An external confirmation is audit evidence obtained as a direct written response to the auditor from a third party (the confirming party), in paper form, or through electronic or other medium. Requesting external confirmations is a commonly used audit procedure in an audit of financial statements. It can be useful in obtaining audit evidence about relevant financial statement assertions regarding such items as receivables and payables, bank and other third party deposits and liabilities, investments, inventory, guarantees, contingent liabilities, significant transactions outside the normal course of business.
External is governed by ISA 500 as discussed previously and confirmation is dependent upon audit evidence received by third party. External confirmation procedure are given is ISA 330 and 240. Each external confirmation has its own method of request defined in audit procedure and most common is bank confirmation, which was discussed in detail in the report.
This document provides an overview of external confirmations as an audit procedure. It defines external confirmation as obtaining evidence directly from a third party in written form. External confirmations are commonly used to verify information with debtors, creditors, banks, lawyers, and those holding company assets/investments. The document outlines factors to consider when using confirmations, such as timing, sample selection, request design. It distinguishes between positive and negative confirmation requests and the risks of each. It also describes audit procedures to follow up on responses, such as investigating exceptions or non-responses to positive confirmations.
The document provides information about engagement letters in an auditing context. It discusses the purposes of engagement letters, the key information that should be included in engagement letters, factors to consider when accepting changes to engagement terms, and circumstances where engagement letters may need to be revised for recurring audits. Specifically:
1. Engagement letters confirm the appointment of the auditor, define the scope and objectives of the audit, and outline the responsibilities of the auditor and management.
2. Key information in an engagement letter includes the scope and objective of the audit, applicable financial reporting framework, responsibilities of the auditor and management, expected audit report, and statement that the report may differ from expectations.
3. Auditors should only accept
The document summarizes key aspects of an examinable supplement issued by ICAP related to auditing. It covers 5 learning objectives:
1. Elements of an auditor's report under ISA 700 (revised).
2. Differences between report formats under ISA 700 versus Form 35A.
3. Determining and communicating key audit matters to those charged with governance.
4. Communication of key audit matters in the auditor's report for listed entities.
5. Revised definition and examples of emphasis of matter.
The document provides learning objectives and substantive procedures for auditing various accounts including non-current assets, intangible non-current assets, inventory, trade receivables, bank, cash, trade payables, accruals, provisions, contingencies, non-current liabilities/long term borrowings, equity, directors' emoluments, revenue, purchases, payroll, interest expense and income, and other expenses. The learning objectives cover verification of additions and disposals for non-current assets, valuation of intangible assets, verification of inventory existence and valuation, and cutoff testing for trade receivables among other procedures.
This document summarizes International Standard on Auditing (UK) 220 (Revised June 2016) regarding quality control for an audit of financial statements. It:
1) Establishes responsibilities of the engagement partner to take responsibility for quality on each audit, monitor compliance with relevant ethical requirements, and form a conclusion on compliance with independence requirements.
2) Requires the engagement partner to be satisfied that appropriate procedures regarding client acceptance and continuance have been followed.
3) Mandates the engagement partner ensure the engagement team collectively has the appropriate competence and capabilities to perform the audit in accordance with standards.
4) Specifies the engagement partner is responsible for direction, supervision, performance, and reviews being performed in accordance with the
Legal requirements (revised notes and case studies) - COMPLIANCE WITH LEGAL R...MUHAMMAD HUZAIFA CHAUDHARY
This document discusses compliance with legal requirements for statutory auditors under the Companies Act, 2017. It covers the appointment and removal of statutory auditors, their rights and duties, and qualifications.
The key points are:
- Appointment of first auditors is done by the board within 90 days, and subsequent auditors are appointed by members at the AGM. SECP can appoint auditors if the company fails to do so.
- Removal of auditors requires a special resolution by members. Procedures for changing auditors at the AGM involve recommendations by the board and members at least 7 days prior.
- Statutory auditors have rights to company information and attendance at meetings. They
This document summarizes the key points of an International Standard on Auditing (UK) regarding audit documentation:
1) It establishes requirements for audit documentation relating to the timing of preparation, documentation of procedures performed and evidence obtained, and assembly of the final audit file.
