the financial statement audit process.pptx-2

7/23/2019 The Financial STatement Audit Process.pptx-2

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OVERVIEW OF THEFINANCIAL STATEMENT

AUDIT PROCESS



∗ Auditing – includes the h!"se #s$ste%"tic

!&cess' (ec"use "n "udit in)&l)es " l&gic"lse!ies &* stes th"t le"d t& the !ende!ing &*"n &ini&n &n the *"i!ness &* +n"nci"lst"te%ents

∗ FS – !e*e!s t& " st!uctu!ed !e!esent"ti&n &*+n"nci"l in*&!%"ti&n

∗ FS "!e c&%le, d&cu%ents "nd -c&nse.uentl$ the !&cess &* "uditing FS

!e.ui!es " s$ste%"tic "nd !"ti&n"l "!&"ch



∗ O(/ecti)e &* the Audit &* FS is t& en"(le the "udit&!t& e,!ess "n &ini&n 0hethe! the FS "!e !e"!ed-in "ll %"te!i"l !esects- in "cc&!d"nce 0ith "n

"lic"(le +n"nci"l !e&!ting *!"%e0&!12

∗

&)e!"ll &(/ecti)e &* the indeendent "udit&! is t&&(t"in !e"s&n"(le "ssu!"nce "(&ut 0hethe! the FS"s " 0h&le "!e *!ee *!&% %"te!i"l %isst"te%ents

∗ Due t& *!"ud &! e!!&!

∗ T& !e&!t the FS in "cc&!d"nce 0ith the "udit&!3s +ndings

∗ PSAs !e.ui!e th"t the "udit&! %&di+es the "udit&!3s&ini&n "cc&!dingl$ &! 0ithd!"0 *!&% the eng"ge%ent2

O(/ecti)e &* the IndeendentAudit&!



∗ 42 Identi*$ing the +n"nci"l !e&!ting *!"%e0&!1t& (e used in the !e"!"ti&n &* the FS

∗ 52 P!e"!ing "nd !esenting the FS in"cc&!d"nce 0ith th"t "lic"(le +n"nci"l

!e&!ting *!"%e0&!1∗ 62 Designing- i%le%ent"ti&n "nd %"int"ining

inte!n"l c&nt!&l !ele)"nt t& the !e"!"ti&n "nd!esent"ti&n &* FS th"t "!e *!ee *!&% %"te!i"l%isst"te%ent- 0hethe! due t& *!"ud &! e!!&!

∗ 72 Selecting "nd "l$ing "!&!i"te"cc&unting &licies

∗ 82 M"1ing "cc&unting esti%"tes th"t "!e!e"s&n"(le &n the ci!cu%st"nces

Res&nsi(ilities &*

M"n"ge%ent



∗ 42 Audit&! Indeendence

∗ 52 P!&*essi&n"l s1eticis%

∗ 62 C&nduct "nd Sc&e &* "n Audit in

Acc&!d"nce 0ith PSAs∗ 72 Audit e)idence "nd FS Asse!ti&ns

∗ 82 Audit M"te!i"lit$

∗ 92 Audit Ris1

∗ :2 P!&*essi&n"l /udg%ent

∗ ;2 Inhe!ent li%it"ti&ns &* "n "udit

∗ PSA 5<<

="sic C&ncets Unde!l$ing " FSAudit



∗ Re*e!s (&th t& the st"te &* %ind &* "udit&! "ndindeendence in "e"!"nce

∗ S"*egu"!ds the "udit&!3s "(ilit$ t& *&!% "n "udit&ini&n 0ith&ut (eing ">ected ($ in?uencesth"t %ight c&%!&%ise th"t &ini&n

∗

Enh"nces the integ!it$- t& (e &(/ecti)e "nd%"int"in the "ttitude &* P!&*essi&n"l s1eticis%

Audit&! Indeendence



∗ @%"1es c!itic"l "ssess%ent- 0ith "

.uesti&ning %ind- &* the )"lidit$ &* "udite)idence &(t"ined "nd is "le!t t& "udite)idence th"t c&nt!"dicts &! (!ings int&.uesti&n the !eli"(ilit$ &* d&cu%ents

