Audit Risk Planning & Documentation Flashcards
When Audit planning starts?
It starts a few weeks before the start of audit so that audit could be performed in an effective and efficient manner
Mandatory as well as needed to be documented.
What are the advantages or importance of audit planning?
Helps auditor in
-identify and resolve problems on a timely basis
-helps give appropriate attention to risky areas
-helps perform audit in effective manner
-helps in selection of appropriate audit team
-Helps in supervision and review of work
Parts Of Audit Planning?
Overall audit strategy
Developing an audit plan
What are the contents of audit palanning and audit strategy?
Audit strategy
-understand entity and it’s environment
-Use if Experts
-what resources are to be deployed
-Financial reporting framework
-availability of Clint personnel
-selection of team
Audit Planning
Materiality
Timetable of planned audit work
Description of nature timing and extent of planned audit procedures
Description of nature timing and extent of planned risk assessment procedures
What is Working Paper?
an audit procedure performed but not documented is like it was never performed.
So Audit procedures are documented on a piece of paper called working paper.
Working papers are a record of:
-Procedures performed
-Evidence collected
-conclusions
Examples:
-Inventory Check
-Bank Confirmation
Advantages/importance of working paper?
It is imp because:
-helps in legal issues
-control i.e; helps partner in checking work of team
-acts as a proof
-hepls in audit planning of next years especially in case of opening balances
Contents(qualities and features) of Woking Paper?
Firm name
Name of client
B/s date
Procedure performed
Evidence obtained
Who prepared
Who received
2 types of working Paper
How long to retain working paper?
Standarized and automated working paper?
Interim and Final Audit remaining?
Materiality and Performance Materiality?
Material Info:
The misstatements/omissions in f/s which individually or in aggregate can change the decisions or users on financial statements.
Performance Mateiality:
The auditors sets a lower amount than materiality for financial statements as a whole in order to reduce the probability that the aggregate of uncorrected misstatements exceeds total materiality.
3 Questions related to
Entity and its Environment
why
what
how
What is Fraud and Error?
Any international act done through deception to get an unjust or illegal advantage by one or more individual members of management, those charged with governnance, Employees or third parties.
Management and Employee fraud Differ.
Types of Fraud?
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Responsibilities of Management and Auditor in Fraud?
what auditor has to get in written representation from Management related to fraud and error?
Auditor should get following written representations related to fraud and error from management:
-they have fulfilled their responsibility to design, implement and maintain controls to detect and prevent any fraud and error
-they have disclosed the managements assessment of risk and fraud in f/s to auditor
-They have disclosed to auditor their knowledge of allegations of any fraud/suspected fraud communicated by employees, former employees analysts etc.
Explain Communication Of Fraud to Those charged with Governance?
If auditor finds any fraud or receives information that a fraud may exist, he must inform to management.
If he finds fraud in which management may be involved, he must inform to those charged with governnance.
If he thinks there is need or if those charged with governance are also involved, he needs to report to regulatory bodies.
What is Compliance and non- compliance?
Following all rules and regulations is called compliance and vice versa….
Indicators of Non- Compliance?
audit procedures in case of Non Compliance?
1- Obtain the understanding of act and circumstances
2 - Obtain further information to evaluate possible effects on financial statements
3 - Discuss with the management and those charged with Governance
4 - Consider to obtain legal advice
5- Evaluate effects on auditors opinion if Sufficient Information not obtained
Reporting the non-compliance?
Discuss this with those charged with governance,
if they are suspected to be involved than report to audit committee but if it not exists take legal advice
Consider the effect of non-compliance on the auditor’s report. Ensure sufficient audit evidence is obtained if management or governance obstructs the reflection of material non-compliance in financial statements
Determine if reporting to regulatory bodies is required
Inherent and Controls risk in NPO?
Inherent Risk:
Regulation is complex
Tax rules for NPO are complex
There is lack of predictable income
There is uncertainity of future income
Donations are quite Significant
Control Risks:
Directors/trustees may give less time to organization
Frequency of Direectors/trustees meetings is less
Directors are less qualified
trustees may not be independent from each other
