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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:35:38] ansi : SESSION 5 - Planning and risk assessment , part 1
[17:35:49] ansi : okay, so we start something more serious
[17:35:55] ansi : which is examined all the time
[17:36:05] ansi : but first chapter is just general
[17:36:09] ansi : however le's stil take a look
[17:36:17] ansi : Identiny the objectives of auditor
[17:36:19] ansi : so what are those
[17:36:29] ansi : ISA 300
[17:36:48] ansi : well try to use common sense
[17:37:18] sue888 : to give independent opinion
[17:37:23] sfoz : to express an opinion onthe financial statement
[17:37:39] ansi : and to do what before giving this opinion
[17:37:57] sfoz : by assessing risks of material misstatement
[17:38:11] sue888 : about the performance of the company the true and fair view of FS
[17:38:15] sfoz : through understanding the entity and its environment
[17:38:22] ansi : look at the same of topic
[17:38:24] ansi : name
[17:38:47] ansi : it might be surprising , but auditors don't just come and give opinions
[17:38:53] ansi : they ...work
[17:39:01] ansi : they plan their work
[17:39:02] sfoz : they plan their audit
[17:39:04] ansi : and then perform it
[17:39:06] ansi : yes
[17:39:15] ansi : so according to ISA 300
[17:39:36] ansi : the objective of the auditor is to plan the audit so that the audit is performed in an effecitve manner
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:39:51] ansi : and that's why this part of syllabus is so important
[17:39:59] ansi : the better u plan it , the better u perform
[17:40:34] ansi : but we need to know a more detailed purpose
[17:40:46] ansi : so why planning is important
[17:41:07] sfoz : to define the objectives and scope of the audit
[17:41:40] sfoz : wether the ressources are available to conduct the audit
[17:41:58] sfoz : wether there will be need for expert assistance
[17:42:06] taimurshahzad : by planning u can spend ur time/resources efficently
[17:42:18] ansi : {sfoz} yea sfoz
[17:42:32] sfoz : to form the team that will be involved in the audit
[17:42:35] ansi : yes taimur
[17:42:44] ansi : right sfoz
[17:42:46] ansi : good one
[17:42:46] taimurshahzad : u can fine out what areas r more risky n spend more time there n less on less risky areas
[17:42:54] taimurshahzad : find not fine*
[17:42:59] ansi : yeap
[17:43:09] ansi : it helps to identity areas of risk
[17:43:37] ansi : also helps to identity and resolve potential problems on timely basis
[17:43:37] sfoz : to understand the industry, the entity and its environment
[17:43:41] ansi : if u organize it well
[17:43:45] ansi : yeap
[17:43:58] ansi : great
[17:44:10] ansi : so u mentioned msot important points
[17:44:27] ansi : and how do u thnk what's the bigger puropse behind all that
[17:44:30] ansi : to reduce what
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:45:04] sfoz : and to know if you want to get involved in auditing for that organisation
[17:45:28] ansi : oh yea
[17:45:36] ansi : u might refuse after al
[17:45:51] ansi : but suppose u don't plan to refuse
[17:45:56] ansi : so all of that helps to reduce the risk
[17:46:06] sue888 : to reduce the risk of giving wrong opinion
[17:46:08] taimurshahzad : u do that before accepting 2 do the audit
[17:46:10] ansi : the risk of giving wrong opinion
[17:46:19] ansi : {sue888} lol give me five
[17:46:20] ansi : :D
[17:46:28] ansi : {taimurshahzad} yea
[17:46:49] ansi : oaky now syllabus says
[17:46:59] sue888 : am I wrong, I can't see what you discussed
[17:47:10] ansi : you are right!!!
[17:47:34] ansi : that the issue we discussed above should be discussed with an attitude of professional sceptisism
[17:47:45] ansi : and to exercise professional judgmenet
[17:47:51] ansi : what is that prof sceptisism
[17:48:17] ansi : ISA 200
[17:49:04] sue888 : be cautious about the info given by the company
[17:49:22] ansi : yes
[17:49:24] ansi : that mean
[17:49:28] ansi : question yourself
[17:49:33] ansi : are you doing right or wrong
[17:49:39] ansi : being alert about what you are doing
[17:49:47] ansi : and to conditions that might lead to error
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:49:54] sue888 : yes
[17:49:55] taimurshahzad : Ab attitude the includes a questioning mind being alert to conditions which may indicate
possible misstatment due to fraud n error?
