1599 direct and deferred taxation - risk assessment and audit plan

7/25/2019 1599 Direct and Deferred Taxation - Risk Assessment and Audit Plan

1/20

Risk Assessment and Audit Plan

This document is to be used for each material account balance (balance sheet account), class of transaction (income

statement account), or disclosure that has been scoped in for audit procedures from Form 1570, Determine Material

Account balances, Classes of transactions, and Disclosure !ithin this document "ou #ill assess and respond to ris$s

identified for the rele%ant material account balance, class of transaction or disclosure "ou are performin& further audit

procedures on

IF AN ACCOUNT BALANCE, CLASS OF TRANSACTION OR DISCLOSURE IS NOT CONSIDERED MATERIAL,

THIS RISK ASSESSMENT AND AUDIT PLAN DOCUMENT, TOETHER !ITH THE CORRESPONDIN MODEL

AUDIT PRORAM, NEED NOT BE COMPLETED, AND THEREFORE SHOULD BE DELETED FROM THE INDE"#

Pe$%&$m t'e Risk Assessment and Audit Plan uidan(e 'ho#

!e shall de%elop an audit plan that shall include a description of

The nature, timin&, and e*tent of planned ris$ assessment procedures

The nature, timin&, and e*tent of planned further audit procedures at the assertion le%el

+ther planned audit procedures that are reuired to be carried out so that the en&a&ement complies #ith our audit

approach -.'A /00 -200017

!e shall identif" and assess the ris$ of material misstatement at

The financial statement le%el

The assertion le%el for classes of transactions, account balances and disclosures to pro%ide a basis for desi&nin& and

performin& further audit procedures -.'A /1525 -230001

For this purpose, #e shall

.dentif" ris$s throu&hout the process of obtainin& an understandin& of the entit" and its en%ironment, includin&

rele%ant controls that relate to the ris$s, and b" considerin& #hat can &o #ron& for the classes of transactions, account

balances, and disclosures in the financial statements

Assess the identified ris$s, and e%aluate #hether the" relate more per%asi%el" to the financial statements as a #hole

and potentiall" affect man" assertions

4elate the identified ris$s to #hat can &o #ron& at the assertion le%el, ta$in& account of rele%ant controls that #e

intend to test

Consider the li$elihood of misstatement, includin& the possibilit" of multiple misstatements, and #hether the potential

misstatement is of a ma&nitude that could result in a material misstatement -.'A /152 -230002


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The ris$ assessment procedures shall include the follo#in&

.nuiries of mana&ement and of others #ithin the entit" #ho in our 6ud&ment ma" ha%e information that is li$el" to

assist in identif"in& ris$s of material misstatement due to fraud or error

reliminar" anal"tical procedures

+bser%ation and inspection -.'A /15 -82502

4is$ assessment procedures b" themsel%es, ho#e%er, do not pro%ide sufficient appropriate audit e%idence on #hich to

base the audit opinion -.'A /155 -82501

.n desi&nin& the further audit procedures to be performed, #e shall

Consider the reasons for the assessment &i%en to the ris$ of material misstatement at the assertion le%el for each

class of transactions, account balance, and disclosure, includin&

The li$elihood of material misstatement due to the particular characteristics of the rele%ant class of transactions,

account balance, or disclosure (ie, the inherent ris$)

!hether the ris$ assessment ta$es account of rele%ant controls (ie, the control ris$), thereb" reuirin& us to obtain

audit e%idence to determine #hether the controls are operatin& effecti%el" (ie, #e intend to rel" on the operatin&

effecti%eness of controls in determinin& the nature, timin& and e*tent of substanti%e procedures)

+btain more persuasi%e audit e%idence the hi&her our assessment of ris$ -.'A //07 -82750

There is a ris$ of data loss #hen the material account balance, class of transaction, or disclosure is chan&ed in the

uestion belo#

Sele(t t'e mate$ial a((&unt )alan(e, (lass &% t$ansa(ti&n &$ dis(l&su$e* Direct and deferred ta*a

Document the considerations resultin& from the partner9led discussion relatin& to plannin& the audit

Durin& our plannin& procedures, #e ha%e

for all material accounts related to direct a

T'e Plannin+ S(&-in+ Res&u$(e Cente$

'ho#

T'e Plannin+ S(&-in+ Res&u$(e Cente$


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The lannin& :: 'copin& 4esource Center, a%ailable in Deloitte 4esources, is primaril" intended to support

