The document discusses audit planning and risk assessment. It covers several key areas:
1. The importance of audit planning to obtain sufficient evidence, keep costs reasonable, and avoid misunderstandings. Planning involves understanding the client, assessing risks, and developing an audit program.
2. Risk assessment is a key part of planning and affects the scope and focus of the audit. The auditor assesses risks at the financial statement and assertion levels.
3. Understanding the entity's accounting systems and internal controls is essential to assess control risks and determine the appropriate audit approach. Analytical procedures and risk factors are also considered during planning.
This is a step-by-step process on how to plan and carry out Auditing. This shall be useful for Accountants , professionals,small businesses,big businesses.
An internal audit is designed to review what a company is doing in order to identify potential threats to the organization's financial health and profitability and to make suggestions for mitigating the risk associated with those threats.
This is a step-by-step process on how to plan and carry out Auditing. This shall be useful for Accountants , professionals,small businesses,big businesses.
An internal audit is designed to review what a company is doing in order to identify potential threats to the organization's financial health and profitability and to make suggestions for mitigating the risk associated with those threats.
COSO's Internal Control - Integrated Framework.
Includes:
Objectives;
Components;
Principles relating to the components and
Point of Focus assisting users in determining whether the principles are present and functioning
Internal Audit is a tool of control to measure and evaluate the effectiveness of the working of an organization primarily with accounting, financial and operational matters.
Internal Audit plays a constructive role by rendering service to the management with objective appraisal of systems, procedures, practices, compliance with policies.
LetzConsult presents a smarter ways for companies to find the most relevant Consultant for their business needs. Find the right consultants for your Company on LetzConsult.com
Client Evaluation and Planning the Audit Lecture slide chapter 8
Describe the steps involved in client acceptance and continuance.
State the purpose and content of an engagement letter.
Explain the steps in planning an audit.
Identify the risks of misstatement through understanding the entity and its environment.
Explain the role of analytical procedures in audit planning.
Describe the requirements to consider the risk of fraud in the audit planning process.
Explain the purpose and function of audit working papers.
COSO's Internal Control - Integrated Framework.
Includes:
Objectives;
Components;
Principles relating to the components and
Point of Focus assisting users in determining whether the principles are present and functioning
Internal Audit is a tool of control to measure and evaluate the effectiveness of the working of an organization primarily with accounting, financial and operational matters.
Internal Audit plays a constructive role by rendering service to the management with objective appraisal of systems, procedures, practices, compliance with policies.
LetzConsult presents a smarter ways for companies to find the most relevant Consultant for their business needs. Find the right consultants for your Company on LetzConsult.com
Client Evaluation and Planning the Audit Lecture slide chapter 8
Describe the steps involved in client acceptance and continuance.
State the purpose and content of an engagement letter.
Explain the steps in planning an audit.
Identify the risks of misstatement through understanding the entity and its environment.
Explain the role of analytical procedures in audit planning.
Describe the requirements to consider the risk of fraud in the audit planning process.
Explain the purpose and function of audit working papers.
What are the major steps in a financial statement audit.pdfRathnakarReddy17
A financial statement audit is a formal examination of a company's financial statements. Its goal is to assess whether financial statements fairly and substantially accurately depict business operations and financial situation in compliance with the Generally Accepted Accounting Principles (GAAP) published by the Financial Accounting Standards Board. The income statement, balance sheet, statement of Cash Flow Budgeting and Forecasting in Washington, and other supporting disclosures are all specifically examined by the auditor for accuracy.A financial statement audit must be performed in accordance with GAAP by an impartial external auditor.
What is the procedure for financial statement audit.pdfRathnakarReddy17
The purpose of a financial statement audit is to add credibility to the reported financial condition and business performance. Annual reports must be submitted by all publicly traded corporations and are subject to SEC audits.Similarly, lenders typically require audits of the financial statements of the companies they finance. Suppliers may also require audited Financial Statement Preparation in New York before granting trade credit (usually only if the amount of credit requested is substantial).
Planning an external audit of financial statementsAyesha Majid
A detailed analysis of what ISA 300 means and how its is ought to be implemented while conducting an audit in accordance with International Standards of Auditing.