[17:50:01] ansi : or ....trust but check
[17:50:02] ansi : :)
[17:50:09] sfoz : lol
[17:50:17] ansi : {taimurshahzad} haha , wow , you know it byheart ?:
[17:50:18] ansi : :)
[17:50:34] ansi : so in case of auditing
[17:50:41] ansi : u as auditors cant' believe everything that management says
[17:50:48] taimurshahzad : some what yeah had a test of it today
[17:50:49] ansi : u need to check all that information :)
[17:51:03] ansi : {taimurshahzad} wow,graet that it's still in your head after the test
[17:51:13] ansi : usually as soon as we pass the test, it's gone with the wind :D
[17:51:16] ansi : like it's never been there
[17:51:22] sue888 : always check, need to get third part statement or evidence
[17:51:32] ansi : {sue888} yeap :)
[17:51:44] sue888 : party*
[17:51:48] ansi : hm
[17:51:57] ansi : syllabus asks a bit strange question
[17:52:03] taimurshahzad : well i had 2 study alot for it n depending on the marks n get loot from dad :d
[17:52:18] ansi : explaijn the need to conduct an audit in accordance with ISAs
[17:52:33] ansi : i beleive it should be something similar to what we discussed about need for regulatory framework
[17:52:38] sfoz : it is comparable
[17:52:45] ansi : {taimurshahzad} haha , your dad examined you?
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:52:53] taimurshahzad : nope
[17:53:00] ansi : yeap, as a point
[17:53:09] sue888 : based on the guideline
[17:53:15] sue888 : to give opinion
[17:53:20] taimurshahzad : i get loot for getting 80-100% marks
[17:53:40] ansi : {taimurshahzad} ah ..and how much u got ? :)
[17:53:55] taimurshahzad : dont know will find out 2morrow @ college
[17:53:58] sfoz : consistit is comparable over the years and with other companies in the same industry
[17:54:11] ansi : {taimurshahzad} okay :)
[17:54:22] ansi : {sfoz} yea, common sense helps
[17:54:44] ansi : what is itnersting is that
[17:54:48] ansi : i can't find it in any book
[17:54:55] ansi : at least not in risk and planning chapter :D
[17:55:34] taimurshahzad : did u c the sfoz book?
[17:55:40] ansi : sfoz book hmm
[17:55:44] ansi : i think no
[17:55:45] sue888 : just like company preparing FS will be based on IFRS or GAAP
[17:55:54] ansi : yea so
[17:55:58] sfoz : what book?
[17:55:58] sue888 : aduit will prepare their statement based on ISA
[17:55:59] ansi : that is our regulatory framework
[17:56:02] ansi : whih we must follow
[17:56:06] sue888 : yes
[17:56:12] ansi : otherwise it won't have legal power
[17:56:19] ansi : plus comparability as sfoz said
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[17:56:26] ansi : guideline ans all hat
[17:56:53] ansi : okay well
[17:56:59] ansi : let's better move to risk
[17:57:00] ansi : :)
[17:57:06] ansi : aha
[17:57:08] sfoz : but
[17:57:10] ansi : components of audit risk
[17:57:12] ansi : yea?
[17:57:39] taimurshahzad : control inherent n detection
[17:57:48] ansi : {taimurshahzad} fantastic
[17:57:56] sue888 : riks of not identifying the material error in FS
[17:57:58] ansi : all together those form an audit risk
[17:58:00] sfoz : sometimes there iare requirements for additonnal procedures than those required by the IAS
[17:58:06] ansi : {sue888} what is that risk?
[17:58:16] ansi : {sfoz} and?
[17:58:37] sue888 : risk of giving wrong opinion
[17:58:47] ansi : {sue888} there is a name for it sue
[17:59:10] ansi : well let;'s discuss one by one
[17:59:15] ansi : Inherent risk
[17:59:18] ansi : whati s that one?
[17:59:22] sue888 : give unqualified opinion which they should not have given
[17:59:28] ansi : those terms are oftn examined
[17:59:31] ansi : iin this or that extent
[18:01:10] taimurshahzad : it is the risk that a misstatment occurs for the 1st itme?