∗ When %"1ing in.ui!ies "nd e!*&!%ing &the!"udit !&cedu!es @ the "udit&! is n&ts"tis+ed 0ith less th"n e!su"si)e "udit

e)idence2

P!&*essi&n"l S1eticis%



∗ C&nduct "n "udit in "cc&!d"nce 0ith PSAs

∗ PSAs c&nt"in ("sic !inciles "nd essenti"l!&cedu!es t&gethe! 0ith !el"ted guid"nce&n the *&!% &* e,l"n"t&!$ "nd &the!%"te!i"ls including "endices

∗ A!e designed t& su&!t eh "chie)e%ent &* the&)e!"ll &(/ecti)e &* the "udit&!2

∗ Audit&! sh"ll c&%l$ 0ith "ll PSAs !ele)"nt t&the "udit2

C&nduct &* "n Audit "nd Sc&e &*"n Audit in "cc&!d"nce 0ith PSAs



∗ The "udit&! sh"ll c&nside! the enti!e te,t &* "PSA t& unde!st"nd its !e.ui!e%ent2

∗ The n"tu!e &* the PSA !e.ui!es the "udit&! t&e,e!cise !&*essi&n"l /udg%ent in "l$ingthe%

∗ The "udit&! sh"ll n&t !e!esent c&%li"nce0ith PSAs unless the "udit&! h"s c&%lied

0ith "ll the PSAs !ele)"nt t& the "udit2



∗ P!&)ide inte!!et"ti)e guid"nce "nd !"ctic"l"ssist"nce t& "udit&!s in i%le%enting PSAs2

∗ An "udit&! 0h& d&es n&t "l$ the guid"nceincluded in " !ele)"nt PAPS needs t& (e!e"!ed t& e,l"in h&0 the ("sic !inciles

"nd essenti"l !&cedu!es in the St"nd"!d"dd!essed ($ the PAPS h")e (een c&%lied0ith2

Philiine Auditing P!"cticeSt"te%ents PAPSsB



∗ @!e*e!s t& the "udit !&cedu!es th"t- in the

"udit&!s /udg%ent "nd ("sed &n the PSAs-"!e dee%ed "!&!i"te in theci!cu%st"nces t& "chie)e the &(/ecti)e &*the "udit2

∗ In dete!%ining the "udit !&cedu!es @ the"udit&! sh&uld c&%l$ 0ith e"ch &* the PSAs!ele)"nt t& the "udit2

Sc&e &* "n Audit



∗ @ %"$ !e.ui!ed t& c&%l$ 0ith &the!

!&*essi&n"l- leg"l &! !egul"t&!$!e.ui!e%ents in "dditi&n t& the PSAs2

∗ In the e)ent th"t th&se l"0s "nd !egul"ti&nsdi>e! *&!% the PSAs- "n "udit c&nducted in

"cc&!d"nce 0ith the l&c"l l"0s "nd!egul"ti&ns 0ill n&t "ut&%"tic"ll$ c&%l$0ith PSAs

Sc&e &* "n Audit



∗ Audit&!3s Res&nsi(ilit$

∗ An "udit in)&l)es e!*&!%ing !&cedu!es t&&(t"in "udit e)idences "(&ut the "%&unts "nd

discl&su!es in the FS2 The !&cedu!es selecteddeend &n the "udit&!3s /udg%ent- includingthe "ssess%ent &* the !is1s &* %"te!i"l%isst"te%ent &* the +n"nci"l st"te%ents-0hethe! due t& *!"ud &! e!!&!2

∗ C&nclude th"t "n "udit in)&l)es g"the!inge)idence "(&ut "%&unts "nd discl&su!es in theFS "sse!ti&nsB

Audit E)idence "nd Fin"nci"lSt"te%ent Asse!ti&n



∗ @in*&!%"ti&n used ($ the "udit&! in "!!i)ing

"t the c&nclusi&ns &n 0hich the "udit &ini&nis ("sed- "nd includes the in*&!%"ti&nc&nt"ined in the "cc&unting !ec&!dsunde!l$ing the FS "nd &the! in*&!%"ti&n

