supervision greater need for independent entities in smaller Authorisation transactions should be → comparison → constant GR Ns leg comparing . → backing up of → once to be " a against if . Pos ) " system it's liable gets into computerised automated From then on common sense they occur, to be discovered frequently data transaction - approved by appropriate person comparison allows error computer controls stress for there is usually less , applied to be , and there is less chance for later transaction to that Arithmetic controls → ensure that simple calculations are correct Extracting TBS & maintaining it the TB ¥ balance → or control accounts don't reconcile control accounts Accounting reconciliations reconciliation → = process of ensuring agree differences must be → that 2 sets of then records from something is amiss different sources accounted for that are often Physical over certain assets established → physical safeguards must be desirable , → such portable assets are , Valuable liable to Performance Review go missing against budget actual performance data → reviewing data to operating → relating Financial a I prior period controls Inherent limitations of internal benefit cost vs may be greater control system establishing an internal needs supervision ? → what → cost of than the benefits Human error not on purpose collusion to employees cooperate → 2 or more system carry to → in → of duties segregation up a I cover fraud out in # = circumvent the internal control mistake OF staff to collude =L risk the override ( bypass ) interest of Management out in the best carried situations , may be → in dire ' ' company if it's however , → Non routine - common a → occurrence are not controls transactions transactions fall outside → relatively automated) (may be highly working transactions routine rare TESTS OF controls Internal ya NOT enough to be alone performed Enquiry the effectiveness management on → enquire → examples : o ask 0 ask processes employees on the hiccups during unusual it there any are circumstances look for evidence in the , minutes of inspection for evidence look → example : inspect file of Observation → watch employees carry Re performance → re perform employees it the results are ' paid supplier out work the procedures invoices " for " PAID stamps procedures as same work ? ) meetings control internal of → does it still approval process leave , on ( staff → internal controls of the according to company 's policy to see control Reporting on internal the internal control Auditors find that → send management ÷÷i letter 1 letter of weakness pp weakness 1 deficiency exists is control o designed T such control o is , not board of the to operating efficiently (or AC ) company , in way that a it's u n able to - 0 o States the doubts raises competence about Auditors will weaknesses " , the ( failure to take example problem can be OF those may exist → problems might be : consequence : supplier invoices net cancelled : double when " recommendation : stamp PAID once invoices fixed not have duty of the found that there is system of internal within the ALL control an control adequate operating company www.AH 0g . IN . Board of directors to ensure "t paid payment are paid normally say that they may others of TCWG . corrective action ) problem implications 1 consequences how merit the attention management's problem Recommend timely : ÷÷÷÷:÷÷÷÷:÷÷÷:÷÷÷÷:÷÷÷÷:: :e.ie#:::r:.:.:::e:ici::e::::au or the correct misstatements prevent importance to O States & missing structure of the letter ; O also detect ya when : implemented operated ::*:*:c:::c::*: :":innit * inadequate / is system # a YOU ! :) " Accounting systems A. Purchases systems the process Diagram to illustrate Document : Document : invoice from Document: approved PO qpw t t Ordering receiving the goods In general needed goods are only at competitive prices, at required suppliers ordered from authorised ordered o o o type goods received notes o invoices are matched o invoices are entered into AP o payments properly made B. Sales are to Delivery note t orders received the goods a despatch good internal system are accepted From credit worthy promptly despatched o goods o goods , bank invoice receiving customers received by customers are deliveries invoices are o payment is o receipts from promptly & accurately invoiced are entered o received properly into are customers the AR Ledger due when are credit control procedures o Document : cheque accurately recorded outstanding targeted at long receivables Payroll systems C. t New In general , employees are o employees are o hours • overtime is • Net pay and o payments 0 leavers are o wages 1 salaries good internal system a hired only and deductions will aim to ensure; as paid correctly are worked → a employees accurately necessary recorded authorised deductions are made promptly are correctly removed accurately to the from the calculated employees , the govt wages systems , others receipt