This document discusses the concept of assurance engagements and the audit process. It defines an assurance engagement as one where a practitioner expresses a conclusion to enhance the degree of confidence of intended users in the subject matter against established criteria. Key elements of assurance engagements include a subject matter, suitable criteria, evidence, and a written report. Assurance can be either reasonable or limited depending on the evidence obtained. The document also discusses planning an audit, including developing an audit strategy and audit plan to effectively carry out procedures and obtain sufficient evidence. It emphasizes the importance of understanding the entity and its environment.
Brennan, Niamh [2003] Accounting in crisis: A story of auditing, accounting, ...Prof Niamh M. Brennan
Recent accounting scandals are the product of multiple failings of auditing, accounting, corporate governance and of the market. In discussing the many factors that led to failure, this paper attempts to provide insights on regulatory inadequacies that contributed to these problems. At the centre is human failure – in particular greed and weakness. Reforms in progress are briefly examined, with the caveat that no reforms will ever fully cater for human weakness.
INTRODUCTION # HISTORY # MEANING AND DEFINITION # TERMINOLOGY USED # CHARACTERISTICS OF FACTORING # NATURE OF FACTORING # FUNCTIONS OF FACTORING # MECHANISM OF FACTORING # PARTIES TO FACTORING # TYPES OF FACTORING # COST OF SERVICES # ADVANTAGES AND LIMITATIONS OF FACTORING
Brennan, Niamh [2003] Accounting in crisis: A story of auditing, accounting, ...Prof Niamh M. Brennan
Recent accounting scandals are the product of multiple failings of auditing, accounting, corporate governance and of the market. In discussing the many factors that led to failure, this paper attempts to provide insights on regulatory inadequacies that contributed to these problems. At the centre is human failure – in particular greed and weakness. Reforms in progress are briefly examined, with the caveat that no reforms will ever fully cater for human weakness.
INTRODUCTION # HISTORY # MEANING AND DEFINITION # TERMINOLOGY USED # CHARACTERISTICS OF FACTORING # NATURE OF FACTORING # FUNCTIONS OF FACTORING # MECHANISM OF FACTORING # PARTIES TO FACTORING # TYPES OF FACTORING # COST OF SERVICES # ADVANTAGES AND LIMITATIONS OF FACTORING
This report identifies an outstanding issue in my organization: lack of proper risk management department. As a newly appointed Risk Manager I prepared an active solution plan, which I present below. I first identify the problem in my organization, and then present a solution and steps toward its implementation. Furthermore, I discuss management’s involvement in the process. Finally, I discuss the expected results.
One of the oldest forms of business financing, factoring is the cash-management tool of choice for many companies. Factoring is very common in certain industries, such as the clothing industry, where long receivables are part of the business cycle.
Solvency II was introduced with a view to protect policyholders by setting stronger requirements for processes like capital adequacy, risk management and governance. This has far-reaching implications for insurers in the European Union (EU) in terms of the models they employ for capital calculation, setting and streamlining supervisory processes, as well as keeping abreast with reporting requirements.
SEC Warns RIAs About Complying With The Custody RuleAdvisors4Advisors
SEC issues compliance alert after its Office of Compliance Inspections and Examinations (OCIE) found deficiencies that about of a third of RIAs with significant deficiencies were not complying with custody rules.
Session 1 Module 2INTRODUCTION TO AUDITING .docxklinda1
Session 1 Module 2
INTRODUCTION TO AUDITING
1
LEARNING OBJECTIVES
After this module you should be able to:
Define auditing
Differentiate between different levels of assurance
Appreciate different audit opinions (covered in depth in session11)
Differentiate between the different role of the preparer of financial statements and the auditor.
Explain the reasons for the demand for audit and assurance services
Appreciate the Corporations Act requirements for company audits
Explain the audit expectation gap.
These are the objectives that students are expected to understand and be able to explain and apply.
Students will only be assessed within the learning objectives provided for each module of the course.
2
AUDITING AND ASSURANCE DEFINED
An audit is an assurance engagement defined as ‘an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.’
This is a definition of an audit highlighting the main parties involved and their roles
3
1-4
Diagram of assurance engagement
4
*Comment on : main parties and their roles
Jaq (J) - add figure 1-1
1-5
Five elements ofassurance
engagement
Three-party relationships:
assurance practitioner (auditor)
responsible party (preparer)
intended user
Subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
Audit engagement has 5 elements
These are explained on following slides
5
AUDITING AND ASSURANCE DEFINED
‘intended users’ - the people for whom the auditor prepares their report.
Example: shareholders, creditors, employees
‘responsible party’ - the person or organisation responsible for preparing the financial statements. Example: company management
‘subject matter’ – that which the auditor is expressing a conclusion on. i.e. financial reports
‘criteria’ – the rules or principles by which the subject matter is being evaluated. i.e. Accounting standards and interpretations and Corporations laws
Comment on explanations of terms
6
AUDITING AND ASSURANCE DEFINED cont’d.
Sufficient appropriate evidence
The quantity and quality of evidence the auditor requires in order to express a conclusion on the subject matter
*Written assurance report
Written report from the auditor expressing the auditor’s conclusion on the subject matter
Comment on explanations of terms
7
DIFFERENT LEVELS OF ASSURANCE
AUDITORS MAY PROVIDE VARYING LEVELS OF ASSURANCE WHEN CONDUCTING ASSURANCE ENGAGEMENTS.
Reasonable assurance
Limited assurance
No assurance
There are 3 levels of assurance which are described on next slide
8
DIFFERENT LEVELS OF ASSURANCELEVEL OF ASSURANCE
EXAMPLE
THE ASSURANCE EXPRESSIONREASONABLE
Highest level of assurance but not absolute assurance on the reliability of the subject matterFinancial Statement AuditThe auditor has conducted sufficient tests and.
Week 5 Learning Team Assignment Grading GuideACC492 Version.docxcockekeshia
Week 5 Learning Team Assignment Grading Guide
ACC/492 Version 8
2
Learning Team Assignment: Week 5 Learning Team Assignment
Purpose of Assignment
Prior to completing the audit, the auditor needs to identify any activity that might affect their reporting. Identification of contingent liabilities and subsequent events are key links between completing fieldwork and issuing the auditors’ report.
A contingent liability is a potential liability (e.g. damages to be paid for a pending lawsuit or a product warranty). For example, if the outcome of a lawsuit and/or amount to be paid in a lawsuit is unknown or unknowable, the company cannot or should not record the amount owed in a particular period in its financial statements. The company may be found not liable for the lawsuit. However, because there is the potential for damages payments, this information needs to be disclosed so the reader of the financial statements can factor that information into their analysis of the company. Likewise, use of warranties is often an unknown.
