Matakuliah
Tahun
: A0294/Audit SI Lanjutan
: 2009
Audit Charter dan Letter of Engagement
Pertemuan 7-8
Learning Outcomes
Pada akhir pertemuan ini, diharapkan mahasiswa
akan mampu :
• Menjelaskan pengertian audit charter dan letter of
engagement
• Menyusun Audit Charter
Bina Nusantara University
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Outline Materi
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Materi 1 Fungsi Audit Internal pada suatu organisasi
Materi 2 Pentingnya Audit Charter
Materi 3 Pengertian Letter of Engagement.
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AUDIT CHARTER
• INTERNAL AUDIT CHARTER SHOULD BE
WRITTING.
• IT PROVIDES FORMAL COMMUNICATION FOR
REVIEW AND APPROVAL BY MANAGEMENT AND
FOR ACCEPTANCE BY THE BOARD.
• THE PURPOSE, AUTHORITY AND RESPONSIBILITY
SHOULD BE DEFINED AND COMMUNICATED TO
ESTABLISH THE ROLE OF THE INTERNAL AUDIT
ACTIVITY AND TO PROVIDE A BASIS FOR
MANAGEMENT AND THE BOARD TO USE IN
EVALUATING THE OPERATIONS OF THE FUNCTION
Bina Nusantara University
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AUDIT CHARTER
• THE CHARTER MUST BE ADEQUATE TO ENABLE
THE INTERNAL AUDIT ACTIVITY TO ACCOPLISH ITS
OBJETIVES.
• THE RESULT OF THIS PERIODIC ASSESSMENT
SHOULD BE COMMUNICATED TO SENIOR
MANAGEMENT AND THE BOARD.
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INDEPENDENCE
•
INTERNAL AUDITORS ARE INDEPENDENT WHEN THEY CARRY OUT
THEIR WORK FREELY AND OBJECTIVELY.
•
IT PERMITS INTERNAL AUDITORS TO RENDER THE IMPARTIAL AND
UNBIASED JUDGMENTS ESSENTIAL TO THE PROPER CONDUCT OF
ENGAGEMENTS.
•
IT IS ACHIEVED THROUGH ORGANIZATIONAL STATUS AND
OBJECTIVITY
AUDITORS CAN COOPERATE WITH THE ENGAGEMENT CLIENT
WITHOUT INTERFERENCES FROM MANAGEMENT.
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THE INTERNAL AUDIT ACTIVITY SHOULD BE FREE FROM
INTERFERENCES IN DETERMINING THE SCOPE OF INTERNAL
AUDITING, PERFORMING WORK AND COMMUNICATING RESULTS.
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OBJECTIVITY
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IT IS AN INDEPENDENT MENTAL ATTITUDE THAT AUDITORS SHOULD
MAINTAIN IN PERFORMING ENGAGEMENTS.
AUDITORS ARE NOT TO SUBORDINATE THEIR JUDGMENT ON
ENGAGEMENT MATTERS TO THAT OF OTHERS.
IT REQUIRES AUDITORS THAT THEY HAVE AN HONEST BELIEF IN
THEIR WORK PRODUCT.
AUDITORS ARE NOT TO BE PLACED IN SITUATIONS IN WHICH THEY
FEEL UNABLE TO MAKE OBJECTIVE PROFESSIONAL JUDGMENTS
THE RESULTS OF IA WORK SHOULD BE REVIEWED BEFORE THE
COMMUNICATIONS ARE RELEASED TO PROVIDE REASONABLE
ASSURANCE THAT THE WORK WAS PERFORMED OBJECTIVELY.
IT IS UNETHICAL TO ACCEPT A FEE O GIFT FROM A EMPLOYEE,
CLIENT, CUSTOMER, SUPPLIER OR BUSINESS ASSOCIATE.
THE STATUS OF ENGAGEMENTS SHOULD NOT BE CONSIDERED AS
JUSTIFICATION FOR RECEIVING FEES OR GIFT.