;ffecti%e implementation of the 2010 audit methodolo&" chan&es, includin& illustrati%e &uidance and e*ample

flo#charts of ris$s and related

controls and audit procedures

;n&a&ement teams in their plannin& and scopin& acti%ities, includin& a &lobal repositor" of leadin& practices and tools

4euirements of the ne# &roup audit standard, .'A 00, alance to contain material misstatements !e also inuire of appropriate le%els of mana&ement about an"

fraud or si&nificant error that has been disco%ered

+ur research into the incidences of misstatement enables us to reco&ni?e factors that ma" increase the ris$ of

misstatement, and #e use these factors to identif" ris$s

4is$s identified should be entered in the ris$ identification table belo#


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The follo#in& points ha%e been considered in assessin& ris$ for this account balance, class of transaction or disclosure

!hether the account balance

1 Contains si&nificant transactions #ith related parties

2 @as related deficiencies in internal control, especiall" those not addressed b" mana&ement

/ @as chan&es in the related information technolo&" en%ironment

@as past misstatements, histor" of errors or a si&nificant amount of ad6ustments at period end

5 Contains si&nificant amount of non9routine or non9s"stematic transactions includin& intercompan" transactions and

lar&e re%enue transactions at period end

Contains transactions that are recorded based on mana&ementBs intent (e&, debt refinancin&, assets to be sold, and

classification of mar$etable securities)

7 Contains application of ne# accountin& pronouncements

3 Contains accountin& measurements that in%ol%e comple* processes

@as e%ents or transactions that in%ol%e si&nificant measurement uncertaint", includin& accountin& estimates

10 @as pendin& liti&ation and contin&ent liabilities (e&, sales #arranties, financial &uarantees and en%ironmental

remediation)

11 Contains transactions or e%ents recordin& si&nificant ad6ustments

12 Contains comple* transactions or e%ents for #hich #e belie%e there is a hi&h ris$ of error

For e*ample, comple* hed&in& transactions in%ol%in& futures and options ma" indicate an increased ris$ in assessin&

the %aluation of lon&9term liabilities

1/ Contains transactions or e%ents that are sub6ect to an unusual de&ree of Mana&ement in%ol%ement or that producedirect or indirect benefit to Mana&ement

1 Contains transactions or e%ents that are outside the normal course of business for the ;ntit"

For e*ample, a finance lease for a ma6or fi*ed asset in an entit" that ordinaril" purchases fi*ed assets

15 Contains transactions or e%ents that e*hibit characteristics that raise concerns about the possibilit" of ille&al

pa"ments

1 Certain assets and liabilities ma" represent a ris$ of material Misstatement o#in& to their %alue and liuidit"

For e*ample, if %er" lar&e amounts of cash could be misappropriated and this fact is not detected on a timel" basis,

#e ma" identif" a ris$ of material misstatement

17 @as improper reconciliation and re%ie# bet#een the &eneral led&er accounts and supportin& records -Adapted from

23001/ and 1

erformed b" 44T 112201

SINIFICANT MATTERS


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uidan(e 'ho#

'i&nificant Matters are matters #hich are 6ud&ed throu&h ob6ecti%e anal"sis of the facts and circumstances to be

si&nificant to the audit, li$e for e*ample fraud, control deficiencies and non9compliance #ith la#s or re&ulations

ud&in& the si&nificance of a matter reuires an ob6ecti%e anal"sis of the facts and circumstances ;*amples of

si&nificant matters include

Matters that &i%e rise to si&nificant ris$s

4esults of audit procedures indicatin& either of the follo#in&

o That the financial statements could be materiall" misstated

o A need to re%ise our pre%ious assessment of the ris$s of material misstatement and our responses to those ris$s

Circumstances that cause us si&nificant difficult" in appl"in& necessar" audit procedures

Findin&s that could result in a modification to the audit opinion or the inclusion of an ;mphasis of Matter para&raph in

our audit report -.'A 2/0A3 -02015

'i&nificant matters and issues identified durin& the plannin& process should be captured #ithin the ris$ tables belo# if

the" &i%e rise to ris$s +ther#ise, the" should be documented in Form 1310, Audit lannin& Memorandum