Audit of Internal Financial Control over Financial Reporting (IFCR) A complet...Taufir Alam
Introduction to the Presentation on internal financial control over financial reporting_a complete guide
The Companies Act, 2013 has introduced some new requirements relating to audits and reporting by the statutory auditors of companies.
One of these requirements is given under Section 143(3)(i) of the Act which requires the statutory auditor to state in his audit report whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.
The section has cast onerous responsibilities on the statutory auditors because reporting on internal financial controls is not covered under the Standards on Auditing issued by the ICAI.
Since the concept of reporting on internal financial controls is still new in India this new reporting requirement has thrown up many challenges for the members.
To help the members properly understand and perform the various aspects of this reporting responsibility, the Auditing and Assurance Standards Board of the Institute of Chartered Accountants of India has brought out this Guidance Note on Audit of Internal Financial Controls Over Financial Reporting.
The Guidance Note covers aspects such as Scope of reporting on internal financial controls under Companies Act 2013, essential components of internal controls, Technical guidance on the audit of Internal Financial Controls, Implementation guidance on the audit of Internal Financial Controls.
I have presented the above guidance note into a presentation that will have a complete guide for those who are planning to go for Audit of Internal financial control over financial reporting. this presentation will cover all the relevant aspects and also provide the standard operation process for the efficient conduct of the IFCR Audit. You don't need to read the complete Guidance note.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
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2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
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CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
Implicitly or explicitly all competing businesses employ a strategy to select a mix
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involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
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A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
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Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
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While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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audit planning and risk assessment new slides.ppt
1. Audit Planning and risk
Assessment
ALI SAJJAD
Session- 9
AUDIT AND ASSURANCE
2. Contents
1. Why audit planning is essential.
2. audit planning and audit approach procedure
3. accept client and initial audit planning
4. engagement letter
5. purpose of audit planning
6. professional skepticism
7. interim audit and final audit
8. Understand entity and its environment
9. understanding accounting and internal control
system
10. Risk and materiality
11. Materiality
3. Three reasons why auditor should
properly plan engagement
1. To obtain sufficient appropriate evidence for
circumstances
2. To help keep audit costs reasonable
3. To avoid misunderstandings with client
4. Planning an Audit and
Designing an Audit Approach
Accept client and perform initial audit planning.
Understand the client’s business and industry.
Assess client business risk.
Perform preliminary analytical procedures.
5. Planning an Audit and
Designing an Audit Approach
Set materiality and assess acceptable audit risk
and inherent risk.
Understand internal control and assess control risk.
Gather information to assess fraud risks.
Develop overall audit plan and audit program.
6. Auditor assess these risks
1. Acceptable
audit risk
It is a measure of how willing the auditor is to accept that the financial
statements may be materially misstated after the audit is completed
and an unqualified opinion has been issued. When the auditor decides
on a lower acceptable audit risk, it means that the auditor wants to be
more certain that the financial state- ments are not materially misstated.
Zero risk is certainty, and a 100 percent risk is complete uncertainty.
7. it is a measure of the auditor’s assessment of the likelihood that
there are material misstatements in an account balance before
considering the effectiveness of internal control. If, for example, the
auditor concludes that there is a high likelihood of material
misstatement in accounts receivable due to changing economic
conditions, the auditor concludes that inherent risk for accounts
receivable is high.
2. Inherent risk
8. Auditing standards require that auditor understanding
with client in an engagement letter which includes
followings:
1. Objectives
2. Responsibilities of management
3. Responsibility of auditor
4. Engagement limitations
5. Expected fees
11. Written representative letter
A management representation letter is a form letter
written by a company's external auditors, which is
signed by senior company management. The letter
attests to the accuracy of the financial statements that the
company has submitted to the auditors for their analysis.
14. Planning and audit
1.1 The purpose of an audit plan
A plan sets out what needs to be done to achieve an objective. In the case of an
external or internal audit, the objective is the production of an audit report
containing an opinion on the information subject to audit. An audit plan should
be prepared as a means of achieving this objective efficiently and effectively.
15. 1.1.1 Content of audit plan
Preparing an audit plan is the first stage in the conduct of an audit engagement.
The plan sets out answers to three main questions (the ‘3Ws’):
Who will perform the audit work? (Staffing)
When will the work be done? (Timing)
What work is to be done? (The scope of the audit)
16. 1.1.2 Risk assessment and
audit planning
To prepare a suitable audit plan, the auditor needs to have an in-depth knowledge and
understanding of:
the entity to be audited, and
the environment in which the entity operates.