[18:01:13] taimurshahzad : time*
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:01:15] ansi : yeap
[18:01:26] ansi : it's all the risk of having a bad client :)
[18:01:27] sfoz : Inherent risk is the risk of material misstatement attached to the type of business
[18:01:29] ansi : for us as auditors
[18:01:32] ansi : yea
[18:01:38] ansi : from the name
[18:01:42] ansi : inherent
[18:01:48] ansi : u can understnd the idea
[18:02:05] ansi : it's the aquired risk .because either the situation in economy is not good
[18:02:13] ansi : like recession or anything
[18:02:20] ansi : and this affects the quality of work of employees
[18:02:27] ansi : or intenal one
[18:02:28] ansi : well let's say
[18:02:34] ansi : the one who prepares fS is drunk
[18:02:36] ansi : al the time :)
[18:02:40] ansi : so
[18:02:41] stasi : :D
[18:02:45] ansi : hi stasi :)
[18:02:49] stasi : hi
[18:02:50] sue888 : hi stasi
[18:02:53] ansi : so nice to see u here :)
[18:03:05] ansi : so any of those internal or external factors
[18:03:05] taimurshahzad : so the one who hired the drunk was drunk also
[18:03:10] stasi : {sue888} hi
[18:03:13] ansi : yea |:D
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:03:20] ansi : so the whole company is drunk
[18:03:21] taimurshahzad : hiya Stasi
[18:03:21] ansi : :D
[18:03:25] ansi : which is a bit ....
[18:03:28] ansi : well good for them
[18:03:34] ansi : but not good for what will happen later
[18:03:35] ansi : :D
[18:03:40] ansi : anyway
[18:03:42] stasi : {taimurshahzad} hi
[18:03:49] ansi : it's the risk that the client will make errors
[18:03:55] ansi : because of any of those factors
[18:04:10] ansi : oh btw ....they mentioned interesting point in lsbf lecture
[18:04:18] ansi : in audit ..don't mix client and customer
[18:04:24] ansi : client is the one whom you audit
[18:04:42] ansi : and customer is the customer of your client
[18:04:50] sue888 : lol
[18:04:57] ansi : :)
[18:04:59] sue888 : true
[18:05:06] ansi : so :)
[18:05:09] ansi : control risk
[18:05:12] ansi : now what is that one
[18:05:27] taimurshahzad : could be audit customer
[18:05:34] ansi : i'll grab some choco milk :P
[18:05:45] stasi : rpoisk that the internal controls will; not st an error or misatsemetnt if it comes up and lets it through
to the FS
[18:06:03] stasi : *spot
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:06:25] taimurshahzad : its the risk that the misstatments r not prevented/detected/corrected in a timely basis
[18:06:31] ansi : are you okay stasi ? :D
[18:06:44] ansi : :D it took me a while to understand what you are sying :D
[18:06:47] ansi : saying
[18:07:05] ansi : but yea it's true
[18:07:10] ansi : yeap
[18:07:17] ansi : the risk that your system of control is not detected
[18:07:19] ansi : and not stopped
[18:07:25] ansi : ups
[18:07:27] ansi : vice versa
[18:07:35] ansi : that error is not detected or stopped
[18:07:38] ansi : by your system of control
[18:08:12] ansi : again
[18:08:19] ansi : u might have a high inherent risk
[18:08:30] ansi : but if u have a good system of control
[18:08:36] ansi : and a low conrol risk
[18:08:40] ansi : then everything's gonna be fine
[18:08:49] ansi : then ...detection risk
[18:08:53] ansi : what is that one
[18:08:56] taimurshahzad : depends on the lvl of high n low
[18:09:19] stasi : sorrycomputer acting crazy
[18:09:23] sue888 : find out the risk through internal checking , reviewing
[18:09:52] ansi : {stasi} i see :))
[18:10:03] sue888 : mine one as well
[18:10:04] ansi : {sue888} who finds ?
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:10:11] stasi : Detection Risk is the risk that the auditor will not detect a misstatement in the FS
[18:10:16] taimurshahzad : its the risk that auditor will not be able 2 detect material misstatments
[18:10:18] ansi : perfect stasi
[18:10:21] sue888 : you are right
[18:10:24] ansi : yes
[18:10:31] ansi : so that one already depends on auditor
[18:10:48] ansi : and if u are to give a definition of audit risk
[18:10:51] ansi : what would u say
[18:12:31] stasi : .
[18:12:35] sfoz : it comprises 3 elements inherent, control and detection riks; that are all risks that material
misstatement go unprevented, undetected or uncorrected
[18:12:37] taimurshahzad : iis the risk that the auditor expresses an inappropiate opinion?