Consequently, how the company plans to account for these should be disclosed.
According to the AICPA, “An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements. This can have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. These occurrences hereinafter are referred to as "subsequent events." (AU 560).
The purpose of this assignment is to give the student some experience in addressing two key steps an auditor goes through as they complete fieldwork and begin preparing for the reporting phase of the audit.
Grading Guide
Content
Met
Partially Met
Not Met
Comments:
Explains the importance of reviewing for contingent liabilities and subsequent events.
Describes the requirements for reviewing for contingent liabilities and subsequent events.
Presentation consists of 10 to 12-slides and is appropriate for the audience.
The presentation includes relevant media and visual aids that are consistent with the content.
Total Available
Total Earned
X
#/X
Presentation Guidelines
Met
Partially Met
Not Met
Comments:
The presentation is laid out with effective use of headings, font styles, font sizes, and white space.
Intellectual property is recognized with in-text citations and a reference slide.
The presentation includes an introduction and conclusion that preview and review major points.
Major points are stated clearly; are supported by specific details, examples, or analysis; and are organized logically.
Rules of grammar and usage are followed including spelling and punctuation.
Total Available
To.
This report identifies an outstanding issue in my organization: lack of proper risk management department. As a newly appointed Risk Manager I prepared an active solution plan, which I present below. I first identify the problem in my organization, and then present a solution and steps toward its implementation. Furthermore, I discuss management’s involvement in the process. Finally, I discuss the expected results.
One of the oldest forms of business financing, factoring is the cash-management tool of choice for many companies. Factoring is very common in certain industries, such as the clothing industry, where long receivables are part of the business cycle.
Solvency II was introduced with a view to protect policyholders by setting stronger requirements for processes like capital adequacy, risk management and governance. This has far-reaching implications for insurers in the European Union (EU) in terms of the models they employ for capital calculation, setting and streamlining supervisory processes, as well as keeping abreast with reporting requirements.
SEC Warns RIAs About Complying With The Custody RuleAdvisors4Advisors
SEC issues compliance alert after its Office of Compliance Inspections and Examinations (OCIE) found deficiencies that about of a third of RIAs with significant deficiencies were not complying with custody rules.
Session 1 Module 2INTRODUCTION TO AUDITING .docxklinda1
Session 1 Module 2
INTRODUCTION TO AUDITING
1
LEARNING OBJECTIVES
After this module you should be able to:
Define auditing
Differentiate between different levels of assurance
Appreciate different audit opinions (covered in depth in session11)
Differentiate between the different role of the preparer of financial statements and the auditor.
Explain the reasons for the demand for audit and assurance services
Appreciate the Corporations Act requirements for company audits
Explain the audit expectation gap.
These are the objectives that students are expected to understand and be able to explain and apply.
Students will only be assessed within the learning objectives provided for each module of the course.
2
AUDITING AND ASSURANCE DEFINED
An audit is an assurance engagement defined as ‘an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.’
This is a definition of an audit highlighting the main parties involved and their roles
3
1-4
Diagram of assurance engagement
4
*Comment on : main parties and their roles
Jaq (J) - add figure 1-1
1-5
Five elements ofassurance
engagement
Three-party relationships:
assurance practitioner (auditor)
responsible party (preparer)
intended user
Subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
Audit engagement has 5 elements
These are explained on following slides
5
AUDITING AND ASSURANCE DEFINED
‘intended users’ - the people for whom the auditor prepares their report.
Example: shareholders, creditors, employees
‘responsible party’ - the person or organisation responsible for preparing the financial statements. Example: company management
‘subject matter’ – that which the auditor is expressing a conclusion on. i.e. financial reports
‘criteria’ – the rules or principles by which the subject matter is being evaluated. i.e. Accounting standards and interpretations and Corporations laws
Comment on explanations of terms
6
AUDITING AND ASSURANCE DEFINED cont’d.
Sufficient appropriate evidence
The quantity and quality of evidence the auditor requires in order to express a conclusion on the subject matter
*Written assurance report
Written report from the auditor expressing the auditor’s conclusion on the subject matter
Comment on explanations of terms
7
DIFFERENT LEVELS OF ASSURANCE
AUDITORS MAY PROVIDE VARYING LEVELS OF ASSURANCE WHEN CONDUCTING ASSURANCE ENGAGEMENTS.
Reasonable assurance
Limited assurance
No assurance
There are 3 levels of assurance which are described on next slide
8
DIFFERENT LEVELS OF ASSURANCELEVEL OF ASSURANCE
EXAMPLE
THE ASSURANCE EXPRESSIONREASONABLE
Highest level of assurance but not absolute assurance on the reliability of the subject matterFinancial Statement AuditThe auditor has conducted sufficient tests and.
Week 5 Learning Team Assignment Grading GuideACC492 Version.docxcockekeshia
Week 5 Learning Team Assignment Grading Guide
ACC/492 Version 8
2
Learning Team Assignment: Week 5 Learning Team Assignment
Purpose of Assignment
Prior to completing the audit, the auditor needs to identify any activity that might affect their reporting. Identification of contingent liabilities and subsequent events are key links between completing fieldwork and issuing the auditors’ report.
A contingent liability is a potential liability (e.g. damages to be paid for a pending lawsuit or a product warranty). For example, if the outcome of a lawsuit and/or amount to be paid in a lawsuit is unknown or unknowable, the company cannot or should not record the amount owed in a particular period in its financial statements. The company may be found not liable for the lawsuit. However, because there is the potential for damages payments, this information needs to be disclosed so the reader of the financial statements can factor that information into their analysis of the company. Likewise, use of warranties is often an unknown.
Consequently, how the company plans to account for these should be disclosed.
According to the AICPA, “An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements. This can have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. These occurrences hereinafter are referred to as "subsequent events." (AU 560).
The purpose of this assignment is to give the student some experience in addressing two key steps an auditor goes through as they complete fieldwork and begin preparing for the reporting phase of the audit.
Grading Guide
Content
Met
Partially Met
Not Met
Comments:
Explains the importance of reviewing for contingent liabilities and subsequent events.
Describes the requirements for reviewing for contingent liabilities and subsequent events.
Presentation consists of 10 to 12-slides and is appropriate for the audience.
The presentation includes relevant media and visual aids that are consistent with the content.