The auditor needs this knowledge and understanding in order to assess the risk
attached to the audit. Risk assessment is a key feature of the audit planning process
and the assessment of risk in the audit will affect:
the amount of audit work performed in general, and
the areas on which the auditor will focus his attention.
The planning process is essential to all audits, both internal and external. It is equally
important to other assurance engagements such as a ‘review’ assignment.
17. 1.2 Professional skepticism
“An attitude that includes a questioning mind,
being alert to conditions which may indicate
possible misstatement due to error or fraud,
and a critical assessment of audit evidence”.
18. 1.3 Interim audit final audit
Interim audit and final audit
Most large audits will be split into two phases. Much of the systems assessment work and
transaction testing will be carried out on the interim audit (taking place perhaps two-thirds of the
way through the year) with the balance of the work and testing of statement of financial position
items taking place at the final audit shortly after the year end.
A number of key benefits may arise from spreading the work across interim and final audit such as:
1. More flexible resource planning within the firm – the timing of interim audit is typically
more flexible than the timing of final audit. This helps reduce demand for audit staff
during ‘busy season’ (traditionally the first few months of a calendar year when many
clients require their final audit to take place)
2. Earlier identification of significant matters
3. Shareholders and other users receive audited accounts earlier
4. Increased audit efficiency
19. 1.3.1. Typical interim audit procedure
includes
1. Understanding the entity, assessing inherent risk (see ISA 315)
and identifying significant matters which will be reflected in the
subsequent audit strategy and audit plan.
2. Recording, evaluating the design and testing the entity’s system
of internal control.
3. Performing substantive testing to ensure the books and records
are a sound basis for performing the year end audit.
20. 1.3.2. Typical final audit procedures
include:
1. Substantive testing. Note that where substantive testing was performed at the
interim phase auditors typically test the subsequent period between interim audit
and period end.
2. Tests to ensure conclusions formed at interim audit remain valid
3. Obtaining third party confirmations such as bank letters and trade receivables
confirmations
4. Analytical review and subsequent events review
5. Subsequent events review
6. Obtaining written representations
ISA 330 specifically states that the following procedures can only be performed at or after the
period end:
1. Agreeing the financial statements to the accounting records;
2. Examining adjustments made during the course of preparing the financial statements; and
3. Procedures to respond to a risk that, at the period end, the entity may have entered into
improper sales contracts, or transactions may not have been finalized
21. 2. Understanding accounting and internal control
system
If the entity has an internal audit function then auditor shall obtain an understanding of the
nature of the internal audit function’s responsibilities, its organizational status, and the activities
performed, or to be performed.
The auditor should try to reach a judgment about how strong (or weak) the internal controls are,
in order to make a decision about the amount of testing that should be carried out in the audit.
He should consider:
1. his previous knowledge of the client company
2. any recent changes
3. any known problems in the internal controls of the client
4. the effect of any new auditing or accounting requirements.
22. Analytical procedure
which involves the study of ratios and trends to identify the existence of
unusual transactions or events or amounts, ratios or trends that might have
implications for the audit (information technology may be of use here in
calculating changes to balances in the financial statements from previous
years and graphing trends).
For example, an analysis of payables days compared to previous years might
indicate that the company is having difficulty in paying its debts. As a result,
the auditor may plan to do more work on this area.
(for example, inspecting internal control manuals or business plans).
Observation and inspection
23. Risk and materiality
The auditor is required by ISA 315 to identify and assess the risks of
material misstatement at both the financial statement and assertion
levels.
1. The financial statement level refers to risks which are pervasive to the
financial statements as a whole and which potentially affect many
assertions (see below). An example might be if management have a
tendency to override internal controls – this would affect all areas of the
accounting systems.
2. The assertion level refers to specific objectives of the financial
statements, for example, that all liabilities have been recorded and that
recorded assets exist. The use of financial statement assertions is
considered in detail in a later chapter.
24. Risk assessment is an important aspect of planning an audit.
Issues to consider are:
1. the areas where risk of misstatement (error) appear to exist, and the nature of the risk
2. when an error should be considered material, and when it may be ignored
3. what aspects of the audit will be the most difficult to plan because of the high risk of
misstatement.
