What should be included in the audit plan?
The nature, timing, and event of risk assessment procedures and further audit procedures and any other procedures necessary to conform to auditing standards
What does an interim audit focus on?
Documenting systems and evaluating controls
What can an interim audit be used to do?
Test specific and complete material transactions, test transactions such as sales, purchases and payroll, access risks that will impact work in final audit and attend stock counts.
What is the definition of fraud?
Intentional act by one or more individuals among management, those charged with governance, employees or third parties involving the use of deception to obtain an unjust or illegal advantage
What are the two types of fraud?
Fraudulent financial reporting and misappropriation
What is fraudulent financial reporting?
Deliberately misstating the financial statements to make the company’s performance or position look better/worse than it actually is
What is fraud misappropriation?
The theft of a company’s assets such as cash or inventory
What is the directors responsibility in respect of fraud and error?
To prevent and detect fraud
Implement an effective system of internal control
Create a culture of honesty, ethical behaviour and active oversight
Consider the need for internal audit department
What is the auditors responsibility in respect of fraud and error?
Obtain reasonable assurance
Maintain an attitude of professional scepticism
Consider any incentives to commit fraud
Discuss among the engagement team
Identify and assess the risks of material misstatement
What is the definition of non compliance?
Acts of omission or commission by the entity either international or unintentional which are contrary to the prevailing laws or regulations. (Must relate to business activities)
What does engagement performance comprise of?
Direction, supervision and review of the engagement
What does direction include in terms of engagement performance?
Informing team members of: Their responsibilities Objectives of the work to be performed Nature of the business Risks Problems that may arise The detailed approach to the performance of the engagement
What does supervision include in terms of engagement performance?
Tracking the progress
Considering competence
Addressing matters arising
Identifying matters for consultation
What does review include in terms of engagement performance?
- The work has been performed in accordance with professional standards
- Appropriate consultations have taken place
- The work performed supports the conclusions reached
- The evidence obtained is sufficient and appropriate to support the auditors report
Listed entities and other high risk entities should be subject to what?
Engagement quality control review (hot review/pre insurance review)
High risk clients include?
Those in the public interest, unusual circumstances and risks and those where laws and regulations require an EQCR
What does a EQCR include?
- discussion of significant matters with partner
- review of FS and proposed auditors report
- review of selected audit docs relating to judgements and conclusions
- significant risks
- judgements in respect to materiality and significant risks
- uncorrected misstatements
- matters to be communicated to management
- conclusions reached
What criteria must be met to be a engagement quality control reviewer?
Should have the technical qualifications to perform the role and should be objective
What can a engagement quality reviewer be referred as?
Independent review partner
During a cold review what is the purpose?
To assess whether the firms policies and procedures were implemented during an engagement and to identify any deficiencies
When should a cold review take place?
After the auditors report has been signed
What files should be selected during the cold review?
A selection of completed audit files for
Who should a cold review be conducted by?
A dedicated compliance or quality department/a qualified external consultant/independent partner
What should working papers demonstrate?
Sufficient appropriate evidence obtained
All matters were resolved before issuing the auditors report
What do working papers provide a record of?
- The planning and performance of the engagement
- The supervision and review of the work performed
- The evidence obtained which the assurance provider considers necessary + arrived at their conclusion
- The quality control procedures carried out
Working papers can be in what format?
Paper, film, electronic and other media
Working papers should show?
Name of client, reporting date, file reference, name of preparer/reviewer/, dates, subject of working paper, objective, source, sample size, work performed, results and analysis of errors
How long do auditors need to keep working papers?
For at least five years of the date of the auditors report