Audit E)idence



AccountingRecords

Other Information

The !ec&!ds &* initi"lent!ies

Minutes &* the %eetings

Su&!ting !ec&!ds C&n+!%"ti&n *!&% thi!d "!ties

Chec1s "nd !ec&!ds&* elect!&nic *undt!"ns*e!s

An"l$sts3 !e&!ts

In)&ices C&%"!"(le d"t" "(&ut c&%etit&!s(ench%"!1ingBB

c&nt!"cts C&nt!&l %"nu"ls

The gene!"l "ndsu(sidi"!$ ledge!s

In*&!%"ti&n &(t"ined ($ the "udit&! *!&%such "udit !&cedu!es "s in.ui!$-&(se!)"ti&n "nd insecti&n

&u!n"l ent!ies

Othe! "d/ust%ents t&the +n"nci"lst"te%ents th"t "!en&t !e?ected in

*&!%"l /&u!n"lent!ies

Othe! in*&!%"ti&n de)el&ed ($ &!")"il"(le t&- the "udit&! th"t e!%its the"udit&! t& !e"ch c&nclusi&ns th!&ugh )"lid!e"s&ning



Category Description/Purpose

Ris1 Assess%ent P!&cedu!es Used *&! &(t"ining "nunde!st"nding &* the client entit$"nd its en)i!&n%ent- includinginte!n"l c&nt!&l2Ris1 "ssess%ent !&cedu!es "!ee!*&!%ed du!ing the "uditl"nning "nd inte!n"l c&nt!&lh"ses &* the "udit

Tests &* C&nt!&ls Used t& test the &e!"tinge>ecti)eness &* c&nt!&ls in!e)enting- &! detecting "ndc&!!ecting- %"te!i"l %isst"te%ent

Su(st"nti)e tests Used t& detect %"te!i"l%isst"te%ents in "cc&unt

("l"nces- cl"sses &* t!"ns"cti&ns"nd discl&su!es

PSAs 6 c"teg&!ies &* !&cedu!es*&! g"the!ing "udit e)idence

Audit P!&cedu!es Acc&!ding t& Pu!&se



∗ M"n"ge%ent i%licitl$ &! e,licitl$ %"1es"sse!ti&ns !eg"!ding the !ec&gniti&n-%e"su!e%ent- !esent"ti&n "nd discl&su!e &*the )"!i&us ele%ents &* FS "nd !el"ted

discl&su!es

∗ ="sed &n this "sse!ti&ns – the "udit&! sh"ll"ssess the !is1s %"te!i"l %isst"te%ent "nd

the design "nd e!*&!%"nce &* test &*c&nt!&ls "nd su(st"nti)e tests2

M"n"ge%ent Asse!ti&ns



∗ 42 Asse!ti&ns "(&ut cl"sses &* t!"ns"cti&ns

"nd e)ents *&! the e!i&d unde! "udit

∗ 52 Asse!ti&ns "(&ut "cc&unt ("l"nces end

∗ 62 Asse!ti&ns "(&ut !esent"ti&n "nddiscl&su!es

PSA 8<< – Audit E)idence g!&us FS

"sse!ti&ns int& the *&ll&0ing c"teg&!ies



∗ 42 Occu!!ence –t!"ns"cti&ns "nd e)ents th"t h")e(een !ec&!ded h")e &ccu!!ed "nd e!t"in t& theentit$

∗

52 C&%leteness – "ll t!"ns"cti&ns "nd e)ents th"tsh&uld h")e (een !ec&!ded h")e (een !ec&!ded

∗ 62 Accu!"c$ – "%&unts "nd &the! d"t" !el"ting t&!ec&!ded t!"ns"cti&ns "nd e)ents h")e (een!ec&!ded "!&!i"tel$

∗ 72 Cut &> – t!"ns"cti&ns "nd e)ents h")e (een!ec&!ded in the c&!!ect "cc&unting e!i&d