AUDITORS SHOULD REPORT THE OFFER OF ALL MATERIAL FEES OR
GIFTS TO THEIR SUPERVISORS
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AUDIT COMMITTEES
• IT IS A SUBCOMMITTEE MADE UP OF OUTSIDE DIRECTORS
WHO ARE INDEPENDENT OF MANAGEMENT.
• ITS PURPOSE IS TO HELP KEEP EXTERNAL AND INTERNAL
AUDITORS INDEPENDENT OF MANAGEMENT AND TO ASSURE
THAT THE DIRECTORS ARE EXERCISING DUE CARE.
• THE RESPONSABILITIES AND CHARACTERISTICS ARE
FOLLOWING:
• THE AUTHORITY SHOULD DEVELOP AND APPROVE A
WRITTEN CHARTER.
• THE AUDIT COMMITTEE SHOULD REVIEWED THE
INDEPENDENCE OF THE PUBLIC ACCOUNTANT.
• A.C. SHOULD MONITOR COMPLIANCE WITH CODES OF
CONDUCTS.
• A. C SHOULD HAVE NECESSARY RESOURCES AVAILABLE.
• TO REGULATE THE REPORTING PROCESS.
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AUDIT COMMITTEE Functions
• TO SELECT EXTERNAL AUDITOR AND REVIEW THE AUDIT FEE
AND ENGAGEMENT LETTER.
• TO REVIEW THE EXTERNAL AUDIT PLAN.
• REVIEW PRELIMINARY, ANNUAL AND INTERIN FINANCIAL
STATEMENTS.
• REVIEW RESULTS OF ENGAGEMENTS PERFORMED BY
EXTERNAL AUDITORS.
• APPROVE THE CHARTER OF THE IA ACTIVITY.
• REVIEW AND APPROVE THE IA PLANS AND RESOURCES
REQUIREMENTS
• COMMUNICATES WITH THE CHIEF AUDIT EXECUTIVE.
• REVIEWS EVALUATIONS OF RISK MANAGEMENT, CONTROL
AND GOVERNANCE PROCESSES REPORTED BY THE
INTERNAL AUDITORS.
• REVIEWS POLICIES ON UNETHICAL AND ILLEGAL
Bina Nusantara University
PROCEDURES.
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AUDIT COM …
• REVIEWS FINANCIAL STATEMENTS TO BE TRANSMITTED TO
REGULATORY AGENCIES.
• REVIEWS OBSERVATIONS OF ORGANIZATIONAL PERSONNEL
• REVIEW THE ORGANIZATION´S INSURANCE PROGRAM.
• REVIEW THE EXTERNAL AUDITOR´S MANAGEMENT
LETTERPARTICIPATE IN THE SELECTION OF ACCOUNTING
POLICIES.
• REVIEW THE IMPACT OF NEW OR PROPOSED LEGISLATION
OR GOVERNMENTAL REGULATIONS.
Bina Nusantara University
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THE CODE OF ETHICS
• THE PURPOSE IS TO PROMOTE THE ETHICAL
CULTURE IN THE PROFESSION OF INTERNAL
AUDITING.
• INCLUDES TWO ESSENTIAL COMPONENTS:
– PRINCIPLES THAT ARE RELEVANTS TO THE PROFESSION
AND PRACTICE OF INTERNAL AUDITING.
– RULES OF CONDUCT THAT DESCRIBES BEHAVIOR NORMS
EXPECTED OF INTERNAL AUDITORS. THESE RULES ARE IN
AID TO INTERPRETING THE PRINCIPLES INTO PRACTICAL
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APPLICATIONS AND ARE INTENTED TO GUIDE THE
The Code OF ETHICS: Principles
• INTEGRITY: PROVIDES THE BASIS FOR RELIANCE
OR THEIR JUDGMENT.
• OBJECTIVITY: THE AUDITORS ESHIBIT THE HIGEST
LEVEL OF PROFESSIONAL OBJECTIVE IN
GATHERING, EVALUATING AND COMMUNICATING
INFORMATION ABOUT THE ACTIVITY OR PROCESS
BEING EXAMINED.