IDENTIFIED RISKS

Document in the table belo# the ris$s and si&nificant ris$s identified for the material account balance, class of

transaction or disclosure

.rrespecti%e of the assessed ris$s of material misstatement, #e shall desi&n and perform substanti%e procedures for

each material class of transactions, account balance, and disclosure -.'A //013 -803501 .f no ris$s are identified,

re%isit the conclusions reached in Form 1570, Determine Material Classes of Transactions, Account >alances and

Disclosures, to ensure the class of transactions, account balance, or disclosure is material .f there are no ris$s

identified, enter


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9 'ome ta*able re%enue has been incorrectl" classified as nonta*able or #as included at an incorrect amount

Ta* pro%ision is misstated becauseadditional ta* assessed b" the Ministr" of Ta* (#hether paid or not) has not been record

Transactions #ith a deferred income ta* impact are not considered #hen calculatin& deferred ta* balances

Deferred ta* calculations, or supportin& schedulesinformation, include mathematical errors

!ith respect to each identified ris$, #e shall

1) ;%aluate #hether the information obtained from the ris$ assessment procedures and related acti%ities performed

indicates that there is one or more ris$s of material misstatement due to fraud

2) Determine #hether an" of the ris$s identified are, in our 6ud&ment, a si&nificant ris$ .n e*ercisin& this 6ud&ment, #e

shall e*clude the effects of identified controls related to the ris$ -Adapted from 231001

uidan(e 'ho#

F$aud Risk Fa(t&$s

!hile fraud ris$ factors ma" not necessaril" indicate the e*istence of fraud, the" ha%e often been present in

circumstances #here fraud has occurred and therefore ma" indicate ris$s of material misstatement due to fraud

-Adapted from 852501

'ee Topic 8525 in the Deloitte Audit Approach Manual for additional &uidance related to fraud ris$ factors

Si+ni%i(ant Risks

As part of our ris$ assessment, #e shall determine #hether an" of the ris$s identified are, in our 6ud&ment, a si&nificant

ris$ .n e*ercisin& this 6ud&ment, #e shall e*clude the effects of identified controls related to the ris$ -Adapted from

231001

.n e*ercisin& 6ud&ment as to #hich ris$s are si&nificant ris$s, #e shall consider at least the follo#in&

!hether the ris$ is a ris$ of fraud

!hether the ris$ is related to recent si&nificant economic, accountin& or other de%elopments and, therefore, reuires

specific attention

The comple*it" of transactions

!hether the ris$ in%ol%es si&nificant transactions #ith related parties


7/20

The de&ree of sub6ecti%it" in the measurement of financial information related to the ris$, especiall" those

measurements in%ol%in& a #ide ran&e of measurement uncertaint"

!hether the ris$ in%ol%es si&nificant transactions that are outside the normal course of business for the entit", or that

other#ise appear to be unusual -.'A /1523 -231002

A((&untin+ Estimates

!e shall determine #hether, in our 6ud&ment, an" of those accountin& estimates that ha%e been identified as ha%in& hi&h

estimation uncertaint" &i%e rise to si&nificant ris$s -.'A 5011 -53200

Related Pa$t0 Relati&ns'i-s and T$ansa(ti&ns

.n determinin& #hether ris$s associated #ith related part" relationships and transactions are si&nificant ris$s, &i%e

consideration to the follo#in&

'i&nificant related part" transactions outside the entit"Bs normal course of business shall be treated as &i%in& rise to

si&nificant ris$s -Adapted from 8/001

Fraud ris$ factors identified #hen performin& the ris$ assessment procedures and related acti%ities in connection #ith

related parties (includin& circumstances relatin& to the e*istence of a related part" #ith dominant influence) -.'A 5501

-Adapted from 8/002

Mana+ement O1e$$ide &% C&nt$&ls

Mana&ement is in a uniue position to perpetrate fraud because of mana&ementBs abilit" to manipulate accountin&records and prepare fraudulent financial statements b" o%erridin& controls that other#ise appear to be operatin&

effecti%el" Althou&h the le%el of ris$ of mana&ement o%erride of controls #ill %ar" from entit" to entit", the ris$ is

ne%ertheless present in all entities Due to the unpredictable #a" in #hich such o%erride could occur, it is a ris$ of

material misstatement due to fraud and thus a si&nificant ris$ -.'A 20/1 -85/501

There is a ris$ of data loss #hen the classification of the ris$ is chan&ed #ithin the table belo#