[18:12:40] ansi : that's all you would say stasi?
[18:12:43] ansi : interesting :)
[18:12:50] stasi : The risk that the auditor gives a wrong opinion on the statements
[18:12:57] ansi : {sfoz} yea , true
[18:13:01] taimurshahzad : she using invisible ink
[18:13:04] ansi : {stasi} {taimurshahzad} yea
[18:13:09] ansi : {taimurshahzad} ahhh
[18:13:12] ansi : i didn't figure at first
[18:13:37] ansi : so it's a combined risk of material misstatement first occuring (IR)
[18:13:45] ansi : then gettung by the system unprevented
[18:13:47] ansi : CR
[18:14:03] ansi : and then getting pased by the auditor undetecctd
[18:14:04] ansi : DR
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:14:17] ansi : and going into FS
[18:14:30] ansi : and as u said it's a risk that auditor opinion is wrong
[18:14:37] ansi : now there is a lovely thing
[18:14:41] ansi : called risk equation
[18:14:44] ansi : what is that one?
[18:15:08] stasi : AR = IR x CR X DR
[18:15:13] taimurshahzad : IR*CR*DR+AR
[18:15:20] ansi : yeap
[18:15:21] taimurshahzad : =AR*
[18:15:32] ansi : and which level of AR is acceptable?
[18:15:47] stasi : low
[18:15:54] taimurshahzad : reaonable
[18:15:55] ansi : of coruse
[18:16:00] ansi : look in audit u have
[18:16:05] ansi : low medium high ..
[18:16:10] ansi : but most of tne it's low and high :D
[18:16:14] ansi : so here it's low
[18:16:26] ansi : and what does it actuall mean
[18:16:32] ansi : can audit opinion be wrong?
[18:17:46] sue888 : that means if you know your client's internal control is weak. misstament highly likely
[18:18:02] ansi : em
[18:18:04] stasi : Could be possible..but not likely if most of errors are detected
[18:18:05] sue888 : you need to do more ( highly % check on their work
[18:18:23] sue888 : to give your opinion
[18:18:32] ansi : stasi is more to the point sue
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:18:48] ansi : low audit risk means that there is a risk that there are errors
[18:18:58] ansi : but in general most of them are dected
[18:19:07] ansi : however it might also mean that audit opinion is wrong
[18:19:12] ansi : and auditors have to accept that fact
[18:19:19] ansi : if u go back to risk equation
[18:19:22] sue888 : k
[18:19:25] ansi : and think very mathematically
[18:19:40] ansi : why audit risk can't be just ..nothing
[18:19:50] ansi : why it's still low ...but completely zero
[18:21:05] sfoz : the errors detected should be material
[18:21:07] ansi : i mean not zero
[18:21:27] ansi : {sfoz} yea , it has to do with materiality for sure
[18:21:29] ansi : but again
[18:21:34] ansi : think mathematically
[18:21:38] ansi : why AR is never zero
[18:21:47] stasi : For it to be zero then there would have to be perfect systems of control and detection
[18:21:48] sfoz : what is AR?
[18:21:52] ansi : audit risk
[18:21:57] ansi : {stasi} yes
[18:21:58] stasi : everyone would have to be perfect and that's not possible
[18:22:03] ansi : any of components should be zero
[18:22:05] sue888 : because IR, CR, DR will not be zero
[18:22:10] ansi : and in real world it's not posible!
[18:22:13] ansi : right!
[18:22:14] ansi : :)
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:22:18] azhar : wow
[18:22:21] ansi : lol
[18:22:24] ansi : hi azzi
[18:22:28] ansi : :)
[18:23:09] ansi : so that's it
[18:23:13] azhar : HI :-@>
[18:23:19] ansi : thank you :)
[18:23:26] azhar : session end:o
[18:23:29] ansi : |:D:D
[18:23:30] azhar : or am on time :D
[18:23:31] ansi : i wish :D
[18:23:41] ansi : but those ones won't let me go like that
[18:23:46] ansi : so ..let's take one question
[18:23:50] ansi : which is a bit harder
[18:24:01] ansi : but we should make it anyway
[18:24:42] ansi : List 8 factors which the auditor would bear in mind when assessing the audit risk of a company. You
should set our your answer under the headings : inherent risk and control risk
[18:24:54] ansi : so 4 factors for one and four for another one
[18:25:23] ansi : so inherent risk
[18:25:28] ansi : when auditor tries to approach it
[18:25:34] ansi : to be able to figure out the level
[18:25:44] ansi : which factors he would consider
[18:26:14] taimurshahzad : industry in which the client operates
[18:26:22] sfoz : IR the industry, the entity, the finance, the ownership, the environment
[18:26:44] ansi : sfoz
[18:26:46] ansi : amazing :D
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:26:57] ansi : {sfoz} :star:
[18:27:09] ansi : and what you were saying about how weak u are in F8
[18:27:30] ansi : so if u think of inherent risk and factors that influence it
[18:27:35] ansi : u look at situation in economy
[18:27:42] ansi : or environment
[18:27:50] ansi : u think of entity, it's employees
[18:27:53] ansi : how tired they are
[18:28:04] ansi : u think of system of finance
[18:28:14] ansi : and one more thing you search for any profit related payment
[18:28:19] ansi : why is this one , tell me?