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The Code of ETHICS: Principles
• CONFIDENTIALITY: AUDITORS RESPECT
THE VALUE AND OWNERSHIP OF
INFORMATION THEY RECEIVE AND DO NOT
DISCLOSE INFORMATION WITHOUT
APPROPIATE AUTHORITY UNLESS THERE
IS A LEGAL OR PROFESSIONAL
OBLIGATION TO DO SO.
• COMPETENCY: AUDITORS APPLY THE
KNOWLODGE, SKILL AND EXPERIENCE
NEEDED IN THE PERFORMANCE OF
INTERNAL AUDITING SERVICES
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The Code of ETHICS
Rules of Conduct
INTEGRITY:
– SHALL PERFORM THEIR WORK WITH HONESTY, DILIGENCE
AND RESPONSIBILITY
– SHALL OBSERVE THE LAW AND MAKE DISCLOSURES
EXPECTED BY THE LAW AND THE PROFESSION
– SHALL NOT KNOWINGLY BE A PARTY TO ANY ILLEGAL
ACTIVITY OR ENGAGE IN ACTS THAT ARE DISCREDITABLE TO
THE PROFESSION OF INTERNAL AUDITING OR TO THE
ORGANIZATION
– SHALL RESPECT AND CONTRIBUTE TO THE LEGITIMATE AND
ETHICAL OBJECTIVES OF THE ORGANIZATION
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The Code of ETHICS
Rules of Conduct
OBJECTIVITY:
–
SHALL NOT PARTICIPATE IN ANY ACTIVITY OR RELATIONSHIP
THAT MAY IMPAIR OR BE PRESUMED TO IMPAIR THEIR
UNBIASED ASSESMENT.
–
SHALL NOT ACCEPT ANYTHING THAT MAY IMPAIR OR BE
PRESUMED TO IMPAIR THEIR PROFESSIONAL JUDGMENT.
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SHALL DISCLOSE ALL MATERIAL FACTS KNOWN TO THEM
THAT, IF NOT DISCLOSED, MAY DISTORT THE REPORTING OF
ACTIVITIES UNDER REVIEW
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The Code of ETHICS
Rules of Conduct
• CONFINDENTIALITY:
– INTERNAL AUDITOR SHALL BE PRUDENT IN THE USE AND
PROTECTION OF INFORMATION ACQUIRED IN THE
COURSE OF THEIR DUTIES.
– SHALL NOT USE INFORMATION FOR ANY PERSONAL GAIN
OR IN ANY MANNER THAT WOULD BE CONTRARY TO THE
LAW OR DETRIMENTAL TO THE LEGITIMATE AND ETHICAL
OBJECTIVES OF THE ORGANIZATION
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The Code Of Ethics, Rules Of Conducts
COMPETENCY: INTERNAL AUDITORS
– TO HAVE THE NECESSARY KNOWLEDGE, SKILL AND
EXPERIENCE.
– SHALL PERFORM INTERNAL AUDITING SERVICES IN
ACCORDANCE WITH THE STANDARDS FOR THE
PROFESSIONAL PRACTICE OF INTERNAL AUDITING.
– SHALL CONTINUALLY IMPROVE THEIR
PROFICIENCY AND THE EFFECTIVENESS AND
QUALITY OF THEIR SERVICES.
Bina Nusantara University
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Terms of Audit Engagement
 ISA 210 Takes about the Terms of Audit Engagement.
Purpose of this ISA is:
• Agreeing the engagement with the client
• Auditor’s response to a request by the client to change
the terms of the engagement.
• Agreed terms needed to be recorded in an engagement
letter.
• Assist the auditor in preparing the engagement letter
• This may be informative still if the scope of audit is
govern by country ‘s law.
Bina Nusantara University
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Audit Engagement letter
It is in the interest of both client and auditor that the auditor
sends as engagement letter, preferably before the
commencement of the engagement, to help in avoiding
misunderstanding with respect to the engagement. The
engagement letter documents and confirm the auditor’s
acceptance of the appointment the objective and scope of
the audit, the extent of the auditor’s responsibilities to the
client and the form of any report.