∗ 82 Cl"ssi+c"ti&n – t!"ns"cti&ns "nd e)ents h")e(een !ec&!ded in the !&e! "cc&unts

Asse!ti&ns "(&ut cl"sses &* t!"ns"cti&ns"nd e)ents *&! the e!i&d unde! "udit



∗ 42 E,istence – "ssets- li"(ilities- "nd e.uit$ inte!este,ist

∗ 52 Rights "nd &(lig"ti&ns – the entit$ h&lds &! c&nt!&lsthe !ights t& "ssets "nd li"(ilities "!e the &(lig"ti&ns&* the entit$

∗ 62 C&%leteness – "ll "ssets- li"(ilities "nd e.uit$inte!ests th"t sh&uld h")e (een !ec&!ded h")e (een!ec&!ded

∗ 72 V"lu"ti&n "nd "ll&c"ti&n – "ssets- li"(ilities "nde.uit$ inte!ests "!e included in the +n"nci"lst"te%ents "t "!&!i"te "%&unts "nd "n$ !esulting)"lu"ti&n &! "ll&c"ti&n "d/ust%ents "!e "!&!i"tel$!ec&!ded

Asse!ti&ns "(&ut "cc&unt("l"nces "t the e!i&d end



∗ 42 Occu!!ence "nd !ights "nd &(lig"ti&ns –discl&sed e)ents- t!"ns"cti&ns "nd &the! %"tte!sh")e &ccu!!ed "nd e!t"in t& the entit$2

∗ 52 C&%leteness – "ll discl&su!es th"t sh&uld h")e

(een included in the FS h")e (een included

∗ 62 Cl"ssi+c"ti&n "nd unde!st"nd"(ilit$ – +n"nci"lin*&!%"ti&n is "!&!i"tel$ !esented "nddesc!i(ed- "nd discl&su!es "!e cle"!l$ e,!essed

∗

72 Accu!"c$ "nd )"lu"ti&n – +n"nci"l "nd &the!in*&!%"ti&n "!e discl&sed *"i!l$ "nd "t "!&!i"te"%&unts

Asse!ti&ns "(&ut !esent"ti&n"nd discl&su!e



∗

C&ncet &* %"te!i"lit$ is inhe!ent in the 0&!1 &* the"udit&!

∗ M"te!i"lit$ is " !el"ti)e c&ncet2

∗ 5<<; IAA= H"nd(&&1 ∗ In*&!%"ti&n is %"te!i"l i* its &%issi&n &! %isst"te%ent c&uld

in?uence the ec&n&%ic decisi&ns &* use!s t"1en &n the ("sis

&* the FS2

∗

Assess%ent &* 0h"t is %"te!i"l is " %"tte! &* !&*essi&n"l /udg%ent

∗ @Audit&! c&nside!s %"te!i"lit$ t0ice

∗ Pl"nning the eng"ge%ent

∗And "t "udit c&%leti&n

Audit M"te!i"lit$



∗ Du!ing Pl"nning

∗ 42 Est"(lish " !eli%in"!$ /udg%ent "(&ut%"te!i"lit$

∗ 52 Dete!%ine t&le!"(le %isst"te%ent

∗ At Audit C&%leti&n

∗ 62 Esti%"te li1el$ %isst"te%ents "nd c&%"!ethe t&t"ls t& the !eli%in"!$ /udg%ent "(&ut%"te!i"lit$

Stes in Al$ing M"te!i"lit$



∗ P!eli%in"!$ /udg%ent &! esti%"te "(&ut %"te!i"lit$∗ @ !e!esents the %",i%u% "%&unt ($ 0hich " set &* FS

c&uld (e %isst"ted "nd still n&t c"use the "udit&! t&(elie)e th"t the decisi&ns &* !e"s&n"(le use!s 0&uld (e