Risks Identi%ied Risk &% mate$ial

misstatement due t&

%$aud2

3.4N5

Classi%i(ati&n &% $isk

Ta* pro%ision is misstated because

9 'ome non9ta*able re%enue has been incorrectl" classified as ta*able or #as

included at an incorrect amount

9 'ome ta* deductible e*penses ha%e been incorrectl" classified as non9ta*

deductible or #ere included at an incorrect amount

Eo 4is$


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9 'ome non9ta* deductible e*penses ha%e been incorrectl" classified as ta*

deductible or #ere included at an incorrect amount

9 'ome ta*able re%enue has been incorrectl" classified as nonta*able or #as


Ta* pro%ision is misstated becauseadditional ta* assessed b" the Ministr" of

Ta* (#hether paid or not) has not been recorded or has been recorded at anincorrect amount

Eo 4is$

Transactions #ith a deferred income ta* impact are not considered #hen

calculatin& deferred ta* balances

Eo 4is$

Deferred ta* calculations, or supportin& schedulesinformation, include

mathematical errors

Eo 4is$

Assess t'e $isk &% mate$ial misstatement at t'e asse$ti&n le1el %&$ t'e a((&unt )alan(e, (lass &% t$ansa(ti&n, &$

dis(l&su$e

Assess the ris$ at the assertion le%el for the account balance, class of transaction or disclosure so as to pro%ide a basis

for performin& further audit procedures

Eote that all assertions related to the same identified ris$ should be entered on the same cell

Risks Identi%ied Risk &% mate$ial misstatement

due t& %$aud2

Classi%i(ati&n &% $is


9 'ome non9ta*able re%enue has been incorrectl" classified as ta*able or#as included at an incorrect amount

9 'ome ta* deductible e*penses ha%e been incorrectl" classified as non9

ta* deductible or #ere included at an incorrect amount

9 'ome non9ta* deductible e*penses ha%e been incorrectl" classified as

ta* deductible or #ere included at an incorrect amount

9 'ome ta*able re%enue has been incorrectl" classified as nonta*able or

#as included at an incorrect amount

Eo 4is$

Ta* pro%ision is misstated becauseadditional ta* assessed b" the Ministr"

of Ta* (#hether paid or not) has not been recorded or has been recordedat an incorrect amount

Eo 4is$


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Transactions #ith a deferred income ta* impact are not considered #hen

calculatin& deferred ta* balances

Eo 4is$

Deferred ta* calculations, or supportin& schedulesinformation, include

mathematical errors

Eo 4is$

Asse$ti&ns 'ho#

The definition of the follo#in& assertions can be found in Form 0020 Assertions or in Topic 8235 of the Deloitte Audit

Approach Manual

Classes &% t$ansa(ti&ns and e1ents*

+ccurrence

Completeness

Accurac"

Cutoff

Classification

A((&unt )alan(es*

;*istence

4i&hts and obli&ations


10/20

Completeness

Galuation and allocation

P$esentati&n and dis(l&su$e*

+ccurrence and ri&hts and obli&ations

Completeness

Classification and understandabilit"

Accurac" and %aluation

Consider #hich assertions #ould be applicable to the account balance, classes of transaction, or disclosure and re%ie#

the table abo%e to determine #hether "our ris$ assessment is complete Additional ris$s and assertions can be added as

needed to the tables abo%e .f certain assertions ha%e been determined to not be rele%ant, consider documentin& the

basis for that assessment belo#

The assertions sub6ected for testin& for e%er" a

identified ris$(s) #hich is associated #ith an acc

The identified ris$(s) related to the account bala

necessaril" co%er all assertions @ence onl" the

the identified ris$ #as sub6ected for testin& that

CONTROL AND SUBSTANTI/E PROCEDURES PLAN TO ADDRESS RISKS IDENTIFIED

!e should desi&n control and substanti%e procedures to address the ris$s identified related to each rele%ant assertion

for the account balance, class of transaction or disclosure 'uch substanti%e procedures should depend on (1) #hether

#e ha%e identified a si&nificant ris$ and (2) #hether #e plan to rel" on controls

.f this account has been identified as rel"in& on information that is produced b" a ser%ice or&ani?ation, please consider

the results listed belo# #hen plannin& "our controls and substanti%e testin& procedures

Name3s5 and L&(ati&n &% Se$1i(e O$+ani6ati&n3s5 Des($i-ti&n &% -&$ti&n3s5 &% t'e Business P$&(ess and