[18:28:39] sue888 : to get if they have incentive to cook their books
[18:28:44] ansi : yea
[18:28:47] ansi : cook the books
[18:28:50] ansi : nice expression :D
[18:29:14] ansi : so , u don't need that creative accounting over there
[18:29:18] ansi : cos u can never trust it
[18:29:36] ansi : profit related payments create a really high risk that results will be manipulated
[18:29:53] ansi : and another one is complication
[18:30:00] ansi : if things that people deal with
[18:30:03] ansi : in those statements
[18:30:04] ansi : are hard
[18:30:08] ansi : risk of mistake is hrder
[18:30:14] ansi : so the more complicated operation is
[18:30:20] ansi : or ...any issue in FS
[18:30:24] ansi : the higher the risk of mistake
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:30:44] ansi : now control risk
[18:30:48] ansi : what are the factors
[18:31:05] taimurshahzad : CR new system: temp staff : lack of segregation of duties : lack of physical n IT controls?
[18:31:18] stasi : WOW
[18:31:59] ansi : :D:D:D
[18:32:04] ansi : taimur :D
[18:32:12] ansi : {taimurshahzad} :star:
[18:32:23] taimurshahzad : :8)
[18:32:24] ansi : looks like i'm not the only one who listened to lsfb lecture for today
[18:32:26] ansi : that's good:D
[18:32:47] ansi : so
[18:32:51] ansi : segregation of duties
[18:32:54] ansi : that's point 1
[18:33:03] ansi : why this segregation is importnat
[18:33:40] sfoz : to reduce risk of error and fraud
[18:33:45] stasi : check and balances on each other
[18:33:59] sue888 : ruduce the chance of minupulation
[18:34:01] ansi : yea of course
[18:34:11] ansi : one person can't do everything
[18:34:20] ansi : first of all he can't check himself
[18:34:34] ansi : secondly . it might be too much load
[18:34:39] stasi : no segregation means easier to cheat company
[18:34:40] ansi : so risk of mistakes and manipulation is high
[18:34:48] ansi : yea
[18:34:54] ansi : now accounting controls
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:34:55] taimurshahzad : n he knows that he is not being watched much n can do fraud
[18:35:00] ansi : reconciliaions
[18:35:04] ansi : why those are important
[18:35:11] ansi : {taimurshahzad} yea
[18:35:26] sfoz : for completeness and accuracy
[18:35:43] ansi : yeap , just as it is
[18:36:04] ansi : to perfor regular control and ensure accuracy
[18:36:13] ansi : next one is personnel
[18:36:19] ansi : interviwe system
[18:36:21] ansi : if it's weak
[18:36:36] ansi : chance of hiring not very competent people is also high
[18:36:43] ansi : and final one ..internal audit
[18:36:48] ansi : why internal audit is so important
[18:36:51] sfoz : effectiveness is compromised
[18:36:53] ansi : :D ..that' a bit of revision D:
[18:36:59] taimurshahzad : risk of theft n damage 2 assets
[18:37:29] sue888 : to reduce external auditors'work
[18:37:48] sue888 : more important to reduce the chance of making error
[18:38:04] ansi : {sue888} yeap
[18:38:17] sfoz : to examine, evaluate and maintain the adequacy of internal control
[18:38:31] stasi : they make sure procedures and policies are being adhered toby staff
[18:38:56] ansi : {sfoz} {stasi} yea
[18:39:00] ansi : okay :)
[18:39:04] sfoz : they audit areas left by external audit
[18:39:26] ansi : no we need to discuss materiality
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:39:52] ansi : so
[18:39:54] ansi : generally
[18:39:59] ansi : when misstatement is material
[18:40:27] sue888 : it will influcence the decision of the users
[18:40:46] ansi : yes
[18:40:47] ansi : to the point
[18:41:16] tud21 : when the decision process is affected by the user of the financial statement
[18:41:26] ansi : Information is material if its omission of mistatement could influence the econimic decisions of users
taken on the basis of FS
[18:41:48] taimurshahzad : ISA 320?