">ected2

∗ AASC issued st"nd"!ds d& n&t !e.ui!e th"t the!eli%in"!$ /udge%nt (e .u"nti+ed2

Est"(lish " P!eli%in"!$ udg%ent"(&ut M"te!i"lit$



∗ 42 Pe!cent"ge e>ect &n net inc&%e (e*&!et",es

∗ 52 e!cent"ge e>ect &n t&t"l !e)enues

∗ 62 e!cent"ge e>ect &n t&t"l "ssets

∗ Pl"nning M"te!i"lit$ – !esulting %"te!i"lit$"%&unt in es&s

The %"te!i"lit$ c!ite!i" used ($selected !"ctici&ne!s



∗ Is the "%&unt &* l"nning %"te!i"lit$ th"t is"ll&c"ted t& "n "cc&unt ("l"nce &! cl"ss &*t!"ns"cti&ns

∗ @ !&cess &* "ll&c"ti&n %"$ (e d&ne /udg%ent"ll$ using *&!%"l .u"ntit"ti)e"!&"ches2

T&le!"(le %isst"te%ent



∗ The l&0e! the t&le!"(le %isst"te%ent- the %&!e

e,tensi)e the !e.ui!ed "udit !&cedu!es

∗ E,"%le "ssu%e th"t t&le!"(le %isst"te%ent *&!"cc&unts "$"(le is e!&@ this %e"ns th"t "n$"%&unt &* %isst"te%ent in "cc&unts "$"(le e)en

&ne cent")& %isst"te%ent c"n ">ect the decisi&n &*the use!s &* FS2

∗ Audit&! sh&uld h")e t& test e)e!$ t!"ns"cti&ns%"1ing u the "cc&unt2

The E>ect &* M"te!i"lit$ &n AuditP!&cedu!es



∗ @ "!&"ch the %"te!i"lit$ le)el- the "udit&!

0&uld c&nside! !educing "udit !is1 ($e!*&!%ing "dditi&n"l "udit !&cedu!es

∗ O! ($ !e.uesting %"n"ge%ent t& "d/ust theFS *&! identi+ed %isst"te%ents

Agg!eg"te &* the unc&!!ected%isst"te%ent



∗ Is the !is1 th"t the "udit&! e,!esses "n in"!&!i"te

"udit &ini&n 0hen the FS "!e %"te!i"ll$ %isst"ted∗ Is " *uncti&n &* the !is1 * %"te!i"l %isst"te%ent "nd

the !is1 th"t the "udit&! 0ill n&t detect such%isst"te%ent

M"$ (e "ssessed eithe! in42 u"ntit"ti)e te!%s – e,2 ;G &* t&t"l "ssets

52 N&n .u"ntit"ti)e te!%s – e,2 High- %&de!"te &! l&0

Audit Ris1



∗ @ is the susceti(ilit$ &* "n "sse!ti&n t& "

%isst"te%ent th"t c&uld (e %"te!i"l-indi)idu"ll$ &! 0hen "gg!eg"ted 0ith &the!%isst"te%ents "ssu%ing th"t the!e 0e!e n&!el"ted inte!n"l c&nt!&ls

Inhe!ent Ris1



∗ Is the li1elih&&d th"t " %isst"te%ent th"tc&uld &ccu! in "n "sse!ti&n "nd th"t c&uld (e%"te!i"l- indi)idu"ll$ &! 0hen "gg!eg"ted0ith &the! %isst"te%ent- 0ill n&t (e

!e)ented &! detected "nd c&!!ected &n "ti%el$ ("sis ($ the entit$3s inte!n"l c&nt!&l

∗ Is " *uncti&n &* the e>ecti)eness &* thedesign "nd &e!"ti&n &* inte!n"l c&nt!&l in

"chie)ing the entit$3s &(/ecti)es !ele)"nt t&!e"!"ti&n &* the entit$3s FS

C&nt!&l Ris1



∗ @ is the li1elih&&d th"t th"udit&! 0ill n&tdetect %isst"te%ent th"t e,ists in "n"sse!ti&n th"t c&uld (e %"te!i"l- eithe!indi)idu"ll$ &! 0hen "gg!eg"ted 0ith &the!%isst"te%ents2

∗ Is " *uncti&n &* the e>ecti)eness &* "n "udit!&cedu!e "nd &* its "lic"ti&n ($ the