In%&$mati&n S0stems -e$%&$med )0 t'is Se$1i(eO$+ani6ati&n

Plan t& test DI E1

RISKS


11/20

.n the section belo#, #e #ill document our planned controls and substanti%e testin& procedures to address the identified

ris$s related to account balances, classes of transactions, and disclosures, other than the si&nificant ris$s addressed

abo%e

Eote The tables belo# #ill be summari?ed in the rele%ant Model Audit ro&ram (5H/0) for control and substanti%e

testin& procedures

C&nt$&ls Testin+ Plan

Risk C&nt$&ls Testin+ Plan uidan(e 'ho#

!e shall desi&n and perform tests of controls to obtain sufficient appropriate audit e%idence as to the operatin&

effecti%eness of rele%ant controls if

+ur assessment of ris$s of material misstatement at the assertion le%el includes an e*pectation that the controls are

operatin& effecti%el" (ie, #e intend to rel" on the operatin& effecti%eness of controls in determinin& the nature, timin&

and e*tent of substanti%e procedures)I or

'ubstanti%e procedures alone cannot pro%ide sufficient appropriate audit e%idence at the assertion le%el -.'A //03

-10001

.n desi&nin& and performin& tests of controls, #e shall obtain more persuasi%e audit e%idence the &reater the reliance #e

place on the effecti%eness of a control -.'A //0 -10007

!ith respect to some ris$s, #e ma" 6ud&e that it is not possible or practicable to obtain sufficient appropriate audit

e%idence onl" from substanti%e procedures 'uch ris$s ma" relate to the inaccurate or incomplete recordin& of routine

and si&nificant classes of transactions or account balances, the characteristics of #hich often permit hi&hl" automated

processin& #ith little or no manual inter%ention .n such cases, the entit"Bs controls o%er such ris$s are rele%ant to the

audit and #e shall obtain an understandin& of them -.'A /15/0 -823001

Risks Identi%ied Rele1ant Asse$ti&n


9 'ome non9ta*able re%enue has been incorrectl" classified as ta*able or #as included at an

incorrect amount

9 'ome ta* deductible e*penses ha%e been incorrectl" classified as non9ta* deductible or #ere

Assetiabilit"

;*istence



12/20


9 'ome non9ta* deductible e*penses ha%e been incorrectl" classified as ta* deductible or #ere


9 'ome ta*able re%enue has been incorrectl" classified as nonta*able or #as included at an

incorrect amount

;*pense

+ccurence

Accurac"

Ta* pro%ision is misstated becauseadditional ta* assessed b" the Ministr" of Ta* (#hether paid or

not) has not been recorded or has been recorded at an incorrect amount

Assetiabilit"


Completeness

4i&hts and obli&ation

;*pense

+ccurence

Accurac"

Completeness

Transactions #ith a deferred income ta* impact are not considered #hen calculatin& deferred ta*

balances

Assetiabilit"

Completeness

;*pense

Completeness

Deferred ta* calculations, or supportin& schedulesinformation, include mathematical errors Assetiabilit"


;*pense

Accurac"

Relian(e &n Audit E1iden(e a)&ut O-e$atin+ E%%e(ti1eness &)tained in P$e1i&us Audits

.n determinin& #hether it is appropriate to use audit e%idence about the operatin& effecti%eness of controls obtained in

pre%ious audits and, if so, the len&th of the time period that ma" elapse before retestin& a control, #e shall consider the

follo#in&

The effecti%eness of other elements of internal control, includin& the control en%ironment, the entit"Bs monitorin& of

controls, and the entit"Bs ris$ assessment process


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The ris$s arisin& from the characteristics of the control, includin& #hether it is manual or automated

The effecti%eness of &eneral .T9 controls

The effecti%eness of the control and its application b" the entit", includin& the nature and e*tent of de%iations in the

application of the control noted in pre%ious audits, and #hether there ha%e been personnel chan&es that si&nificantl"

affect the application of the control

!hether the lac$ of a chan&e in a particular control poses a ris$ due to chan&in& circumstances

The ris$s of material misstatement and the e*tent of reliance on the control -.'A //01/ -10011

.f #e plan to use audit e%idence from a pre%ious audit about the operatin& effecti%eness of specific controls, #e shall

establish the continuin& rele%ance of that e%idence b" obtainin& audit e%idence about #hether si&nificant chan&es in

those controls ha%e occurred subseuent to the pre%ious audit !e shall obtain this e%idence b" performin& inuir"

combined #ith obser%ation or inspection, to confirm the understandin& of those specific controls, and