Total Available
Total Earned
X
#/X
Presentation Guidelines
Met
Partially Met
Not Met
Comments:
The presentation is laid out with effective use of headings, font styles, font sizes, and white space.
Intellectual property is recognized with in-text citations and a reference slide.
The presentation includes an introduction and conclusion that preview and review major points.
Major points are stated clearly; are supported by specific details, examples, or analysis; and are organized logically.
Rules of grammar and usage are followed including spelling and punctuation.
Total Available
To.
This is a sample from "Solution Manual Auditing & Assurance Services 9th Edition by Timothy Louwers & Penelope Bagley".
About the main textbook:
“Auditing & Assurance Services” authored by Timothy Louwers and Penelope Bagley is a comprehensive textbook focusing on the principles and practices of auditing and assurance services. Here’s an overview of what you might expect from this book:
Fundamentals of Auditing: The book likely begins with an introduction to auditing, covering its purpose, objectives, and the role of auditors in providing assurance to stakeholders. It may also discuss the legal and ethical responsibilities of auditors.
Auditing Standards and Regulations: This section typically covers the auditing standards and regulations that auditors must adhere to. This includes internationally recognized auditing standards such as those issued by the International Auditing and Assurance Standards Board (IAASB) as well as jurisdiction-specific regulations.
Audit Planning and Risk Assessment: Auditing involves assessing the risks associated with the client’s business and designing audit procedures to address those risks. This section likely discusses the process of audit planning, risk assessment methodologies, and the development of an audit strategy.
Internal Control Evaluation: Understanding and evaluating the client’s internal control environment is crucial for auditors. The book may cover the concepts of internal control, the components of internal control systems, and the auditor’s responsibilities regarding internal control assessment.
Audit Evidence and Documentation: Auditors gather evidence to support their conclusions about the client’s financial statements. This section likely covers the types of audit evidence, methods of gathering evidence, and the importance of proper documentation of audit procedures and findings.
Audit Sampling: Auditors often use sampling techniques to select items for testing when conducting audits. The book may discuss different sampling methods, sample size determination, and the evaluation of sample results.
Audit Procedures and Techniques: This section likely provides detailed coverage of various audit procedures and techniques used to gather evidence and assess the client’s financial statements. Topics may include substantive testing, analytical procedures, and tests of controls.
Audit Reporting and Communication: Auditors communicate their findings and opinions through audit reports. The book may discuss the content and format of audit reports, as well as the different types of audit opinions that auditors may issue based on their findings.
Special Topics in Auditing: Depending on the edition, the book may also cover special topics such as audits of specific industries, audit considerations related to information tec
Solution manual for Auditing & Assurance Services A Systematic Approach 12th ...ssuserf63bd7
Solution manual for Auditing & Assurance Services A Systematic Approach 12th Edition by William Messier Jr.docx
Full download contact u84757@protonmail.com or
https://qidiantiku.com/solution-manual-for-auditing-assurance-services-a-systematic-approach-12th-edition-by-william-messier-jr.shtml
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Honest Reviews of Tim Han LMA Course Program.pptxtimhan337
Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
1. Chapter 1: Concept of Need for Assurance
1.1 WHAT ISASSURANCE ENGAGEMENT?(Dec-2015),
An assurance engagement is one in which a practitioner express a conclusion designed to enhance the degree of
confidence of intendedusers otherthan the reasonable party the outcome of the evaluationor measurement of a
subject matter against criteria.
1.2 KEY ELEMENTS OF AN ASSURANCE ENGAGEMENT (Jun/10,11,12;Dec/13)
A. Three people involved
i. The practitioner(e.g.,Accountant)
ii. The intendedusers (e.g.,
Shareholder/ownersof company)
iii. The reasonable party(the
person(s)/managementwhoprepare the
subjectmatter)
B. A subjectmatter (Onwhichthe assurance is
given)
A subjectmatterislikelytofall intothree
categories:
i. Data (For example, Financial Statementor
Businessprojection)
ii. Systemsor process (For examples, internal
control systemor computersystem)
iii. Behavior (Forexamples,Social&
Environmental performance orcorporate
governance)
C. Suitable criteria (নির্ ণায়ক, মািদন্ড)
Suitable criteriathoughtof as‘the rules’against
whichthe subjectmatterisevaluatedinorderto
reach an opinion.Forexamples Lawand
accounting standards,BSAs,BFRSs.
D. Sufficientappropriate evidence to supportthe
assurance opinion.
E. A written report inappropriate form.
1.3 LEVEL OFASSURANCE
Level of assurance dependonthe evidence thatcan be obtainedby the practitioner(Accountant/Surveyor)
There are 2 typesof assurance engagement:
I. Reasonable (িযায্য, যয্ৌক্তিক) assurance engagement (Complete accesstosubjectmatterbypractitioner)
II. Limitedassurance engagement(Limitedaccesstosubjectmatterbypractitioner)
The key difference between2typesof assurance engagementare:
a) The evidence obtained(SufficientandAppropriate[Highlevel (Forreasonable)orLowerlevel (ForLtd)])
b) The typesof opiniongiven(Positive[ Forreasonable] orNegative [ForLimited])
An example of 2typesisgivenbelow:
A practitioner is seeking evidence to conclude (নিদ্ধান্তে উপনিত হওয়া) whether the report issued by the
chairman of a company in the financial statement is reasonable or not. He could seek evidence,
conclude that the statement is reasonable and state a report something like this:
A. ‘In my opinion, the statement by chairman regarding X is reasonable.’ (positive andReasonable)
B. ‘In the course of my seeking evidence about the statement by the chairman, nothing has come to
my attention that the statement is not reasonable.’ (This conclusion is less certain, as it implies that
matters could exist which cause the statement to be unreasonable but the practitioner has not
uncovered (উদগাঘাটি করা হয় নি) any such matters. This is therefore called negative assurance [Lower
level of assurance] and limited assurance).
1.4 EXAMPLESOF ASSURANCE ENGAGEMENT
I. Local authorityaudit
II. Bank/Insurance companyaudit
III. Pensionscheme audit
IV. Solicitors’(আইিজীনি) audit
V. Environmental audit
VI. Internal audit
VII. Inventoriesand receivablesreport
VIII. Value of moneystudies
IX. Cost/Benefitreport
X. Reportson Businessplanandprojection
XI. Internal control report.
1.5 THE FOLLOWING SERVICESARE NOT ASSURANCE ENGAGEMENT
I. Compilationof accounts
II. Tax preparation
III. Managementconsultancy
IV. Otheradvisoryreport
2. 1.6 AUDIT
Auditishistoricallythe mostimportanttype of assurance service inBangladesh.Auditisaprocesswhichenable to
expressthe opiniononthe financial statement.