"udit&!2

∗ Rel"tes t& the n"tu!e- ti%ing "nd e,tent &*the "udit&!3s !&cedu!es th"t "!e dete!%ined

($ the "udit&! t& !educe "udit !is1 t& "n

Detece ti&n Ris1



∗ The g!e"te! the !is1 &* %"te!i"l%isst"te%ent the "udit&! (elie)es e,ists-the less the detecti&n !is1 c"n (e "cceted

∗ The less !is1 &* %"te!i"l %isst"te%ent the"udit&! (elie)es e,ists- the g!e"te! thedetecti&n !is1 th"t c"n (e "cceted



∗ The highe! the c&%(ined "ssess%ent &* IR

"nd CR∗ @ the l&0e! the "%&unt &* the DR th"t c"n

(e "cceted

∗ The l&0e! the "ccet"(le DR- the g!e"te! the"%&unt &* "udit !&cedu!es t& (e e!*&!%edin &!de! t& !educe the ch"nces &* n&tdetecting %isst"te%ents

E>ect &* Audit Ris1 &n AuditP!&cedu!es



∗ The highe! the %"te!i"lit$ le)el @ the l&0e!

the "udit !is1 "nd )ice )e!s"

∗ The "udit&! t"1es the in)e!se !el"ti&nshi(et0een %"te!i"lit$ "nd "udit !is1 int&

"cc&unt 0hen dete!%ining the n"tu!e- ti%ing"nd e,tent &* "udit !&cedu!es2

Rel"ti&nshi (et0een Audit Ris1"nd M"te!i"lit$



∗ Desc!i(ed "s the "lic"ti&n&* !ele)"nt

1n&0ledge- "nd e,e!ience- 0ithin 0hich thec&nte,t !&)ided ($ "uditing- "cc&unting "ndethic"l st"nd"!ds- in !e"ching decisi&ns "(&utthe c&u!ses &* "cti&n th"t "!e "!&!i"te inthe ci!cu%st"nces &* the "udit eng"ge%ent2

∗ M"te!i"lit$ "nd "udit !is1

∗ The n"tu!e- ti%ing "nd e,tent &* "udit!&cedu!es used t& g"the! "udit e)idence

P!&*essi&n"l udg%ent



∗ 42 P!e@eng"ge%ent –c"!!$ing &ut initi"l "udit"cti)ities - such "s client "ccet"nce "nd c&ntinu"nce-"nd "g!ee%ent &n the te!%s &* eng"ge%ent2

∗ 52 Audit Pl"nning –de)el&ing "n &)e!@"ll "udit

st!"teg$ "nd !e"!ing the det"iled "udit l"n

∗ 62 Stud$ "nd E)"lu"ti&n &* Inte!n"l C&nt!&ls –d&cu%enting "nd e)"lu"ting the "udit&!3sunde!st"nding &* the inte!n"l c&nt!&l st!uctu!e &* the

client2 ="sed &n the unde!st"nding &* inte!n"l c&nt!&l-the "udit&! "ssess !is1 "nd dete!%ines the "!&!i"te"udit "!&"ch2

Ph"ses &* the Audit P!&cess



∗ 72 Su(st"nti)e testing – g"the!ing &*e)idence ($ e!*&!%ing su(st"nce "udit!&cedu!es

∗ 82 C&%leting the "udit – 0!"ing@u!&cedu!es "nd !e)ie0 &* "udit c&nclusi&ns!i&! t& issu"nce &* the "udit !e&!t

∗ 92 issu"nce &* "udit !e&!t – !e"!"ti&n "ndissu"nce &* the "udit !e&!t

∗ :2 &st "udit !es&nsi(ilities @ de(!ie+ng

Ph"ses &* the Audit P!&cess



∗ Eng"ge%ent Lette! @ d&cu%ents "nd

c&n+!%s the "udit&!s "ccet"nce &* the"&int%ent - the &(/ecti)e "nd sc&e &* the"udit- the e,tent &* his !es&nsi(ilities t& theclient "nd the *&!% &* "n$ !e&!ts

Te!%s &* Eng"ge%ent



∗ Ple"se see &n $&u! !e*e!ence (&&1

P!inci"l c&ntents &* "nEng"ge%ent Lette!