.f there ha%e been chan&es that affect the continuin& rele%ance of the audit e%idence from the pre%ious audit, #e shall

test the controls in the current audit

.f there ha%e not been such chan&es, #e shall test the controls at least once in e%er" third audit and shall test somecontrols each audit to a%oid the possibilit" of testin& all the controls on #hich #e intend to rel" in a sin&le audit period

#ith no testin& of controls in the subseuent t#o audit periods -.'A //01 -1001


.n respondin& to an assessed ris$ of material misstatement related to accountin& estimates, #e ma" determine it

appropriate to test the operatin& effecti%eness of the controls o%er ho# mana&ement made the accountin& estimate,

to&ether #ith appropriate substanti%e procedures

R&ll%&$7a$d P$&(edu$es

.f #e obtain audit e%idence about the operatin& effecti%eness of controls durin& an interim period, #e shall

+btain audit e%idence about si&nificant chan&es to those controls subseuent to the interim period

Determine the additional audit e%idence to be obtained for the remainin& period -.'A //012 -872002

Aut&mated C&nt$&ls

An automated control can be e*pected to function consistentl" unless the pro&ram (includin& the tables, files, or other

permanent data used b" the pro&ram) is chan&ed +nce #e determine that an automated control is functionin& as

intended, #hich could be done at the time the control is initiall" implemented or at some other date, #e ma" consider

performin& tests to determine that the control continues to function effecti%el" 'uch tests mi&ht include determinin& that

Chan&es to the pro&ram are not made #ithout bein& sub6ect to the appropriate pro&ram chan&e controls

The authori?ed %ersion of the pro&ram is used for processin& transactions


14/20

+ther rele%ant &eneral controls are effecti%e -.'A //0A2-20025

Audit E1iden(e a)&ut t'e a((u$a(0 and (&m-leteness &% In%&$mati&n -$&du(ed )0 t'e entit0 &)tained t'$&u+'

testin+ &% aut&mated (&nt$&ls

!hen usin& information produced b" the entit" #e shall e%aluate #hether the information is sufficientl" reliable for our

purposes, includin& as necessar" in the circumstances

+btainin& audit e%idence about the accurac" and completeness of the information

;%aluatin& #hether the information is sufficientl" precise and detailed for our purposes -.'A 500 -851011

.n some circumstances, #e ma" conclude that hi&h9le%el Controls are not dependent on information produced b" the

entit"

For e*ample, a hi&h9le%el Control mi&ht be that the Controller re%ie#s the bi#ee$l" pa"roll e*pense for all 0 salaried

emplo"ees, usin& a s"stem9&enerated report The Controller bases his re%ie# of the pa"roll e*pense on his prior

$no#led&e of the bi#ee$l" e*pense, his $no#led&e of the chan&es in the number and composition of the #or$force, his

e*perience #ith the bud&etin& process relatin& to salar" e*pense, and his $no#led&e of salar" ad6ustments and bonuses

that ha%e occurred durin& the period .n this case, the ControllerBs e*pectation of the bi#ee$l" pa"roll e*pense is

de%eloped #ithout usin& the s"stem9&enerated report, and conseuentl", #e mi&ht conclude that it is not necessar" to

perform procedures to test the accurac" and completeness of the s"stem9&enerated report in order to test the

effecti%eness of this Control -202/

Su)stanti1e P$&(edu$es

Su)stanti1e Testin+ Plan uidan(e 'ho#

!e shall incorporate the follo#in& considerations in the desi&n of substanti%e procedures

The nature, timin&, and e*tent of substanti%e procedures are based on and are responsi%e to the assessed ris$s of

material misstatement due to fraud and error at the assertion le%el -.'A //0 and .'A 20/0 -Adapted from 827502

Audit procedures should be appropriate in the circumstances for the purpose of obtainin& sufficient appropriate audit

e%idence -.'A 500 -Adapted from 82001

R&ll%&$7a$d P$&(edu$es


15/20

.f substanti%e procedures are performed at an interim date, #e shall co%er the remainin& period b" performin&

'ubstanti%e procedures, combined #ith tests of controls for the inter%enin& period, or

.f #e determine that it is sufficient, further substanti%e procedures onl"

that pro%ide a reasonable basis for e*tendin& the audit conclusions from the interim date to the period end -.'A //022