LTT) → raising the - all orders t will aim to ensure; orders ° and Document : invoice to customer Document: approved PO , CGRN ) condition ) , ledger t o quantity , systems Document : In general making payment quantity & quality time , ( correct goods received as expected booked into inventory o → j receiving the invoice when ordered o Document : approved invoice will aim to ensure; good internal system a , supplier timely leavers payment D. Inventory systems purchases overlap with sp AP t receive In general a , store with sales → despatch goods goods will aim to ensure; good internal system misappropriated I stolen cannot be goods o a goods overlap goods cannot be damaged identification OF obsolete l slow moving items o - o with goods are only despatched o • inventory records 0 the ' correct ' cut - approval complete & accurate is established are off E. Cash systems sales overlap with overlap t o F hold 1 bank received is accurately recorded cash securely promptly & intact o cash is held o cash is banked o only • all can be made authorised payments payments Non - accurately are recorded systems current assets . overlap cash with , purchases & inventory overlap a Depreciate purchases o as inventory o as sales control ( specific objectives o all assets o assets documents be to non - approved and adequately maintained title safely kept of are & completely accurate + records as an asset according to their useful insured ( FA accurately recorded include ; assets) recognised maintain and safeguarded current are completely t accurately recorded authorised and appropriately depreciated are are be must capital expenditures only must be must assets disposals - o o acquisitions - - Dispose will aim to ensure; good internal system as o → a Acquire , with Ohashi sales t In general payment will aim to ensure; good internal system a , all → a receive cash In general with old purchases lives listing ) Computer System controls control activities Types of i. ← controls Application o designed to integrity of the ensure £ , → the I important , i. → , , . generally aim gets into 2 a to ensure → example employee changing controls very completeness CC ) & accuracy CA ) 0 met 3 . data much method are standing data over example → sequence checks CC ) a sequence checking the completeness of of pre numbered documents before r processed they are input : → we selling price 1 unit checks processing has been done & to be odd 1 out of if processing appears edit - the month , will the include checks range :÷÷:: ÷÷÷÷÷÷÷÷÷÷÷÷÷÷÷: i one - - for - one checks CC ) ( AKC ) add up the value of ' ' run - to run - control cnet.me?gf-: i: i:ri:n: n: z: :a:i n.an on the from totals balance input the ART invoices s sing = and processing run one from the second totals pro Ce - the 2nd processing from results - the - . AR 4 . Output IF batch the results processing pre determined are control total does not odd runs complete & accurate agree the total is used, - IF of the scrutinised regularly by logs should be responsible official to look for controls → ensure that > level description logs run a against the system transaction logs give a high processing that was performed run - documents logs & run closing balance on before they 're input to double check end of - - control totals - " checking that every hourly paid employee has submitted a clock card o O opening checks , pay be the ? run include : - " o : methods towards is sick accountant example if CA) incorrect data wages what want to know sequence examining the data For content & format to identify unfeasible I otherwise - basic , steps to check it take deliberate indication → change used I referred many times is : - Edit data , does not reference = but Processing controls - O their : standing → methods include : o . data will be processed to conclusion it incorrect → general salary intervention human support many applications because → o : often there is no system computerised further transaction once a → unauthorised up files antivirus programs preventive 1 detective will be controls development of , applied on ) ( preventive 1. initiation of input generally access of the records , programs , prevention of back changes to the systems maintaining accounting records the the over its & computers manual 1 automated o General IT controls controls Include 0 output to establish completeness to be an agree → investigated ( there might 's exception report → ¢ no ' ' ' data no File → rejected → can be distributed results of trans - → missed resubmitted ( output → ensure that the file data ' control ) processing are properly , input o Audit → → programs used to can be quickly can zp used : Cee, example re - data so auditor → - perform ' 1 balances odd transactions AR ledger . slow moving inventory calculations easily could not those predictions be tested other way ' program the chosen specifically criteria investigate stratified on the balances credit : according to the data used to