Bina Nusantara University
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Audit Engagement
• Circumstances of first audit engagement
• Factors to consider prior to accepting
– Rules of professional conduct
– Communication with predecessor auditor
– Additional information sources
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Accepting the engagement
Auditing Problems
Specific reporting requirements
Example/Scenarios
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Circumstances of First Audit Engagement
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New entity, never audited
Existing company, never audited
Existing company, audited periodically
Existing company, consistently audited
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Accepting the Engagement
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Actions & Considerations
• Discuss major issues with management:
– related to initial auditor selection
– communication of this issues to those in charge of governance
– analysis of how these issues affect the audit plan and strategy
• Audit procedures to obtain sufficient audit evidence pertaining to
opening balances
• Delegation of tasks to firm employees
– to determine potential audit risks
• Any procedures required for quality control of the initial audit
engagement
– i.e. the firm may require that an additional partner review the audit
strategy before the commencement of audit procedures
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Engagement Letter
• Used for audits, engagements, compilations
• Good practice
• Signed by both client and auditor
– corporations: signed by authoritative figure such as the president
or chair of audit committee
– private businesses: signed by authoritative figure such as
partner or proprietor
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Important Features of Engagement Letter
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Purpose of engagement
Services to be rendered
Standards to comply by
Auditor’s responsibilities in respect to misstatements, internal control
Management’s responsibilities with respect to financial reporting
Mention of significant limitations
Important dates (deadline, payment dates)
Request for the client to sign and send duplicate copies back to the
auditor
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Sample Engagement Letter
Chairman of the Board of Directors,
Price Marwick & Co was appointed to audit the financial statements of
the company for the year ended September 30, 20x8. This letter
explains our understanding of the scope and objectives of the audit
engagement as well as the method of determination of our fees. We
would appreciate your acknowledgement that this is also the
understanding of the Board of Directors.
We will conduct the audit in accordance with GAAS. The objective of
our audit is to form an opinion as to whether the financial statements
are, in all material respects, presented fairly and in accordance with
GAAP and to communicate this opinion to your shareholders.
Please note that the purpose of the audit is not to detect instances of
fraud or to report on the adequacy of the company's accounting
information system and related control procedures. Neither is the
purpose of the audit to provide a warning as to the likelihood of
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business failure. However, if, during the course of our audit, we become
Sample Engagement Letter
Please also note that we are not responsible for the preparation of the financial
statements. If we were to be responsible for their preparation, we would not be able to
provide an independent opinion on their presentation. The responsibility for the
preparation of the financial statements rests with the management of the company.
In forming our opinion, we will not examine all transactions relating to the financial
statements. To do so would be prohibitively costly. Instead, and in accordance with
appropriate auditing standards, we will form our opinion based on both an examination of
a selection of representative transactions and an evaluation of accounting policies and
information derived there from. As a result, and bearing in mind other limitations (of the
audit, internal control procedures and accounting information generally), our audit will
provide less than absolute assurance that the financial statements are free of material
misstatement.
We recognize that the company's officers and employees are generally fully occupied
attending to their own duties. However, in order for us to conduct our audit effectively, we
will need to make inquiries to, and receive representations from, some of the company's
officers and employees as well as a number of third parties with whom XYZ Industries
has dealings. We intend to carry out this work with as little disruption as is possible. In
addition, we will require access to any records, accounting or otherwise, that we consider
may be relevant to the formation of our opinion on the financial statements.
Bina Nusantara University
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Sample Engagement Letter
Our fee for the audit will be based on the actual time spent by this firm
(in planning the audit, and in gathering and evaluating the necessary
evidence we need to form an opinion on the financial statements), plus
out-of-pocket costs.
Please sign and return the attached copy of this letter to acknowledge
that the letter properly sets out the Board's understanding.
Sincerely,
Peta Fabiano,
.................................{signature) ..................(date)
Partner, Price Marwick & Co
Chairman of Directors
Copy: Chairman of Audit Committee.
XYZ Industries.
Bina Nusantara University
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Bahan Diskusi
Anggap Anda sebagai bagian dari suatu Tim yang ditunjuk
oleh Pimpinan perusahaan untuk membuat konsep tentang
Audit Charter.
Kerjakan dalam kelompok-kelompok dan Diskusikan di
kelas
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The
Bina Nusantara University
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