[18:42:00] ansi : how
[18:42:02] ansi : yes
[18:42:10] ansi : so how materiality is determined
[18:42:38] sfoz : by conducting materiality performence?
[18:42:44] stasi : The auditors determine it by using guidelines
[18:42:47] tud21 : by it's nATURE
[18:42:49] taimurshahzad : the circumstances surrounding the entity
[18:42:52] sue888 : depends on the size of the company
[18:42:52] tud21 : TIMING
[18:43:01] sue888 : and nature of the error
[18:43:02] ansi : all of those
[18:43:02] tud21 : AND THE EXTENT OF THE AUDIT
[18:43:16] ansi : tud, click on caps lock once
[18:43:18] ansi : thank u:)
[18:43:32] tud21 : sorry
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:43:42] ansi : materiality is amtter of professional judgement
[18:43:52] ansi : nd as sue said it's very much dependsnt on size of company
[18:43:52] sfoz : lol
[18:43:55] ansi : size of business
[18:44:09] ansi : so to determine it auditor should consider
[18:44:09] taimurshahzad : nature also
[18:44:13] ansi : yes
[18:44:18] ansi : size and nature of misstatements
[18:44:21] ansi : and business :D
[18:44:29] ansi : circumstances surrounding entity
[18:44:42] ansi : and informationa needs of users as a group
[18:44:57] ansi : what is a materiality threshold
[18:46:02] sue888 : depends if they are revenue or profit
[18:46:14] ansi : so what is that actually sue
[18:46:22] ansi : in other words
[18:46:30] sfoz : benchmarks?
[18:46:35] ansi : kind of
[18:46:38] ansi : it's a level
[18:46:42] ansi : level of materiality
[18:46:50] tud21 : .5%- 1% of turnover
[18:46:51] sue888 : 5%-10% of revenue
[18:46:52] ansi : which depends on what we said above
[18:46:57] ansi : thos are examplse
[18:47:01] ansi : we'll got back to them lever
[18:47:03] ansi : later
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:47:09] ansi : and they vary from company to company
[18:47:24] sue888 : vary from industry to industry as well
[18:47:27] ansi : which are the two types of materiality
[18:47:28] ansi : yea
[18:47:30] sue888 : size of the company
[18:48:06] sfoz : performance materiality?
[18:48:10] taimurshahzad : performance n torerable materiality
[18:48:12] ansi : no
[18:48:32] ansi : what is that torerable
[18:49:02] ansi : qualitative and quantitative
[18:49:04] ansi : :)
[18:49:13] sue888 : yes
[18:49:16] sue888 : :)
[18:49:17] ansi : quantitative - material by size
[18:49:32] ansi : qualitative - material by nanutre
[18:49:34] ansi : nature
[18:49:38] sue888 : the other by nature
[18:49:45] ansi : qualitative is easy
[18:49:49] ansi : you stated mentioning it
[18:49:56] ansi : whuch are typical levels?
[18:50:02] taimurshahzad : hmm i was tought those 2 in class
[18:50:10] ansi : {taimurshahzad} :)
[18:50:23] sue888 : I remembered these 2 as well
[18:50:30] ansi : {taimurshahzad} oka ...well performance we will mention after it ..as for torerable , i haven't heard of it
[18:50:30] sue888 : but didn't click here
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:50:31] taimurshahzad : kk
[18:50:43] ansi : so levels
[18:51:01] ansi : u just said something about turnover
[18:51:13] sue888 : 5%-10%
[18:51:23] ansi : 5-10% of what
[18:51:28] sue888 : turnover
[18:51:31] taimurshahzad : pbt
[18:51:36] ansi : that's alot sue
[18:51:44] sue888 : 1%-5%
[18:51:45] ansi : u know
[18:51:48] ansi : turnover figure
[18:51:50] sfoz : 2.5 to 5
[18:51:52] ansi : is sometimes huuuuuuuuuuuuuge
[18:51:53] ansi : :)
[18:51:54] sue888 : I dont'remember the exaact number
[18:51:54] taimurshahzad : profit before tax
[18:51:57] sue888 : lol
[18:51:59] sfoz : %
[18:51:59] sue888 : I know
[18:52:05] ansi : so better say 0.5 -1% of turnover
[18:52:10] taimurshahzad : turn over is 1/2-1
[18:52:12] ansi : 5-10 of pbt
[18:52:14] ansi : yea
[18:52:20] ansi : or 1-2 of total assets
[18:52:20] sue888 : k
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:52:26] taimurshahzad : 1-2 gross assests
[18:52:29] ansi : taimur knows it all :D
[18:52:48] sue888 : only 5-10 bps ?
