mistakes Flashcards
(49 cards)
Questions to ask potential clients
Potential conflicts of interest
Previous auditor contact process
Any scenarios from questions been fixed/changed, or problems for the company/future.
going concern
Retirement of leader,
Or lack of succession plans
Auditors can prepare FS for who
LTDs only
Assurance report on controls can be…
Either limited or Reasonable assurance, never absolute (expectations gap)
Opinion shopping additional procedures.
Perform back ground checks on MGMT
Ensure adequate resources and expertise are available in the firm
legal proceedings extra point
LICENSE REVOCATION or Closure of business
MGMT override tests
Whistle blowing procedures
Review significant estimates/judgements
Intimidation threat safeguard
Safeguard:
More experienced workers
Impact on other areas of the audit
Self interest threat
Anything relating to loss + fee income
Misstatements
Disciplinary action
considerations for new appointments
Opening balance concerns + companies
Enquiries of MGMT over RATIOS:
is it due to …( (list changes in activities)
Due to over/under statement of … (link to ratio)
GPM and OM differences due to:
> Changing classification of costs
> Provisions for damages…
sources of evidence/documents
Aged receivables, inventory, payables
Contracts/Correspondence with suppliers/customers
Breakdown of {COGS}{operating costs}
Product costs + selling prices
Client evaluating Firm tender
Auditors experience in sector + with systems
[quality] Audit strategy, reliance on controls/IA, Use of data analytics
proposed fee, BEST VFM
personnel for audit,
>can they work with them?
> efficiency
Proposed timeline> deadlines >busy periods
References
Any other services they can provide?
Points for Engagement letter + reason
Who report is directed to
Intended use:
> to avoid reliance by unforeseen 3rd parties
> limited liability
Period covered by forecast info
nature of assumptions
> clarity on what subject to review
> Accountant reports on reasonableness
Statement of MGMTs responsibilities… (SPECIFIC)
Performed in accordance with … (ISAs, ISAEs)
caveat/disclaimer -> avoid over reliance
nature of assurance to be provided (reasonable/limited)
Form of reports provided
after date payments for
FINES
Analytical procedures
Compare year on year
Compare average per:
>for prior year
>for budget
>for each office
Providing finance to client
= credit checks
= review their budgets + forecasts
sensitivity analysis
inflation
interest rates
exchange rates
time to achieve…
amounts received…
variations in seasonality, costs, demand
cost of selling/making etc
loss of customers when opening stores from on lines
rent reviews
receivables
check terms of contract for credit details
check date on contract
direct confirmation of balance with customers
re perform calculations, exclude certain customers
reasonable assurance
detailed testing (controls, systems, numbers) + analytical …
limited assurance
mgmt enquiries + analytical review
third party revenue holder
cut off issues due to banking of revenue at third party
recognition of revenue net of costs
purchase of NCA
Vouch purchase costs to…
vouch ownership/registration documents
consider significant losses/profits on disposal
process of analytical procedures
Substantive analytical procedures assist the external auditor in forming an overall conclusion on the financial statements. The procedures are used to obtain relevant and reliable audit evidence by identifying expected relationships or detecting material misstatements and can be used as a ‘proof in total’. The procedures assist audit efficiency as they can reduce the need for tests of details, reduce sample sizes and identify areas where further work is required.
Consequences of: Dont check assets to register
Assets may not be available when required for use resulting in business disruption.
Additionally, incorrect capital allowances may be claimed and depreciation charges/useful life may be inappropriate.
Compliance with covenants may be affected by misstated assets/profits.