The objective of anauditof financial statementistoenable the auditortoexpressanopinionwhetherthe financial
statementsare prepared,inall material respects(প্রািনিক মাি), in accordance withan applicable financial reporting
framework.
In Bangladesh,the auditorwillnormallyexpresshis auditopinionbyreference to ‘true and fair view’,whichisan
expressionofreasonable assurance.(Dec-2015)
TRUE: Informationis factual (িাস্তনিক) and conformswithreality,notfalse.
FAIR: Informationisfree fromdiscriminationandbiasincompliance withexpectedstandardsandrules.
1.7 LEGAL AND PROFESSIONAL REQUIREMENTS OFAUDITORS IN BANGLADESH
The companyAct1994 requiresthatauditorsmustbe a memberofICAB(a recognized supervisory body under theministry
of commerce of the government of Bangladesh). Professional qualifications (e.g. ACA, FCA) are a prerequisite of
membership of ICAB.
ICAB has the responsibilityto implementprocedure formonitoringits licensedauditors (ACA,FCA),toissue
auditingstandards and to issue ethical standards.
1.8 INELIGIBLE PERSON FOR BEING A COMPANY AUDITOR (Company Act1994) (June-2015)
CompaniesActsetout factorswhichmake a personineligible forbeingcompanyauditor,forexample,
I. An officeroremployee of the company
II. A partneror an employee of anyofficer,employee tothe company.
III. A personwho indebtedtothe company exceedingTK.1,000
IV. A personwhoisdirectoror a memberof a private company,or a firm, whichisthe managingagentof the
company.
V. A personwhoisdirectoror holderof shares exceeding5% of the subscribedcapital.
1.9 BSA 200 ObjectivesandGeneral PrinciplesGoverninganAuditof Financial Statementsstatesthat:
I. Auditorsshould complywithrelevantethical requirementrelatingtoauditengagement.
II. An auditorshouldconductanauditin accordance with ISAs (InternationalStandardsof Auditing).
III. Auditorare requiredtocarry out theirworkwitha degree of professional scepticism(িন্তেহপ্রিিতা)
1.10 AUDIT RISK
Auditormustassess(পনরমাপ করা) the risks associatedwith the audit and to seekto minimizethose riskssothatthe
risk of givingthe wrong opinion on financial statementisminimized.Thisrisksreferredtoauditrisk.
1.11 IMPORTANCE/BENEFIT OF ASSURANCE (Dec-2015)
Keybenefit:Independent,professional verification andopinionbeinggiventothe intended users.
SubsidiaryBenefit:
I. Give confidence tootherparties/Users.
II. Deterrent(প্রনতন্তরাধক; Preventative) tofraudand error.
III. Reduce the risk of management bias.
IV. Adds to the reputation of organizations.
V. Userscan know the existence of problems/deficienciesinthe informationprovidedbymanagement.
1.11 LIMITATION OF ASSURANCE(WHY ASSURANCE NEVERBE ABSOLUTE?) (Dec-2015)
Assurance can never be absolute. A key issue(Problem) for accountants is that there are limitations to assurance
services,andtherefore there isalwaysa risk involvedthat the wrong conclusionwill be drawn. Assurance provider
can never give certification of absolute correctness due to the limitations set out below:
I. Testing is used (Sampling basis)–The auditors do not oversee (তদারক করা) the process of the financial
statement from start to finish. Assurance providers would not test every item of subject matter.
II. Conclude estimates - Some items inthe subjectmattermay be estimates and are therefore uncertainandit
is impossible to conclude absolutely that judgmental estimates are correct.
III. Information of third party
IV. The assurance providers have to rely on the reasonable party and its staff to provide correct information.
V. The client’sstaffmay involveinfraudthatcanbe intentionallyhiddenfromthe auditorormisrepresent(নমথ্যা
ির্ ণিা) matter to them for the same reason.
3. VI. Most audit evidence ispersuasive ratherthanconclusive (নি:িক্তেগ্ধ).
1.12 THE EXPECTATION GAP
Users are not aware of the nature of the limitationson assurance provision, ordo not understandand believe that
assurance provider offering a service (such as a guarantee of correctness) which in fact he is not. The distinction
between reasonable and limited assurance may also be misunderstood by users.
So, the expectationgapisa gap betweenwhatthe assurance providerunderstands he isdoing and whatthe userof
the information believes he(Auditor) is doing.
1.13 HOW TO CLOSE THIS GAP
Assurance providerneedtoclosethisgapasfaraspossible inordertomaintainedthe value of theassurance provided
for the users. This is done by variety ways, for examples:
I. By issuingan engagementletterspellingoutthe scope of work andthe limitationofthe work
II. By regularly reviewingthe formatand content ofreport issuedasa resultof assurance work.
END OF THE CHAPTER
Chapter 2: Processof Assurance [Obtainingan Engagement]
2.1 HOW AUDIT/ASSURANCEFIRMOBTAIN AN ENGAGEMENT
Accountants are often invited to tender (Offer/Proposal) for particular engagements, which means they offer a
quote for services, outlining(Describing) the personnel (Staffsof engagement),usuallyincompetitionwithother
firms which are tendering at the same time.
2.2 ACCEPTINGAN ENGAGEMENT (APPOINTMENTCONSIDERATIONS)
As perschedule Cof ICAB & IFAC code of ethics,for acceptinga new engagement/appointment/new clientaudit
the auditormust carry out the followingprocedure:
I. Ensure professionallyqualified toact
II. Ensure existingresourcesadequate –Availabilityof time, Staff andtechnical expertise.
III. Obtainreference –make independentenquiryif directorsnotpersonallyknown.
IV. Communicate withpresentauditor.
2.3 BASICFACTORSOF APPOINTMENTCONSIDERATION
The integrityof those managingacompany
The risk position(LoworHigh)
2.3 RISKFACTORSFOR ACCEPTINGAN ENGAGEMENT
Low Risk High Risk
1. Good longterm prospects(Expectation) Poorrecentor forecastperformance
2. Well-financed Likelylackof finance
3. Strong internal control Significantcontrol weakness
4. Conservative,prudentaccountingpolicies Evidence of questionableintegrity, doubtful accountingpolicies
5. Competent,honestmanagement Lack of finance director
6. Fewunusual transaction Significantunexplainedtransactions
2.4 WHY AUDIT FIRMWANT LONGTERM RELATIONSHIPWITHCLIENT?
Audit firm will generally want long term relationship withclient and this is not only to enjoy receiving fees year
after year but; it is also to allow the audit work to be enhanced by better knowledge of the client and thereby
offer a better service.