[18:52:51] sue888 : are u sure
[18:52:56] ansi : sue
[18:52:59] ansi : em
[18:52:59] sue888 : I don't remember
[18:53:01] ansi : :)
[18:53:04] ansi : just think of it
[18:53:06] sue888 : only rember 5 and 10
[18:53:07] ansi : u might have
[18:53:12] ansi : 3 mln of turnover
[18:53:18] ansi : and just 200 of pbt
[18:53:30] ansi : so 10% of bpt is quite material
[18:53:32] ansi : it's profit!
[18:53:41] sue888 : no
[18:53:45] sfoz : found it in the book. it's right.
[18:53:47] ansi : not material ? :)
[18:53:47] sue888 : it's turnover not profit
[18:54:00] ansi : pbt, profit before tax
[18:54:02] ansi : 5-10%
[18:54:05] ansi : is material
[18:54:23] sue888 : sr
[18:54:25] sfoz : PBT 5% in my book
[18:54:33] ansi : starting from 5%
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:54:37] sue888 : 0.5%-1% of revenue
[18:54:38] ansi : trust me it is :D
[18:54:47] ansi : yes
[18:54:49] ansi : right sue
[18:54:53] sfoz : it's true Sue
[18:54:57] taimurshahzad : revenue=turnover
[18:54:58] sue888 : I remembered it wrongly
[18:55:06] ansi : :)
[18:55:12] sue888 : 1%-2% of total assets
[18:55:19] ansi : yea
[18:55:19] sue888 : 5%-10% profit
[18:55:27] ansi : u are trying to remember ?:D
[18:55:31] sfoz : yes
[18:55:33] ansi : write it down 200 times
[18:55:36] ansi : for a week
[18:55:39] ansi : before sleeping
[18:55:46] ansi : and u won't forget it even if u forget my name one day :D
[18:55:54] sue888 : I remembered it wronly got it mixed with profit
[18:56:01] ansi : okay :)
[18:56:14] tud21 : 5 to 10% of profit before tax
[18:56:18] ansi : lol :D
[18:56:22] sue888 : lol
[18:56:28] ansi : oaky let's all repeat it :D
[18:56:32] ansi : one by one :D
[18:56:35] ansi : come on guys
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:56:36] ansi : we did it :D
[18:56:42] taimurshahzad : 1/2-1 turnover
[18:56:44] ansi : qualitative materiality
[18:56:48] taimurshahzad : 5/10 pbt
[18:56:53] ansi : what is that one
[18:57:24] sue888 : say if it is error on revenue
[18:57:25] taimurshahzad : materiality by amout? (guess)
[18:57:36] ansi : nah
[18:57:41] ansi : amount is qunatity
[18:57:48] sue888 : it is less concerned than errro on director pay
[18:57:51] ansi : yae, you re close sue
[18:57:52] sue888 : for example
[18:57:56] ansi : qualititaive means
[18:57:58] stasi : the type of materiality...may not bee a big number but includes fraud or something
[18:58:01] ansi : the nature of materiality
[18:58:02] sfoz : fraud?