investigate the operation of accounting programs that 's designs dummy data to be processed by the client program to check that → accounting be set to identify program might - → ' automatically be samples have - Test . clients to select samples of transactions - ° thousands OF records examining each read interrogate and examine techniques ) audit assisted ( computer CA A- Ts Traditional techniques and Automated tools to works what the auditor should predict present are check that the controls do should program then a compare with what the produces program actually Data analytics -7 science of → commonly examining used o data raw to draw conclusions data analytics tools compare purchase 1 → cost INRV purposes in Inventory age o AR IAP o analysis of revenue o analysis of Ram ° 3 - risk assessment analytical procedures for substantive procedures : selling price a ° ageing routines → as well overdue as trend by expenses vs ( invoice way match , PO , items item 1 region capital expenditures GRN ) a RR@cfeeivvaabb A- ④ ⑧UUA#SS assertions : Relevant Existence ① a presentation Rights r obligations classification , . Completeness Accuracy , Allocation , . Valuation and email Fy goof " 73 4 M G B P 0 9 AR test AR ledger to Analyse 0 listing the AR essential the older the provide good - greater the payment - . play → might be quality quantity → there ongoing an → , on amount the change balance may I amount ROMM is - → usually → generally an indicator of the a , → notes receivables invoices and Trace → proof that the ledger has been procedures) → IF the = scrutinise → allowed to send the credit Notes issued during to after year end - a selected at random , that in some time have not moved Disagreements gain more along with credit balances , timing and error may arise due to assurance) balances or Nll , t cash in - transits - - OR goods in - ptorb88EhEbI reverse the invoices I ( riskier balances ) has to be reconciled - receive the ' ' balance , 0 are account -7 might have to receivable is still not received Cws may be raised the year made the , some balances good Bo debts for allowance for doubtful o are only auditor o . - auditor o in AR received i should not be . authorisation I balance, book Dr entries requests 's usually include management to to disclose confidential Information encouragement will usually target higher details ) - ignore expected confirmations of tests of detail ) cash not smaller balances ' the to will the notes ' dispatch obtain evidence → examine after date receipts ( analytical end is received after year → IF the receivable o , o paid invoices to amount verify the goods invoices → in the order file to from o are low , misstatement is when risk of customers bad news = suitable of large proportion detail ) 1 Tests of the AR - effectiveness of the of amount receivable receipts (tests of to order received and exist completeness ° period amounts if the customer disagrees requests a reply ONI - of , measure on longer collectibility Test recent orders copy of - disputed Negative confirmation receivables / day Tales - handful of receivables dispatch • a no M period collect ibility of the AR a the credit control Trace 0 collection error o procedures ' the expected suspicion of irregularity ° - examine high high is internal controls, weak when ; ° analytical minutes ° scrutinise the board should be which may be going bad , → large receivables in board discussions in AR reflected days sales o misstatement of suitable when risk , ( whether they not) agree or - be recoverable may not suspicions) : everyone requests a reply from analytical procedures - receivable, valuation of the positive confirmation - a of verify the amount to will confirmation requests types of TWO o risk of customers disputes on the ( as to not raise for time . with evidence customer in debt a → ' correspondence o scrutinise existence receivable non be debt needs to allowance for doubtful increase) l as days overdue calculated ( increase ' - accuracy does not ! directly to the auditor the on and its analytical procedures for valuations debt -7 the → -7 o account AR control the the on balances sum of the Reconcile the provides good evidence o PROCEDURES " " - asking customers to respond owed to confirm the amount o & OTHER ° EXTERNAL CONFIRMATION # involves to procedures some are the balances " What about the worry OVERSTATEMENT of Mel o As a business transits request customer ( with client 's another confirmation or approval , to protect the relationship b/w client and last resort, phone the - auditor may customer) AACC a presentation Rights r obligations classification , . Completeness Accuracy , reconcile o scrutinise the sum appear on AP the Scrutinise the board → Ledger but over the amount. - from PO → 0 ensure to Trace from events that is not yet o and completeness cut cut accurate - indicator of how fast company pays its suppliers → longer period versa vice payments & cash book - end in a ' payable having trouble