The auditor should consider:
1. assessments of inherent risks and control risks, and the identification of significant audit areas
2. setting materiality levels
3. the possibility of material misstatements, including those arising because of fraud (rather than
unintentional error)
4. the identification of complex accounting areas, particularly those involving accounting estimates. (Areas
of accounting where the estimates used will be more difficult to audit.)
The auditor will then focus his work on balances in the financial statements
where he considers there is a material risk of misstatement. High risk/material
items will be audited in detail, but low risk/immaterial items will receive less
attention.
26. This audit risk approach was developed in the 1980s. Previous
approaches included the following:
1. The substantive approach whereby every item in the financial
statements is tested and vouched to supporting documents. This
approach is still sometimes used for small entities where internal
controls are weak and there are few transactions. It may be more
efficient to just test everything (especially if the auditor is also providing
accountancy services, where he will see all of the supporting documents
in any case).
2. The systems approach which was developed to avoid over-auditing.
Under this method the underlying accounting systems were tested with
less emphasis on the testing of individual transactions and balances.
However, this approach could still lead to over-auditing as systems
covering low- risk/immaterial areas were also tested.
Most firms now use a mixture of the audit risk approach and a systems-
based approach.
27. 2.4 Materiality:
“Information is material if its omission or misstatement could influence the
economic decisions of users taken on the basis of the financial statements.”
AUDITORS ENTITLED TO ASSUME THAT USERS:
1. have a reasonable knowledge of business and are willing to study the information in
the financial statements diligently
2. understand that financial statements are prepared and audited to levels of materiality
3. recognize the uncertainties inherent in certain amounts in the financial statements
(such as provisions)
4. make reasonable economic decisions based on the information in the financial
statements.
28. Examples of Planning
Analytical Procedures
Liquidity activity ratio:
Inventory turnover 3.36 5.20
Ability to meet long-term obligations:
Debt to equity 1.73 2.51
Profitability ratio:
Profit margin 0.05 0.07
Short-term debt-paying ability:
Current ratio 3.86 5.20
Client Industry
Selected Ratios
29. Compare Client and Industry
Data
Inventory turnover 3.4 3.5 3.9 3.4
Gross margin 26.3% 26.4% 27.3% 26.2%
Client Industry
2009 2008 2009 2008
30. Compare Client Data with
Similar Prior Period Data
Net sales $143,086 100.0 $131,226 100.0
Cost of goods sold 103,241 72.1 94,876 72.3
Gross profit $ 39,845 27.9 $ 36,350 27.7
Selling expense 14,810 10.3 12,899 9.8
Administrative expense 17,665 12.4 16,757 12.8
Other 1,689 1.2 2,035 1.6
Earnings before taxes $ 5,681 4.0 $ 4,659 3.5
Income taxes 1,747 1.2 1,465 1.1
Net income $ 3,934 2.8 $ 3,194 2.4
2009
(000)
Prelim.
% of
Net sales
2008
(000)
Prelim.
% of
Net sales
32. Profitability Ratios
Earnings
per share
Net income
Average common shares outstanding
=
Gross profit
percent
(Net sales – Cost of goods sold)
Net sales
=
Profit margin
Operating income
Net sales
=
33. 3. Audit risk
3.1 Risk based audit approach
3.2 Response to assessed risk
1. At the financial statement level these “responses” are overall ones, which
may include:
2. emphasizing to the audit team the need to maintain an attitude of
professional skepticism
3. assigning more experienced staff or increased supervision of staff
4. the use of experts
5. changing the nature, timing and extent of audit procedures (for example,
performing more substantive procedures at the final rather than at the interim
audit, or obtaining more “persuasive” audit evidence).
34. The assessment of the risks at this level and therefore the auditor’s response is very much
affected by the auditor’s assessment of the control environment. An effective control
environment will be likely to increase the auditor’s confidence in controls in all areas and
allow him to carry out more procedures at the interim audit and to carry out less tests of
detail. Both of these terms are considered in later chapters.
In summary, the auditor is required to:
1. assess the risks involved in the audit
2. plan the audit work so that any material misstatements are identified and corrected if
necessary.
This should then ensure that a ‘true and fair view’ is presented by the financial statements.