∗ A !e.uest *!&% the client *&! the "udit&! t&ch"nge the eng"ge%ent %"$ !esult *!&%

∗ 42 " ch"nge in ci!cu%st"nces ">ecting the

need *&! the se!)ice

∗ 52 " %isunde!st"nding "s t& the n"tu!e &* "n"udit &! !el"ted se!)ice &!igin"ll$ !e.uested&!

∗ 62 " !est!icti&n &n the sc&e &* theeng"ge%ent- 0hethe! i%&sed ($%"n"ge%ent &! c"used ($ ci!

Ch"nges in the te!%s &*eng"ge%ent



∗

The "udit 0&!1 is t& (e "de.u"tel$ l"nned "nd"ssist"nts- i* "n$ "!e t& (e !&e!l$ sue!)ised2

∗ Audit l"nning in)&l)es the *&ll&0ing "cti)ities

∗ 42 O(t"ining "n unde!st"nding &* the client "nd

its en)i!&n%ent

∗ Unde!st"nding the entit$ "nd its en)i!&n%entincluding its inte!n"l c&nt!&l

∗

En"(les the "udit&! t& identi*$ the e)ents-t!"ns"cti&ns- "nd !"ctices th"t signi+c"ntl$">ect the FS unde! "udit2

∗ P!&)ides "n &)e!)ie0 "(&ut the &ssi(le c"uses"nd s&u!ces &* %isst"te%ents

Audit Pl"nning



∗ 52 Dete!%ining the need *&! e,e!ts

∗ The "udit&! c&nside!s 0hethe! the client3sline &* (usiness in)&l)es ce!t"in %"tte!s th"t

0&uld !e.ui!e the 1n&0ledge &* !&*essi&n"ls*!&% &the! discilines

∗ 62 Est"(lishing %"te!i"lit$ "nd "ssessing !is1

∗ The "udit&! est"(lishes the !eli%in"!$ /udg%ent "(&ut %"te!i"lit$ "nd %"1es!eli%in"!$ "ssess%ents &* inhe!ent !is1 "ndc&nt!&l !is12

Audit Pl"nning



∗ 72 Assessing the &ssi(ilit$ &* n&n@c&%li"nce

∗ PSA st"te th"t 0hen designing "nd e!*&!%ing "udit !&cedu!es "ndin e)"lu"ting "nd !e&!ting the !esults the!e&*- the "udit&! sh&uld!ec&gnie th"t n&nc&%li"nce ($ the entit$ 0ith l"0s "nd !egul"ti&ns%"$ %"te!i"ll$ ">ect the FS

∗ 82 Identi*$ing !el"ted "!ties su(sidi"!iesB@ identi+ed (ec"use !el"ted"!ties t!"ns"cti&ns "!e usu"ll$ n&t c&nducted "t "!%3s length

∗ Rel"ted "!ties includes

∗ Ali"tes &* the clients∗ In)estee c&%"nies – using e.uit$ %eth&d

∗ T!ust *&! the (ene+ts &* the e%l&$ees

∗ P!inci"l &0ne!s &* the ente!!ise

∗ M"n"ge%ent "nd i%%edi"te *"%ilies &* the !inci"l &0ne!s &* the client

Audit Pl"nning



92 Pe!*&!%ing !eli%in"!$ "n"l$tic"l !&cedu!es

PSA 85< &n An"l$tic"l P!&cedu!es

− In)&l)e the e)"lu"ti&n &* FS th!&ugh " stud$ &*

l"usi(le !el"ti&nshi "%&ng (&th +n"nci"l "ndn&n +n"nci"l d"t"2

− Hels st!engthen the "udit&!3s unde!st"nding &*the clients (usiness t!"ns"cti&ns "nd hel

identi*$ &tenti"l !&(le% "!e"s 0ithin the FS

Audit Pl"nning



:2 De)el&%ent &* the &)e!"ll "udit st!"teg$"nd det"iled "udit l"n

Audit&! n&0 de)el&s the "udit st!"teg$ the"!&"ch t& (e t"1en in &!de! t& e>ecti)el$"chie)e the &(/ecti)e