2.5 SOURCES OF INFORMATION ABOUT NEW CLIENT
Enquiries of other sources – Bankers, Solicitors
Review of documents – Most recent annual accounts, credit rating
Previousaccountantsorauditors–previousauditorsshouldbeinvitedtodisclosefullyall relevant information
Review of rules and standards – Consider specific law/standards that relate to industry.
4. 2.6 PROCEDURE AFTER ACCEPTING ENGAGEMENT
Ensure that outgoing auditor’s removal was carried out properly (in accordance with national legislation)
Ensure thatnew appointmentisvalid(obtainingacopyof resolutionpassedatthe general meetingappointing
them as company’s auditor.
Submit a letter of engagement to the board of directors of the company.
2.7 FORMALITIES OF COMPANY ACT 1994 REGARDING ACCEPTING A NEW CLIENT
Auditor inform his acceptance of new audit in form 23B within 30 days to RJSC.
2.8 AUDIT ENGAGEMENT LETTER
Auditstandardsrequiredthatthe auditor and the clientshouldbe agreedon the terms of the engagement.The
agreedtermsmustbe inwritingandtheusualformwouldbealetterof engagement.Anengagementlettershould
be sent to all clients to clarify the terms of the engagement.
2.9 PURPOSE OF ENGAGEMENT LETTER
I. To define clearlythe extent(িযানি, Limit) of the firm’s responsibilityandto minimize the possibilityof any
misunderstanding between the client and the firm.
II. To provide written confirmation of the firm’s acceptance of the appointment.
2.10 INFORMATION THAT INCLUDE IN AUDIT ENGAGEMENT LETTER
Content of audit engagement letter:
I. The objective of audit of the financial statement
II. The scope of the audit
III. Management responsibility for the financial statements
IV. Reporting form
V. Test nature and inherent limitations of an audit
VI. Unrestricted access
2.11 WRITE THE COMMUNICATION LETTER WITH PREVIOUS AUDITOR
See Jahed Bai’s (SSAC) note: page 3, chapter-2.
2.12 WRITE AN ENGAGEMENT LETTER TO NEW CLIENT
See Jahed Bai’s (SSAC) note: page 4, chapter-2.
END OF THE CHAPTER
Chapter 3: Processof Assurance [Planningthe Assignment]
3.1 Prerequisite of effective & efficient audit
An effective and efficient audit relies on proper planning procedure. ISA 300 states that the auditor should plan
the audit so that the engagement will be performed in an effective manner.
3.2 Audit strategy
Auditstrategyisthe formulationof general strategyfor the auditwhichsets scope, timing,and direction of audit
and guides the development of audit plan.
3.3 Audit plan
Anauditplanshows howthe overallauditstrategywillbe implemented.Itisasetof instructionstothe auditteam
that sets out the further audit procedure to be carried out.
Auditplanismore detailedthan auditstrategysetsout nature, timing,and extentof audit procedures (including
riskassessment) tobe performedbyengagement teammembersinordertoobtainsufficientanappropriate audit
evidence.
3.4 How audit plan will be implement/Why audits are planned:
i. Ensure appropriate attention is devoted (Nijokto) to important area of the audit
ii. Ensure that audit is properly organized and managed
iii. Facilitate (Simplify) direction and supervision of engagement team member.
iv. Assign work to engagement team members properly.
v. Identify potential problem and resolve them on a timely basis
vi. Facilitate review of work.
3.5 A structured approach or key element of planning or planning procedure
i. Ensuring the ethical requirements continue to be met
5. ii. Ensuring the term of engagement are understood
iii. Establishing the overall audit strategy
iv. Developinganauditplanincludingriskassessmentprocedures,audit test,andanyotherprocedurenecessary
to comply with.
3.6 The key elements of audit strategy
I. Understanding the entity’s environment
II. Understanding the accounting an internal control system
III. Risk and materiality
IV. Consequent nature, Timing, and extent of procedures
V. Co-ordination, direction, supervision and review
3.7 How audit strategy can be established
I. Determiningthe relevantcharacteristicsof the engagement (Suchas,the reportingframeworkusedasthis
will set the scope for the engagement and understanding the entity and its environment.
II. Determiningthe keydatesforreportingandothercommunication.
III. Determiningmateriality,preliminaryriskassessment(whetherinternal controlsare tobe tested)
IV. Considerationof whenworkistobe carriedout (before orafterthe yearend)
V. Considerationof ‘teammembers’available theirskillhow andwhentheyare to be used (Forexample
particularskill forhighriskarea.
3.8 Why the auditor should plan the audit (as per BSA 300)?
The auditorshouldplanthe auditso that the engagementwill be performedinaneffective manner.
3.9 What do you understand by entity (as per BSA 315)?
The auditorshouldobtainandunderstandingof the entityanditsenvironment.
3.10 Why do need an understanding of entity’s environment?
I. To identifyand assessthe risk of material misstatementinthe financial statement.
II. To designand perform furtheraudit procedure
III. To provide a frame ofreference forexercisingauditjudgment
IV. To be betterable to assessthe risk of fraud
3.11 What we have to see of an entity?
I. Industry, regulatoryand otherexternal factors
II. Internal control
III. Nature of the business includingselectionandapplicationof accountingpolicies.
IV. Measurementand reviewof entity’s financial statement
V. Objectivesandstrategiesand relatingbusinessriskthatmightcause material misstatementinthe
financial statement.
3.12 How do we understand of an entity’s environment?
I. Inquiriesof managementand others withinthe entity.
II. Analytical procedures.
III. Observationand inspection.
IV. Prior periodknowledge.
3.13 What do you mean by “Professional Scepticism”?
Anattitude of professionalscepticismmeansa critical assessment(সমাললাচনামুলক মূলযায়ন) withaquestioning
mind.Professional scepticismdoesnotmeanthatthe auditorsshoulddisbelieveeverythingthattheyare told,
however they must have a questioning attitude.
3.14 What is analytical procedure?
Analytical procedures mean evaluation of financial information made by a study of plausible (নিশ্বািন্তয্াগয)
relationships among both financial and non-financial data (For example relationship between salaries
expenses and number of employees and their designation).