paying company might liabilities and as miss out PapYura7n÷ , when cash on accrued I day they're due discounts given early payments For perform ' balances to suppliers statements reconciliations of individual verify the completeness be properly accounted For → to → all must reconciling items - cash - in - transit confirm that shortly after - - goods - in - on payment appears year statements the bank end transit been goods have confirm that the IF received before year - end, disputed invoices should valid, the invoice received after year ensure the be amount is cancelled with a - auditor may use external confirmation to request end accrued CN From 1, → AP) off offouttakes the → → CCR suppliers have to be the balances , → payment period = outcome claim legal identify year → - examine the : the occurred but have off after date payments included in the AP → if not Review o re - may not determined credit entries in and to invoices GRN credit entries ( Cr AP ) to → to ensure o to that amounts by suppliers claimed example 0 Trace AP control account to the minutes contingent liabilities any For balances suppliers with correspondence may be ongoing disputes → there 0 of the individual . Valuation and Allocation , ftp.BBYehftaaresomeproggaures-io o - balances assertions : Relevant Existence Yow ;r¥asa7a:¥mEhfot me Ppaayyaabblke uunn# direct evidence supplier AA #rruuaallss pprreeppaayymmeennttss * T T AR 's Friend AP 's friend Relevant Existence a presentation Rights r obligations classification , . Completeness qfppfq.qepqfehsfta.9mafsomepr.ro assertions : , Accuracy , : amines torso compare . Valuation and Allocation ' www.nagmeaaiisng year figures to last prepayments pareffamymafn.is#/-F 20×0 I 20×0 - 121000 13,000 - pattern , we can expect o amounts are usually similar the amounts - around the to be accrued 1 prepaid same time too is change that doesnt often likely to be a periodic → since there's , usually there a periodic pattern : y y . scrutinise payments made shortly before latter year end - Accruals → it the look , end to see payments made after year pertain to period covered at - by the FS made payments ( 20 XO ) → prepayments see it ( some o perform → look , at payments made before year end to correct period - services paid for pertain to the the partially pertain could to 20×0-11 ) analytical procedures example : analyse the overall IF an - expenses level or - widely → might expense varies difference in payment a year on year date → - ES are swor9d4Mh ' o drawn prepayment → ensure that the the prince the accruals / matching goods received not invoiced → there → payables balances goods since the 1 will be recorded liability purchase Dr inventory Cr - must supplier A in ' , , but since the becomes Dr inventory not invoiced goods received letter From e. g . all statement inventory the corresponding - been invoice has not the directors to received . accrual letter of representation → when be recorded it Cr o AP sing "eoogni as expenses they accrual may be timing differences b/w suppliers balances and D a i.ie/ the and the auditors making certain representations Financial statements in the liabilities have been accounted For based c. not 're occur they when on paid) need for accrual up using " "" be due to owvoemfsia enema inventory HAW @ nnttoryy assertions : Relevant Existence a presentation Rights r obligations classification Completeness $71 Accuracy , , Valuation and Allocation business that manufactures Inventory is usually material For → directly → in affects particular the 0 is and cc quantity of the inventory of old - do during what auditors should a STOCK take to ascertain this !!:{Ignites!! em!! :O: " . • checks → listing to Floor to listing → some floor cut off • inventory sheets opening opening ( less ) cogs 110 , 0001 : COGS - closing : closing 15,000 20,000 Revenue : (less) COGS : ( less ) ( 10,000 ) COGS - " l9'°¥go¥ u , 000 Gross 10,000 Gross than NRV → what the NRV → costs may include : i. will " - IE o → → in profit would be purchase' adjustments purchases incorrect perform closing inventory correct → to adjust purchases profit in 20×0 or sales Coas → correct of the sales whether x ' overheads ) - SHELF 01A I PKT 28 , sea page , inventory : : Dr or at the purchase not the costs are invoice ) lower I higher Invoices - agreed to costing . , show consider whether inventory client 's premises the treatment inventory or AP Dr AR or inventory ' accounts and the but for every value the should Follow records quantity For specialised inventory recognise purchase payable' ← over down below cost need to be written retail → goods , consider the for ) sale ( Jm⇐II÷÷÷¥wNesw"aIIFo , inventory , not in has to " received before Year end circumstances, goods → on normal ab les purchases & pay can be found in inventory : , :f"""µ"# / ftp.YR returned in For the Closing inventory $ , added , $1 put balance always question of ownership → goods may be held at ) - been determined by looking ( including can be → o be costs unit value = management o , cut off ( purchases have agreed to suppliers - costs conversion . profit profit ↳ numbered sheets inventory sheets disagreement purchase price . added etc Should be T B any value 20 , 000 : All usually considerable be can %iiMpIe - Revenue , example renren.iocaum.oas.si# \ Page should not count lrewrd Inventory in the warehouse I mixed team ( 1 From warehouse, have a ( can inventory o . given out be department the value of -11,000 19.000) familiar with the steps instructions have to recovered are : : - is to The best solution ) from other 25,000 : be staff may not 3rd party inventories that see , B 251000 : (less ) and cogyunat, tewannfswor o → there A damaged - dispatch notes Illustration closing inv area important to ° ORIGINAL the count sequentially pre numbered inventory . tests - All and → a opareninnuemyngrwe.eay.nineune.niorgm.io#otnismsnouiabepre- completeness G Rws (stock lake) count area ascertain existence , ascertain , a- the year → For ensure that and """" counts slow-moving preparation of the sorted out -7 easily identify has to be tidy and o counts of the inventory test take note of the last few ° " too much → write physical inventory end year mostly performed once is required, careful advanced planning i. management " - , value should its includes stock take as it's any discussion w/ year on Instructions o instructions look at the issued in advance , identify shortcomings for , decide what → → not as saleable inventory ( old auditor may rely main aspects of - properly described it's make sure . be ( as its condition this includes consideration down to NRV) - l sells goods COS) deducted in calculating losing inventory is check : auditor has to , assets) BS ( current has to be assessed ) " cookies → ✓ ° . , . moving damaged - , cut off - or profit obsolete inventory year end sewing prices after may getting consider consignment on → on . is added to basis , expert to an vice versa ( sales) snipped before end year " , norma, circumstances goods recorded in AR 's" not still be in inventory , but should IE : o - still in ' recorded , but the goods sales is Inventory overstatement of fury → ( even though the warehouse , sales goods have is already not left recorded) Inver the - nnoonn-ccuurrrreenntaassss.ee#$ Relevant Existence a presentation Rights r obligations classification , . Completeness q fj.BY Ferhat are non - some procedures current assets assertions : , Accuracy to o , → many of the non current assets are → check for existence from books ( non longer exist - assets IF the helps auditor scrutinise RAM examine test 01 B Boller 01A likely damage invoices respectively Form purchase requisition a it was ( Rem expense = expenses amounts as of the supported by are discussed in the board cap ex capitalised ) , = meeting per GL to the in the register the detail cost a non - current assets register depreciated amounts accumulated T 2 . 000 to ensure → may be possible through class of assets 2.000 3,500 → t fully depreciated on ' reasonableness test assets → re perform a ' total on depreciation for a sample of detailed calculations on individual assets total (per client) 7,500 ? Total ( per auditor ) 71200 - 300 calculations accuracy → - Difference check to reconcile to the depreciation oreperform ( 3 yrs useful life) oven due to impaired $ depreciation oven 01A reconciliation should and register ) to Floor completeness FS balances → example the expenses disposed be receipts & purchase cash → current assets needs to be asset Fifth high value of - must → to addition is very material → to ensure of reasonableness it any to check is material → addition H ° no Checking disposals & additions → IF ° ( inspection perform physical → 0 . Valuation and Allocation p Is reasonable this o - disposals check for register to ensure that the → ( cost and = → when an auum is traded asset Fair value of is properly adjusted depre are taken . old - out of the register . Profit I loss is properly calculated) in , asset should be counted as disposal proceeds t included in the cost of new asset o inspect documents of title → o o that the confirm → rights & obligations purposes for e.g . agree the all requirements of IAS 16 PPE assets revaluation in the same class have amount to a valuation accounted have been been met revalued report → other and OCI com pre shown income For confirm that gain is correctly in equity in revaluation surplus in SOCE → stm of changes separately based on revalued amount expense depreciation o recalculate to retained earnings in o . → revaluation amount may be transferred From with in accordance IAS 16 surplus BB aannlk a a presentation Rights r obligations classification , . Completeness , occurs Accuracy . Valuation and Allocation , auaitoseomiiriormaneiaiiiisiaabcaonumiei: n'iii. :O / of:L's's event assertions : Relevant Existence aanndd Ccaasshh me client's bank - en → o any show any → → → will behalf of on