avappp.doc
TRANSCRIPT
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AVA ALEGADO REPORT
page 361-370 (before 3. Confirmation)
1stslide:
The auditor plans and performs substantive proedures to be responsive to the related
assessment of the ris!s of material misstatements. These proedures also inlude the results oftests of ontrols.
The auditor obtains audit evidene to dra" reasonable onlusions on "hih to base the audit
opinion b# performing audit proedures.
The deision as to "hat audit evidene$ its timing and e%tent to obtain is determined b# the
auditor&s degree of reliane on the:
- auditor&s degree of reliane on the aounting and internal ontrol s#stems
ma%imum allo"able level of detetion ris!
finanial statement assertions
'n the olletion of audit evidene$ audit testing "ill be performed. udit testing inlude:
ontrol testing and substantive testing.
The audit evidene obtained in substantive testing "hih inlude information as to "hether apartiular aount balane is complete, valid and accurateare disussed in this hapter. ()
*ndslide:
Substantive procedures- audit proedures performed to detet material misstatements at the
assertion level. lso !no"n as +Tests of Assertions., 't inludes:
tests of details of lasses of transations$ aount balanes and dislosures
substantive analtical procedures!proess of obtaining audit evidene
'/ 2CT'4: to detet an# material errors that ma# have passed through the aounting
and internal ontrol s#stem filter or irregularities that ma# have been introdued throughoverride of internal ontrols b# management.
3rdslide:
5/ 88C9 to ;T/T'4 TT'/5
Tests of balances- speifiall# tests for atual errors in the ending balance account
- most po"erful of the proedures available to the auditor sine it fouses on the
details and aggregations that omprise an aount balane at the end of the #ear
Tests of transactions- atual errors indiate the li!elihood that errors ma# have ourred in
other transations not e%amined
- similarl# po"erful beause the# involve e%amination of the detail in support of individual
transactions
particularly important for large transactions that have a significant impact on the financial statements
thslide:
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Transaction Testin"is an all enompassing term used b# auditors that refer to evidene
gathering ativities direted at lasses of transations underl#ing a partiular aount balane
assertion. ppliable "here the audit approah for a particular account balance assertion is in-dept#$
-inomplete reported transations ? not valid (non-anal#tial in-depth approah)
The e%tent of transation testing (in-depth approah) relating to a partiular aount balaneassertion depends on the @uantit# and @ualit# of evidene re@uired b# the auditor to form an
opinion as to the e%tent of misstatements in the aount balane.
- in-depth approach needed: high @uantit# of evidene re@uired$ allo"able detetion ris! is lo" andontrol ris! is high
- in-depth approach not needed: allo"able detetion ris! is moderate or high
6thslide:
The assessment of ris!s of material misstatement at the finanial statement level is affeted b#
the auditor&s understanding of the ontrol environment.
e.g.effetive ontrol environment: auditor "ill have more onfidene in the internall#-generated audit
evidene"ea! ontrol environment: see! more e%tensive audit evidene from substantive audit proedures
5/ ;: the higher the @uantit# and @ualit# of evidene re@uired in relation to an
aount balane assertion$ the greater the need for the testing of transations.
-/ote: "hen auditors gather evidene in relation to revenue and e%pense aount balanes$ there is
often little evidene available at the aount balane level. This means that the auditors "ill often adoptan in-depth approah for those revenue and e%pense aount balanes.
7thslide:
PSA %%&indiates that the higher the auditor&s assessment ris!$ the more reliable and relevant is
the audit evidene sought b# auditor from substantive proedures. 'n effet the level of detetion ris! related diretl# to the auditor&s substantive proedures.
Detection Risk (DR) is a funtion of the effetiveness of an auditing proedure and of its
appliation b# the auditor.
The deision about "hih proedures to use to ahieve a partiular audit obAetive is based on
the auditor&s Audgment about the e%peted effetiveness and effiien# of the available
proedures in reduing detetion ris! for speifi finanial statement assertions.
- B : e%tensive tests of speifi finanial assertions must be onduted- 9'59 is aeptable: less substantive evidene
Dthslide:
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S'(STA)T*VE EV*DE)+E! VAL*D*T, +OPLETE)ESS, A++'RA+
4alidit#: the e%istene or ourrene assertion
- Top-don approac!" the auditor VO'+.ES from the aounting reords to the doumentar#evidene.
Completeness:
-#ottom up approac!"TC'/5 rather than vouhingE an auditor an deide "hether all events "ere
reorded and omplement the evidene obtained b# vouhing. ura#: the auditor "ill usuall# vouh from the aounting reords to the doumentar#
evidene$ although "ith aura#$ the diretion of the vouhing is not as ritial.
thslide:
TPES O/ S'(STA)T*VE TESTS
Substantive Anal$tical %rocedures"a!a TT = //
- are used to e%amine speifi relationships among aounts and operating data in order to provide
indiations of the aura# of speifi aount balanes.
Tests of details"
-tests of details of transactions:performed "hether individual transations have been orretl#reorded-tests of details of account balances: are performed to diretl# test "hether a speifi aount is
orretl# stated in total.
The seletion and mi% of tests "ill var# aross segments of the audit due to the different ris!s
identified in earlier stages of the audit$ partiularl# in the tests of ontrols and ris! assessments..
5enerall#$ the more signifiant and ris!# an audit obAetive$ the more evidene the auditor "ill
"ish to obtain related to that obAetive.
10thslide:
S'(STA)T*VE TEST*)G PRO+ED'RES a0a VAL*DAT*O) PRO+ED'RES-depend upon both the ma%imum allo"able level of detetion ris! as "ell as the assertions
being e%amined.
1. bservation and in@uir#*. e-performane and realulation
3. Confirmation
. %amination of doumentar# evidene
6. eoniliation
7. Cut-off tests
11thslide:
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O(SERVAT*O) and *)1'*R
&n'uir$ involves as!ing @uestions of the appropriate lient personnelE often a starting point to
gather further evidene and is rarel# ade@uate b# itself for satisf#ing an audit obAetive.
-valuating responses to in@uiries is an integral part of the in@uir# proess.
bservation is "hen the auditor "itnesses the ph#sial ativities of the lient.
REPER/ORA)+E A)D RE+AL+'LAT*O)
eperformane involves reperformane of lient proedures or omputations$ in part or in full.
The auditor repeats the ativities of the lient and ompares the result to the lient&s result.
n auditor an verif# the mathematial aura# of underl#ing aounting data b# repeating the
alulations performed originall# b# the management.