6. 3.15 Whatmattersare includedinthe analytical procedures(AsperBSA)?/ How analytical proceduresare applied?
The BSA statesthatanalytical procedures include:
The considerationofcomparisons with:
a) Comparable information forprior periods
b) Anticipatedresults of the entityfrombudgets,forecastorexpectationof the auditor.
c) Similarindustryinformation
The considerationof relationships between:
a) Elementsof financial informationthatare expected toconform(Mil howa) to a predictedpattern
basedon the entity’sexperience (Suchasthe relationshipof grossprofittosales).
b) Financial informationand relevantnon-financial information(suchasthe relationshipof payroll
costs to numberof employees)
3.16 What are the sources of analytical procedures in planning the audit?
I. Interim(মধযিতী িময়, interval) financial information
II. Non-financial information
III. Budgets
IV. Bank andcash records
V. Board minutes(notes,records)
VI. VATreturns
VII. Managementaccounts
VIII. Discussionsorcorrespondencewiththe clientatthe year-end
3.17 Certain accounting ratios that used as analytical procedures:
Performance, short & Long-term liquidity, efficiency ratio [ Mannual page 50(Assurance) ].
3.18 Materiality
Materiality relates to the level of error that affects the decisions of users of the accounts.
As perBSA framework, amatter is material if itsomissionor misstatements wouldreasonably influencethe
economicdecisionof the users takenon the basis of the financial statements.
3.19 Benefit of measurement of Materiality
Materialityassessmentwill helpthe auditortodecide –
A. How manyand whatitemto examine
B. Whether(নকিা) to use samplingtechniques
C. What level oferror is likelytoleadtoanauditorto say the financial statementdo notgive a true and fair
view.
3.20 How materiality is used in the course of an assurance engagement?
See manual page 53 (Figure:3.2: Auditmateriality).
3.21 How can we determine materiality? Or, describe the method of assessing of materiality.
Methodsof assessof materiality:
Particulars Materiality level
Profitbefore tax 5%
Gross profit ½ - 1%
Revenue ½ - 1%
Total assets 1 – 2%
Netassets 2 – 5%
Profitaftertax 5 – 10%
3.22 When we should be considered materiality?
As perBSA 320 materialityshouldbe consideredwhen –
i. Determiningthe nature,timingandextentof auditprocedure
ii. Evaluatingthe effectof misstatements
7. 3.23 Why do need review of materiality?
The level of materialitymustbe reviewedbecause –
i. Draft accounts are altered(due to material errorandso on) and therefore overall materialitychanges.
ii. External factors may cause changes inrisk estimates.
Such changesare causedby errors foundduringtesting.
3.24 Tolerable error
The maximumerror that an auditor is preparedto accept in a class of transactionsor balancesinthe financial
statements.
3.25 Audit risk
The risk that the auditorsgive an inappropriate opinionon the financial statements.
Audit Risk = InherentriskXControl riskX Detectionrisk.
3.26 Elements of audit risk
Auditriskhas twoelements –
1. The risk that financial statements containamaterial misstatement.
2. The risk that auditorswill fail todetectany material misstatement.
3.27 Inherent risk
The susceptibility(িংন্তিদিশীলতা) of an accountbalance or class of transactionsto misstatement (ভু ল বিিৃবি) that
couldbe material individuallyorwhenaggregatedwithmisstatementsinotherbalancesorclasses,assumingthere
were no relatedinternal controls. Inherentrisk isaffectedbythe nature ofentity.
3.28 Issues that might increase inherent risk
Inherentriskisthe riskthat will be misstateddue to characteristicsof those items.Examplesof issuesthatmight
increase inherentrisk are:
A. Balance isor includesan estimate.
B. Balance isimportantinaccount
C. Financial statementsare liable tomisstatementsbecause:
i. Companyisin trouble
ii. Companyisseekingtoraise finance
iii. Othermotivationfordirectorstomisstate the figures(suchasprofittargetsorprofitrelated bonuses)
D. Financial statementscontainbalanceswith complexfinancial accountingrequirements orchoice of treatment
The auditor mustuse theirprofessional judgementandall available knowledgetoassessinherentrisk,if nosuch
informationorknowledge isavailablethenthe inherentriskishigh.
Inherentriskisaffectedby the nature of the entity;forexamples,the industryitisin andthe regulationitfall
under,andthe nature of strategiesitadopts.
3.29 Control risk:
The risk that a material misstatementwould notbe prevented,detectedorcorrected bythe accountingand
internal control systems.
3.30 Detection risk:
The risk that the auditors'procedures will notdetecta misstatementthatexistsinan accountbalance or classof
transactionsthatcouldbe material,eitherindividuallyorwhenaggregatedwithmisstatementsinotherbalances
or classes.
3.31 Objective of an audit as per BSA 200.
As perBSA 200, ‘The auditorshouldplanandperformthe auditto reduces auditrisktoan acceptably lowlevel
that isconsistentwiththe objective of the audit’, thatis,givingreasonable assurance onthe truthandfairnessof
the financial statements.
Note 1: The auditorwill obviouslyconsiderhow riskyanew clientinduringthe acceptance process,andmay
decide notto aheadwithwiththe relationshipforhighriskyclient.
Note 2: It is notin the auditors’powertoaffectinherentandcontrol risk.Astheyare risksintegral tothe client,
the auditorcannot change the level of these risks.
8. Note 3: The auditormanagesoverall auditriskby manipulating(বনপুনভালি পবিচালনা কিা) detectionrisk,the only
elementof auditriskthe auditorhascontrol over.
3.32 Identifying and assessing the risk as per BSA 315.
BSA 315 says that 'the auditorshould identifyandassessthe risks of material misstatement at the financial
statementlevel,andat the assertion (বিিৃবি) level forclassesof transactions,accountbalances,anddisclosures'.
It requiresthe auditortotake the followingsteps:
Step1: Identifyrisksthroughoutthe processof obtaininganunderstandingof the entity
Step2: Relate the riskstowhatcan go wrongat the assertionlevel ( thisassertionismade inthe financial
statementsbythe director,forexample,thatinventoryisCUx)
Step3: Considerwhetherthe risksare of a magnitude (Large,Give importance)thatcould resultinamaterial
misstatement
Step4: Considerthe likelihoodof the riskscausingamaterial misstatement
3.33 Significant risk as per BSA 315/ Mention some significant risk.
Some risksmaybe significantrisks,whichrequire special auditconsideration.BSA 315 setsoutthe following
factors whichindicate thatarisk mightbe a significantrisk:
1. Riskof fraud
2. Relatedtorecentsignificanteconomic,accountingorotherdevelopment
3. The complexityof the transaction
4. The degree of subjectivityinthe financial information
5. It isan unusual transaction
6. It is a significanttransactionwitharelatedparty
3.34 Explain the risk based approach.
Auditorsanalyse the risksassociatedwiththe client'sbusiness,transactionsandsystemswhichcouldleadto
misstatementsinthe financial statements,anddirecttheirtestingtoriskyareas.