and the I bank charges as evidence normally perform reconciliation loans client the that cash is correct amount certificate bank to the the bank statement agree the balance per to ( outstanding) deposits a un presented cheques the uncleared agree cleared are 's bank statement to confirm that they month next items For reconciling the bank statement as adjusted ' confirm that if the client has → to → it → for overdrafts interest IF a balance per client 's books material amount of confirm the existence the balance is using ' the agrees to the . the bank holds that assets → → auditors which the bank has any security and immaterial , imprest system physical cash → some accuracy of the cash auditor may still perform ( cash t authorised vouchers cash cash count = counts will be carried out balance Imprest due to balance ) high risk of theft → test controls authorisation on the of vouchers replenishment of float during the interim and aauuddiitt llhhteerrnnaall y/ L .am#rn:an:g mro:nt-ortne/ : im:iaeYim iea.ng:i s t Definition an appraisal & monitoring activity " , on the adequacy effectiveness of Internal 07 BUI control , other experts if auditor • , whether it auditor 's expert reasons to is evidence the an management audit audit USA 620) the necessary expertise 1 a management expert • Planning at - - - - ° Other the , nature , following matters must be agreed; work scope and objectives of respective responsibilities Nature that external . scope and timing the expert observes auditors ( NOT tested of communications confidentiality in AA) of IT controls A with external auditors * and has the supported by organisational access to status TCWG professional qualifications & experience adequate resources IA applies a systematic µ disciplined approach to i → has o → → planning performing → 's expert work have tests liaises direct IA is competent → assertions ( may be IA auditor 's expert ; ° ( ACCA COVER) sufficiently reliable For it management does not - to the IA is objective → has ( ISA 500) sufficient assists in obtaining or EA) needing evaluate - - o capabilities t objectivity of their work → → system IA , provided that : the work of preparing the in competence the evaluate - - f money audits for control A ) Audit Committee CAC , appropriateness - → the ←§ using as work ; wants to use the evaluate - reports to objectives management operation for internal checks value → , agents lawyers ) assist management FS ( estate 's expert → management • an element a m.rs; ;; e.this:S:p .in#r:iti:.ne:.ie:e.onom → the independence of corporate risk assessment . may rely on working papers prepared of IA includes helps achievement aids → by the IA internal audit Using the work of experts such o out for more external auditors to review the achieve to , codes ' audit need for internal & directors a required are Directors management to corporate governance under & of → : £ Hence the main function = report look Functions :*:: :: f examine , evaluate , : documenting its activities ( including performing QC ) Purposes of audit documentation Audit documentation # ( ✓ Thet Quality control Typical contents OF working papers - title date - prepared - work has been done properly senior staff to review the junior staff 's " :÷÷÷÷:÷÷:÷ Permanent File ° ; , often ; as does not information that contains description - & enable auaiisi.EE?t:::::::;:ai:tm::::::Y.::::::..i:p::::: types . change accounting system of :::÷÷:÷÷÷:÷÷÷ .. . trend) (to see the conclusion from the work performed reviewers signature show that the audit o work → ÷÷÷÷÷÷÷÷÷÷÷:÷÷÷÷÷÷÷ - o date of review 0 Current contains audit file , the FS being ✓ Quality control ( ISA 220 ) policies quality control → the objective is control leadership the EL is responsible for the overall Ethics ° appropriate are partners are ; QC requirements • applicable legal standards & 1 engagement issued by the firm reports o assurance that; professional requirements regulatory and procedures are the responsibility provide reasonable to audit complies with o → control systems , States that quality quality and audit firm of the performed work audited + audit alert the El has to remain , quality of the audit engagements and through observations enquiries for evidence of non compliance - El has to be appropriate El must be to properly another the - - - additi ons listed entities audit { - - - and capabilities direction , supervision reviews , , before etc procedures should audits l independent ) partner the are report EQ CR ( Engagement Quality will be appointed to perform undergo an control Review) objective significant judgments made by the engagement team involves ; Discussion significant matters with of EL FS and the audit report of the Review of selected audit documentation Review Evaluation of the conclusions reached Hr to & consider 's consider the team 's evaluation of the firm consider it consider , y appropriately operating out of the ) review signing ( HOT farmed he that