St!"teg$ %ust (e c&n)e!ted int& " %&!edet"iled "udit l"n – c&nt"ins the "cti&n &ints

t& (e e!*&!%ed In &!de! t& i%le%ent thest!"teg$2

Audit Pl"nning



∗ ;2 P!e"!"ti&n &* !eli%in"!$ "udit !&g!"%s

∗ Audit !&g!"%s c&nt"in the !&cedu!es t& (ee!*&!%ed *&! e"ch "cc&unt &! cl"sses &*t!"ns"cti&ns

∗ Su(/ect t& ch"nge deending !esults &*c&nside!"ti&n &* inte!n"l c&nt!&l

Audit Pl"nning



∗ PSA 648 @ !e.ui!es "udit&! t& &(t"in "nd

unde!st"nding &* the clients inte!n"l c&nt!&lst!uctu!e2 On !ecu!!ing eng"ge%ent- the"udit&! sh&uld *&cus &n "sects &* thec&nt!&l st!uctu!e th"t h")e (een "dded-

ch"nged &! "ssu%ed inc!e"sed i%&!t"ncesince the !e)i&us "udit

Stud$ "nd E)"lu"ti&n &* Inte!n"lC&nt!&ls



∗ 42 O(t"in "nd d&cu%ent "n unde!st"nding &*inte!n"l c&nt!&l

∗ 52 M"1e " !eli%in"!$ "ssess%ent &* c&nt!&l !is1

∗ 62 Dete!%ine the "udit&!3s !es&nse t& the !is1"ssess%ent

∗ 72 Re"ssess c&nt!&l !is1 @ Test c&nt!&l c&n+!% the!eli%in"!$ !is1 "ssess%ent – c&nt!&ls "!e e>ecti)e

∗ 82 Dete!%ine the n"tu!e- e,tent "nd ti%ing &*su(st"nti)e tests

∗

92

Fi)e stes in the stud$ "nde)"lu"ti&n &* inte!n"l c&nt!&l



∗ @ includes in.ui!$- &(se!)"ti&n- insecti&n-

c&n+!%"ti&n - !ec"lcul"ti&n tests- "n"l$ses &*%"n$ t$es "nd "n"l$tic"l !e)ie0s-

Su(st"nti)e Testing E)idence"the!ingB



AuditProcedures

Description

Test &* det"ils In)&l)e the e,"%in"ti&n &* ite%s &!det"ils th"t c&%!ise "n "cc&unt("l"nce test &* ("l"ncesB &! cl"ss &*

t!"ns"cti&ns test &* t!"ns"cti&nsBE)e!$ "udit in)&l)es the e!*&!%"nce&* test &* det"ils

Su(st"nti)e "n"l$tic"l!&cedu!es

Alied seci+c"ll$ *&! the u!&se &*testing the !e"s&n"(leness &* "cc&unt("l"nces "nd identi*$ing signi+c"nt

?uctu"ti&ns &! di>e!ences 0hich %"$!e.ui!e *u!the! "udit in)estig"ti&n2Su(st"nti)e "n"l$tic"l !&cedu!es!e.ui!e less ti%e "nd e>&!t- (ut "!e"ls& less !eli"(le "s c&%"!ed t& test&* det"ils2

Su(st"nti)e "n"l$tic"l !&cedu!es "!e

Desc!iti&n &* Su(st"nti)e Tests



∗ The "udit&! c&nside!s the n"tu!e &* the "udit+ndings

∗ And the ci!cu%st"nces &* the eng"ge%ent2

∗ I!!egul"!ities – the "udit&! c&nside!s theli1elih&&d &* %"n"ge%ent in)&l)e%ent

∗Re&!t the %"tte! t& " le)el &* client3s&!g"ni"ti&ns

Re&!ting &* Audit Findings

the financial statement audit process.pptx-2

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