-872005


>ased on the assessed ris$s of material misstatement, #e shall determine

!hether mana&ement has appropriatel" applied the reuirements of the applicable financial reportin& frame#or$

rele%ant to the accountin& estimate

!hether the methods for ma$in& the accountin& estimates are appropriate and ha%e been applied consistentl", and

#hether chan&es, if an", in accountin& estimates or in the method for ma$in& them from the prior period are appropriate

in the circumstances -.'A 5012 -53/01

.n respondin& to the assessed ris$s of material misstatement #e shall underta$e one or more of the follo#in&, ta$in&

account of the nature of the accountin& estimate

Determine #hether e%ents occurrin& up to the date of our audit report pro%ide audit e%idence re&ardin& the

accountin& estimate -530

Test ho# mana&ement made the accountin& estimate and the data on #hich it is based .n doin& so, #e shall e%aluate

the appropriateness of the method of measurement and the reasonableness of assumptions used b" mana&ement

-5350

Test the operatin& effecti%eness of the controls o%er ho# mana&ement made the accountin& estimate, to&ether #ith

appropriate substanti%e procedures (530)

De%elop a point estimate or a ran&e to e%aluate mana&ementBs point estimate -5370 -.'A 501/ -Adapted from

53/00

Consider #hether speciali?ed s$ills or $no#led&e in relation to one or more aspects of the accountin& estimates are

reuired in order to obtain sufficient appropriate audit e%idence -.'A 501 -Adapted from 53/012

Risk &% Mana+ement O1e$$ide &% C&nt$&ls

.rrespecti%e of our assessment of the ris$s of mana&ement o%erride of controls, #e shall desi&n and perform audit

procedures to

4e%ie# accountin& estimates for biases and e%aluate #hether the circumstances producin& the bias, if an", represent

a ris$ of material misstatement due to fraud .n performin& this re%ie#, #e shall


16/20

o ;%aluate #hether the 6ud&ments and decisions made b" mana&ement in ma$in& the accountin& estimates included

in the financial statements, e%en if the" are indi%iduall" reasonable, indicate a possible bias on the part of the entit"Bs

mana&ement that ma" represent a ris$ of material misstatement due to fraud .f so, #e shall ree%aluate the accountin&

estimates ta$en as a #hole

o erform a retrospecti%e re%ie# of mana&ement 6ud&ments and assumptions related to si&nificant accountin&

estimates reflected in the financial statements of the prior "ear

For si&nificant transactions that are outside the normal course of business for the entit", or that other#ise appear to

be unusual &i%en our understandin& of the entit" and its en%ironment and other information obtained durin& the audit, #e

shall e%aluate #hether the business rationale (or the lac$ thereof) of the transactions su&&ests that the" ma" ha%e been

entered into to en&a&e in fraudulent financial reportin& or to conceal misappropriation of assets -.'A 20/2 -;*cerpt

from 85/50/

!e shall determine #hether, in order to respond to the identified ris$s of mana&ement o%erride of controls, #e need to

perform other audit procedures in addition to those outlined abo%e (ie, #hen there are specific additional ris$s of

mana&ement o%erride that are not co%ered as part of the procedures performed to address the reuirements in

85/50/) -.'A 20// -85/512

Related Pa$t0 T$ansa(ti&ns

For identified si&nificant related part" transactions outside the entit"Bs normal course of business, #e shall

.nspect the underl"in& contracts or a&reements, if an", and e%aluate #hether

The business rationale (or lac$ thereof) of the transactions su&&ests that the" ma" ha%e been entered into to en&a&e

in fraudulent financial reportin& or to conceal misappropriation of assets

The terms of the transactions are consistent #ith mana&ementBs e*planations

The transactions ha%e been appropriatel" accounted for and disclosed in accordance #ith the applicable financialreportin& frame#or$

+btain audit e%idence that the transactions ha%e been appropriatel" authori?ed and appro%ed -.'A 5502/ -8/511

.f mana&ement has made an assertion in the financial statements to the effect that a related part" transaction #as

conducted on terms eui%alent to those pre%ailin& in an armBs len&th transaction, #e shall obtain sufficient appropriate

audit e%idence about the assertion -.'A 5502 -8/515

Inst$u(ti&ns

Document our planned substanti%e responses to ris$s, #hich should include the nature, timin&, and e*tent of the

procedures to be performed, &i%in& consideration to the follo#in&

.f the planned procedure #ill rel" on information produced b" the entit" (.;) and #e #ill be obtainin& audit e%idence

about the accurac" and completeness of the .; throu&h testin& of automated control procedures select JKesB for