the Qc evaluation - For engagements the conclusions are and deem audit quality provide evaluation of o , satisfied that team has the appropriate competence perform the interest Public o approach Monitoring ensure → and audit relationships Engagement performance El has to o satisfied with the Assignment of engagement teams o o continuance of client and Acceptance o it appropriate audit the co www.M ' conclusion documentation on significant judgments independence differences of selected reflects Kr to the opinion the made report is appropriate whether the engagement has taken work place performed support #rraauuddaannddeerrrroorr I :*:#informers theft → open < assets of records I misappropriation of deliberately falsifying in the management → responsibility to prevent and 's communicated Fraud must be → 1 material misstatement remember : management relevant to know non . that - events will - existed at the end of the in ④ not going January ( year end is Dec) to liquidation be in a bad financial position possible liability arising from past existence of the liability will only be confirmed by Future events Different treatments of liability 's , have written A the condition December no Cr → provision for possible obligation but - possible existence future events use the maybe require disclose in notes to Meyerwould i - leave it V need to pay ? # dont think maybe likely provision is needed in flow → disclosure needed is assets 's of the economic virtually certain - so → nothing is needed benefits it's not a is contingent ✓ show in SFP pr Assets Cr most → it the arising From past events , will only be confirmed by Different treatments of → disclose in but y asset whose best estimate does not likely to be obligated , existed existed FS # • FS V not adjust kitties * Uconn#nnggeenntaasssee - → IF inflow is probable notes to FS v → not - outflow of resources → need to notes to off the Factory ) the fire after , down in January - liability V Dr expense after the year end, requires the outflow for the occur end is Dec) - • provision immaterial as a, events ' → are end factory burning in December, A would probably should believe uncorrected misstate arose after the reporting - → that - representation from mgmt written they require the FS to be adjusted date - ( ccoonnttiinnggeennttll iaabbx of resources obtain adjusting event c. year customer A A - example : example : " if the present obligation o events year conditions reporting period → → of uncorrected assess materiality misstatements → does - provides evidence of conditions TY ✓ o ogidveornse that requires the FS to be adjusted - they may be for the stakeholders f L qualified I communicated to management / not correct the misstatement involved) ( often , AC will be merits - 4- report , a in adjusting event of report occasionally occur and should be ° is implicated yF0nmg an issue f ' ' corrected -7 SSUUbbsscc.gg#nn&@vveenn tr has an active duty # auditor to a management refuses , but the the misstatement should be auditor believes it correct detect TCWG if results to :{ niameisniiaiemaen: o lading and form of teeming may exists with B 's receipts) ( theft of A 's receipts , cover it → ¥ OF cash a - likely to be obligated disclose - in the leave it V ' - wwrriitteennrreepprreesseenrrtaatiioonns IS A 580 auditor must obtain , acknowledges o written representations all transactions representation t of → alone IF , all relevant provided the auditor with it has o Lor . that : responsibility for the preparation applicable Financial reporting framework its o letter I TCWG , IF applicable) of the FS in with the accordance → management from cannot management been recorded audit evidence have information reflected a in the FS provide sufficient appropriate audit evidence for an assertion : 's intentions are required consider , reasons for management 's intention o intentions management's ability to pursue its intentions 's past history in carrying out o o management 0 Other info may contradict that useful intention management's particularlycompleteness ~ ascertain , in Lor ; → typically found subject matter specific representations auditor fraud has been disclosed to 1 suspicion of any knowledge to the examples of - o all known o auditor → t 1 actual litigation accounted for and all events o plans relating to has management's going management • i. the auditor reassess; 's competence management ° reliability of all Not reliable , an it more integrity representations Hence, auditor should disclaim are inconsistent with refuses to provide should o are opinion , as financial reporting requirements the FS have concern arise when 's potential problems o written representations been disclosed in accordance with to the date of occurring subsequent 0 claims I disclosed been assessment other audit representations → adjusted I disclosed & its matter remains ethical values , etc audit evidence on the feasibility evidence FS it the written representations to unsolved