3.35 What are the major contents of audit risk?
Major componentsof auditrisk:
a) Dependentonthe client
b) Dependentonthe auditors.
END OF THE CHAPTER
Chapter 4: Processof Assurance [Evidence andReporting]
4.1 Audit Evidence
Auditevidencemeans all the informationusedbythe auditorin arriving at the conclusions on whichthe audit
opinionis based.Auditormustobtain sufficientandappropriate auditevidence.
4.2 How to collectAudit evidence
There are two types of potentiallytestsbyauditorscarryout to gatherevidence –
1. Testsof controls: Auditprocedures Performedtoobtain auditevidence aboutthe effectivenessofcontrols
inpreventing,ordetectingandcorrectingmaterial misstatementsatthe assertionlevel.
2. Substantive procedures:Auditproceduresperformedtodetectmaterialmisstatementsatthe assertion
level.Theyinclude/There are twotypesof substantive test:
Testsof detail of classesoftransactions, account balancesand disclosures.
Substantive analytical procedures.
4.3 Whydo auditorsneedto carry out test ofcontrol?
For followingreasons:
1) The directorssetup systemsof internal controlstoensure theyreportcorrectlytothe shareholders
9. 2) The auditorsare requiredtoconclude whetherthe financialstatementsgive atrue andfairview.
3) The auditorsevaluate the control system.
4) The auditorstestthe control system.
4.4 Whydo you collectsufficientandappropriate audit evidence?
As per BSA 500, auditevidencerequire,auditorstoobtainsufficientappropriate auditevidence tobe able todraw
reasonable conclusions on whichtobase the auditopinion.
4.5 What do you mean by the terms “Sufficiency” & “Appropriateness”?
Sufficiencyisthe measure of the quantity of auditevidence.
Appropriatenessisthe measure of the quality or reliabilityof the auditevidence.
If the evidence ishigh quality,the auditormayneedlessthanif itwere poorquality.
4.6 Describe the qualityof audit evidence / List the sources of audit evidence.
The reliabilityof auditevidence isinfluencedbyitssource andnature.
I. External: Auditevidence from external sourcesismore reliable thanthat obtainedfromthe entity'srecords
II. Entity: Evidence obtainedfromthe entity'srecordsismore reliablewhenrelated control systemsoperate
effectively
III. Auditor: Evidence obtained directlybyauditors ismore reliable thanthatobtainedindirectly.
IV. Written:Evidence inthe formof documents(paper or electronic) or writtenrepresentations are more
reliable thanoral representations
V. Originals:Original documentsare more reliable thanphotocopies.
4.7 Whyauditors carry out substantive procedures?
Auditorscarryout substantive proceduresbecause of the limitationofinternal control systems.
4.8 Financial Statement Assertion
The re-presentations (বিিিণ) by management,explicit(স্পষ্ট ) or otherwise,thatare embodied(সুস্পষ্টভালি প্রকাবিি )
inthe financial statement.
4.9 Assertionusedby the auditors / Managementassertionsunder differentcategories
1. Assertionsabout classesoftransactions and eventsforthe periodunderaudit:
i. Occurrence
ii. Accuracy
iii. Completeness
iv. Cut-off
v. Classification
2. Assertionabout accountbalances at the periodend:
i. Existence
ii. Rightsand obligations
iii. Completeness
iv. Valuationandallocation
3. Assertionabout presentationanddisclosure:
i. Accuracy and valuation
ii. Occurrence and rightsand obligations
iii. Completeness
iv. Classificationandunderstandability
4.10 Whenauditors use test of control?
Auditorsshoulduse testof control when
The auditorbelieve controlsare operatingeffectively
It isnot possible toobtainsufficientappropriateauditevidence from substantive procedure
4.11 How do you performtest of control?
We mayuse the followingprocedurestoperformtestof control:
10. 1. Inquiry
2. Inspection
3. Re-performance
4.12 Whensubstantive proceduresare performedmust?
The auditormust alwayscarry out substantive proceduresonmaterial items.Inadditionauditorsmustcarry
out the followingsubstantiveprocedures:
Agreeingthe financialstatementstothe underlyingaccountingrecords
Examiningmaterial journalentries
Examiningotheradjustmentsmade inpreparingthe financial statements
4.13 What is the difference between“Analytical procedures”& “Testofdetail”?
Analytical procedures tendto be appropriate forlarge volumesof predictable transactionsi.e.wagesand
salaries. Testsofdetail (Other procedures) maybe appropriate togain informationaboutaccountbalances
i.e.inventoriesortrade receivables,(particularlyverifyingthe assertionsof existenceandvaluation).
Whensignificantrisk existstestsof detail are likelytobe more appropriate,butthe auditormustdetermine
proceduresthatare specificallyresponsive(দ্রুতসাড়াদেয়এমন) tothatrisk,whichmay include analytical
procedures.
4.14 What is the difference betweenthe Reviewreport& the Auditreport?
Reviewreportopiniongiveslimitedassurance atmoderate (পরিমত,সীরমত) level withanegativelanguage,
while Auditreportopiniongivenreasonable assuranceathighlevel withpositive language.
4.15 What is unqualifiedReviewReportOpinion?
Basedon our review,nothinghascome toour attentionthatcausesus to believe thatthe accompanying
financial statementsdonotgive atrue and fairview (or‘are not presentedfairly,inall materialrespects’) in
accordance withInternationalAccountingStandards.
4.16 What is Reasonable assurance opinion?
In our opinion,the financial statementspreparedinaccordance withBangladeshAccountingStandards(BAS),
give a true and fairviewof the state of the Company'saffairsasof December31, 20XX, and of the resultsof
itsoperationsanditscash flowforthe year thenendedandcomplywiththe applicablesectionsof the
CompaniesAct1994 and otherapplicable lawsandregulations.
4.17 What is the elementsauditreport according to BSA 700?
Accordingto BSA 700, the auditreportshouldinclude the followingbasicelements,usuallyinthe following
layout.