17/20

completeness of .; throu&h substanti%e procedures or manual controls then select JEoB and document the planned

testin& of .; (includin& the name of the report) #ithin the substanti%e testin& or control procedures tables (as

appropriate)

.f the planned procedure does not rel" on .; then select JEoB for audit e%idence about the accurac" and

completeness of the .; throu&h testin& of automated controls

.f the results of our D::. or +; of the .nformation '"stems as documented at Form 153*9.T, Audit lan for .nformation'"stems, impacts the e*tent of an" substanti%e or control testin& of the accurac" and completeness of .; For e*ample,

if #e substanti%el" test a report produced b" an Application '"stem #hich is found to ha%e a si&nificant deficienc" in

controls, #e ma" need to modif" the nature, timin& or e*tent of our testin& of that report

.f our response to ris$s includes procedures to be performed at interim, the planned procedures should describe both

the interim and rollfor#ard procedures

The planned control reliance strate&" should be considered #hen determinin& the e*tent of testin&

;*amples of substanti%e procedures can be inserted in the table b" usin& the


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;*pense

+ccurence

Accurac"

Completeness

Transactions #ith a deferred income ta* impact are not

considered #hen calculatin& deferred ta* balances

Assetiabilit"

Completeness

;*pense

Completeness

Eo

Deferred ta* calculations, or supportin& schedulesinformation,

include mathematical errors

Assetiabilit"

Galuation and

allocation

;*pense

Accurac"

Eo

F&$ SAS Use Onl0

'i&nificant ris$s #ith no .T in%ol%ement

'i&nificant 4is$s .dentified 4ele%ant Assertion Auto9

mated

Audit ;%ide

about the

accurac" an

completene

.; obtainethrou&h tes

automated

controls

4is$s #ith no .T in%ol%ement

4is$s .dentified 4ele%ant Assertion Auto9 Audit ;%ide

about the

accurac" a


19/20

mated completen

.; obtain

throu&h tes

automated

controls

Eon9.T 'ubstanti%e rocedures ('i&nificant 4is$s)

'i&nificant 4is$s .dentified 4ele%ant Assertion lan to test +; in current

period

Eon9.T 'ubstanti%e rocedures (4is$s) 9 C4'

4is$s .dentified 4ele%ant Assertion lan to test +; in

current period

Description of planned substanti%e tes

Eon9.T 'ubstanti%e rocedures (4is$s) 9 Eo C4'

4is$s .dentified 4ele%ant Assertion lan to test +; in

current period

Description of planned substanti%e tes


9 'ome non9ta*able re%enue has been incorrectl"classified as ta*able or #as included at an incorrect

amount

9 'ome ta* deductible e*penses ha%e been incorrectl"

classified as non9ta* deductible or #ere included at an

incorrect amount

9 'ome non9ta* deductible e*penses ha%e been

incorrectl" classified as ta* deductible or #ere included

at an incorrect amount

9 'ome ta*able re%enue has been incorrectl" classified

as nonta*able or #as included at an incorrect amount

Assetiabilit"

;*istence

Galuation and

allocation

;*pense

+ccurence

Accurac"

Eo Ta*ation 01

1 +btain the ta* calculation as prepar

computed as per .ncome Ta* a#s of

2 Chec$ also #hether the an" ta* ass

/ Trace that the amounts (allo#abled

/ 4eperform the computations and co

Ta* pro%ision is misstated becauseadditional ta*assessed b" the Ministr" of Ta* (#hether paid or not)

has not been recorded or has been recorded at an

incorrect amount

Assetiabilit"

Galuation and

allocation

Completeness

4i&hts and

obli&ation

Eo Ta*ation 01




/ Tace that the amounts (allo#abled



20/20

;*pense

+ccurence

Accurac"

Completeness

Transactions #ith a deferred income ta* impact are not

considered #hen calculatin& deferred ta* balancesAssetiabilit"

Completeness

;*pense

Completeness

Eo Ta*ation 01






Deferred ta* calculations, or supportin&

schedulesinformation, include mathematical errorsAssetiabilit"

Galuation andallocation

;*pense

Accurac"

Eo Ta*ation 01






1599 direct and deferred taxation - risk assessment and audit plan

Documents