[18:58:10] ansi : yea
[18:58:12] sue888 : the nature of the error
[18:58:14] sfoz : complex transactions
[18:58:14] ansi : so
[18:58:16] sue888 : materiality
[18:58:24] ansi : fraud or illegal
[18:58:29] ansi : or anythinga bout directors pay
[18:58:47] ansi : because you shuld agree that when u just make some mistake in statemne
[18:58:48] ansi : t
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[18:58:56] ansi : or when u made some really illegal thing
[18:59:12] ansi : like didn't pay enough tax or whetver
[18:59:18] ansi : level of materiality is different
[18:59:34] ansi : performance materiality
[18:59:36] ansi : what is that
[19:00:49] tud21 : the amount set by the auditor at less thn materiality for thr fs
[19:00:56] sfoz : it is the amount or amounts set by an auditor as less than materiality for the FS as a whole to reduce
risk of material misstatement to an appropriate low level
[19:01:18] ansi : lol
[19:01:24] ansi : sfoz was less lazy then tud :D
[19:02:02] taimurshahzad : lol i just say ISA 320 it says all :P
[19:02:05] ansi : yand yse it is
[19:02:09] ansi : taimur
[19:02:15] ansi : sometimes it's not enouhg to be so smart
[19:02:19] ansi : specially in my sessions
[19:02:24] ansi : u need to give a full answer :)
[19:02:32] taimurshahzad : k
[19:02:42] ansi : :) but nice tot mention standard number
[19:02:47] ansi : just it won't give u point at exam :)
[19:03:07] taimurshahzad : depends on the marks of the Q
[19:03:12] ansi : mmm
[19:03:15] ansi : it states
[19:03:19] ansi : we do need to know
[19:03:25] ansi : numbers of ISAs
[19:03:26] ansi : so
[19:03:35] ansi : it can only impress marker
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[19:03:51] ansi : which might motivate him to be more loyal to your wok
[19:03:52] ansi : but
[19:04:04] ansi : i'm almost sur that u can't find mark for number of standard
[19:04:15] taimurshahzad : true
[19:04:18] ansi : :)
[19:04:25] ansi : :%%:
[19:04:45] taimurshahzad : but its a 4 line def if u write it all
[19:04:50] ansi : so
[19:04:58] ansi : performance materiality
[19:05:02] ansi : should be a smaller amount
[19:05:07] ansi : the then overall materiality
[19:05:15] ansi : and the total of
[19:05:22] ansi : indenfitie but uncorrected misstatements
[19:05:31] ansi : expectd unindentifid mistatement
[19:05:51] ansi : okay so
[19:05:59] ansi : it looks like a good point to stop
[19:06:04] ansi : what do u think ? :)
[19:06:14] stasi : sure why not
[19:06:17] stasi : lol
[19:06:21] ansi : :)
[19:06:39] ansi : we covered quite a number of things today and time is up so
[19:06:51] ansi : for next time keep studying risk and planning
[19:06:51] stasi : what's next topic for next week?
[19:06:56] sfoz : k
[19:07:00] stasi : ok
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[19:07:05] sfoz : tanx
[19:07:14] ansi : chapter 3-6 ...do't know how much of them we will cover
[19:07:15] ansi : :)
[19:07:22] ansi : we mentioned things from chapter 4
[19:07:30] ansi : and from chapter 6 as well
[19:07:35] ansi : so 3-7
[19:07:39] taimurshahzad : u guys using the bpp book?
[19:07:48] ansi : everyone uses differnt books i gues
[19:07:52] ansi : i use all of them :D
[19:07:55] ansi : when i can :D
[19:08:10] ansi : it was nice to have you in the session
[19:08:15] taimurshahzad : k so what ch will those be in kap book?
[19:08:16] ansi : and tjhank you for being so active
[19:08:23] stasi : {taimurshahzad} we follow the syllabus and not a specific text
[19:08:26] ansi : sfoz and taimur , you did impressive job today
[19:08:40] ansi : sue ...if u didn't prepare at all - then it's great the way how u replied
[19:08:47] ansi : stasi, was very nice to have u insesion :)
[19:08:55] ansi : ah yea
[19:08:58] ansi : when i mention chapters
[19:09:01] ansi : that's from syllabus
[19:09:08] stasi : :)
[19:09:11] taimurshahzad : ah kk
[19:09:12] ansi : thank u stasi
[19:09:23] sue888 : thanks ansi
[19:09:33] sue888 : thank u all
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F8 (Int) – Session 5
11/08/2011 – F8 chat room
[19:09:38] taimurshahzad : thx Ansi
[19:09:43] sfoz : bye everyone
[19:09:44] ansi : you are welcome :)
[19:09:46] littlestart : thanks, ansi
[19:09:48] ansi : it was quite relaxing today
[19:09:49] littlestart : bye all
[19:09:50] ansi : :)
[19:09:59] ansi : take care everyone , have a good rest :)
[19:10:07] taimurshahzad : cya all
[19:10:25] ansi : see u guys! :)
[19:12:40] tud21 : bye
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