1. Title
2. Addressee
3. Introductory paragraph identifyingthe financial statementsaudited
4. A statementof management'sresponsibilityforthe financialstatements
5. A statementof the auditor'sresponsibility
6. Scope paragraph, includingadescriptionof the workperformedbythe auditor
7. Opinionparagraph containinganexpressionof opiniononthe financialstatements
8. Date of the report
9. Auditor'saddress
10. Auditor'ssignature
(A measure of uniformityinthe formandcontentof the audit reportisdesirable becauseithelpsto
promote the reader'sunderstandingandtoidentifyunusualcircumstanceswhentheyoccur)
11. 4.18 What are the explicitopinionsgivenbythe auditors?
In respectof the state of the company'saffairs at the endof the financial year
In respectof the company's profitor loss for the financial year
The information giveninthe directors' report isconsistentwiththe financial statements
4.19 What is the expectationgap?
The expectationgapisdefinedasthe difference betweenthe apparentpublicperceptionsof the
responsibilityof auditorsonthe one hand(andhence the assurance that theirinvolvementprovides) andthe
legal andprofessionalrealityonthe other.
The above definitionof the expectationsgapisnotdefinitive (চুড়ান্ত) anditisnota 'static(রিরতশীল)
phenomenon(অসাধািন েৃশয বা ঘটনা)'.However,we canhighlightsome specificissues.
1. Misunderstandingofthe nature of auditedfinancial statements,forexample that:
i. The balance sheetprovidesafairvaluationof the reportingentity.
ii. The amountsin the financial statementsare statedprecisely.
iii. The auditedfinancial statementswill guarantee thatthe entityconcernedwillcontinuetoexist.
2. Misunderstandingas to the type and extentof work undertakenby auditors, forexample that:
i. All itemsinfinancial statementsare tested
ii. Auditorswill uncoverall errors
iii. Auditorsshoulddetectall fraud
4.20 Misunderstandingaboutthe level ofassurance providedby auditors,
for example, that:
i. The auditorsprovide absolute assurance thatthe figuresinthe financial statementsare correct
(ignoringthe conceptof materialityandthe problemsof estimation).
Note:The actual nature of the descriptioninthe accountsisdefinedbythe PartsI,II & III of the Schedul e XItothe
CompaniesAct1994.
CHAPTER 9: INTERNAL AUDIT
9.1 Internal audit
Internal auditisan appraisal (Evaluation)ormonitoringactivityestablishedwithinanentityasaservice tothe entity.
Its functions included examining, evaluating,and reporting to management about effectiveness of the accounting
and internal control systems.
12. 9.2 Corporate objectivity
Corporate objectivitywillvaryfromcompanytocompany,and will be found,forexample,in companies’mission
statements andstrategicplans
9.2 How the internal audit function can assist the board?
The internal audit function can assist the board in other ways as well:
(1) By acting as auditors for board, reports not audited by the external auditors.
(2) By assisting in implementation of new standards.
(3) By liaisingwithexternal auditors,internal auditorscancheckthat external auditorsare reportingbackto the
board everything they are required to under auditing standards.
9.3 External audit and the objectives of external audit?
External audit means an audit carried out by an external auditor as opposed to (নিপরীন্তত) an internal auditor.
Objectives: The objective of an external auditof financial statements is to enable the auditor to express an opinion
whether the financial statements are prepared, in all material respects, in accordance with an applicable financial
recording framework.
9.4 Distinguish between internal auditor and external auditor? (May-June’ 2010, 2011)
Distinguish between internal auditor and external auditors are mentioned below: (Four R)
Point of view Internal audit External audit
Reason
Internal auditisanactivitydesignedtoaddvalue
and improve an organization’s operations.
An exercise toenableauditorsto express
an opinionon the financial statements
Reportingto
Internal auditreporttothe board of directors,
or the audit committee
The external auditorsreporttothe
shareholdersof a company
Relatingto
An internal audit’sworkrelatestothe
operationsof the organization
External auditor’sworkrelatestothe
financial statements
Relationshipwith
the company
Internal auditorsare veryoften employeesof
the organization
External auditorsare independentof the
companyand itsmanagement.Theyare
appointedbythe shareholders.
9.5 What does internal audit do? / Define the activities of inter audit? May-June’ 2011,2013
Internal audit activities usually involve:
(a) Monitoring internal controls
(b) Examining financial and operating information.
(c) Review of the economy (সুপবিচালনা), efficiency and effectiveness of operations.
(d) Review of compliance with laws, regulations and other external requirements.
(e) Special investigations, for instance suspected fraud
What are roles of the internal audit department in relation to risk management? (Page-164)
The internal audit department has a two-fold role in relation to risk management.
(1) Monitoring the company’s overall risk management policy to ensure it operates effectively.
(2) Monitoring the strategies implemented to ensure that they continue to operate effectively.
Identify the role of internal auditor as part of internal control. (Page -164)
The roles of internal auditor as part of internal control are mentioned below:
(a) Development of internal control systems
(b) Monitoring the overall internal control process
(c) Meet objectives effectively.
(d) Focused on all the operations of the company.
(e) Testing will be far greater than the external auditor.
Operational / management / efficiency audit? (Page-164) _Nov – Dec’ 2014
Operational auditisauditsof the operational processesof the organization.Theyare also knownas managementor
efficiency audits. Their prime objective is the monitoring of management’s performance.
Objectives of an operational assignment? (Page-164)
Ans: There are two aspects of an operational assignment:
(1) Ensure policies are adequate
(2) Ensure policies work effectively.
In term of adequacy, the internal auditor will have to review the policies of a particular department by:
(a) Reading them
13. (b) Discussion with members of the department.
What are the other functions of an internal auditor in addition to regular function? (Page-165)
Internal audit may also carry out other functions for the directors in a company. For instance, theymight undertake
special investigationsinrespectof a suspectedfraud,or theymightcarry traditional financial audits.Internalauditor
will not become involved in the operational activities of the company.
All Self-test,Interactive Question& WorkedExample shouldbe done from the manual.
Previous year’s question (ICAB):
May-June’ 2010
8. What are the keydifferencesbetweenexternalandinternal audit?Asobjectivityisakeyissue forinternalauditors,
they are likely to routinely be involved in operational activities, do you agree? Explain (Self-test-4, Page-166)
May-June’ 2011
8. What does internal audit do? What are the key differences between external and internal audit?
May-June’ 2013
3.(c) List the activities usually undertaken in an internal audit.
Nov - Dec’ 2014
5. Write down short notes on following terminology: a) Operational Audit