2) Audit documentation provides evidence of the audit work performed and conclusions reached, and promotes quality and consistency in the audit.
3) The auditor must document significant matters, judgments made, and any departures from audit standards. Audit documentation must be sufficient to allow an experienced auditor to understand the nature, timing and extent of procedures performed.
Auditor evaluates several matters before forming an opinion on financial statements, including whether misstatements or scope limitations exist, and if so, whether their effects are material or pervasive. The auditor must conclude that the financial statements present a true and fair view, include adequate disclosures, and have reasonable accounting estimates and policies selected, applied and disclosed in accordance with accounting standards. If a change in accounting policy occurs, the auditor will note the exception to consistent application in the report and refer to the related disclosure in the financial statements, stating whether concurrence with the change exists. When a misstatement is identified, the auditor accumulates all misstatements, evaluates whether uncorrected misstatements are material, and determines the effect on the audit report.
This document provides an overview of external confirmations as an audit procedure. It defines external confirmation as obtaining evidence directly from a third party in written form. External confirmations are commonly used to verify information with debtors, creditors, banks, lawyers, and those holding company assets/investments. The document outlines factors to consider when using confirmations, such as timing, sample selection, request design. It distinguishes between positive and negative confirmation requests and the risks of each. It also describes audit procedures to follow up on responses, such as investigating exceptions or non-responses to positive confirmations.
The document provides information about engagement letters in an auditing context. It discusses the purposes of engagement letters, the key information that should be included in engagement letters, factors to consider when accepting changes to engagement terms, and circumstances where engagement letters may need to be revised for recurring audits. Specifically:
1. Engagement letters confirm the appointment of the auditor, define the scope and objectives of the audit, and outline the responsibilities of the auditor and management.
2. Key information in an engagement letter includes the scope and objective of the audit, applicable financial reporting framework, responsibilities of the auditor and management, expected audit report, and statement that the report may differ from expectations.
3. Auditors should only accept
The document summarizes key aspects of an examinable supplement issued by ICAP related to auditing. It covers 5 learning objectives:
1. Elements of an auditor's report under ISA 700 (revised).
2. Differences between report formats under ISA 700 versus Form 35A.
3. Determining and communicating key audit matters to those charged with governance.
4. Communication of key audit matters in the auditor's report for listed entities.
5. Revised definition and examples of emphasis of matter.
The document provides learning objectives and substantive procedures for auditing various accounts including non-current assets, intangible non-current assets, inventory, trade receivables, bank, cash, trade payables, accruals, provisions, contingencies, non-current liabilities/long term borrowings, equity, directors' emoluments, revenue, purchases, payroll, interest expense and income, and other expenses. The learning objectives cover verification of additions and disposals for non-current assets, valuation of intangible assets, verification of inventory existence and valuation, and cutoff testing for trade receivables among other procedures.
This document summarizes International Standard on Auditing (UK) 220 (Revised June 2016) regarding quality control for an audit of financial statements. It:
1) Establishes responsibilities of the engagement partner to take responsibility for quality on each audit, monitor compliance with relevant ethical requirements, and form a conclusion on compliance with independence requirements.
2) Requires the engagement partner to be satisfied that appropriate procedures regarding client acceptance and continuance have been followed.
3) Mandates the engagement partner ensure the engagement team collectively has the appropriate competence and capabilities to perform the audit in accordance with standards.
4) Specifies the engagement partner is responsible for direction, supervision, performance, and reviews being performed in accordance with the
Legal requirements (revised notes and case studies) - COMPLIANCE WITH LEGAL R...MUHAMMAD HUZAIFA CHAUDHARY
This document discusses compliance with legal requirements for statutory auditors under the Companies Act, 2017. It covers the appointment and removal of statutory auditors, their rights and duties, and qualifications.
The key points are:
- Appointment of first auditors is done by the board within 90 days, and subsequent auditors are appointed by members at the AGM. SECP can appoint auditors if the company fails to do so.
- Removal of auditors requires a special resolution by members. Procedures for changing auditors at the AGM involve recommendations by the board and members at least 7 days prior.
- Statutory auditors have rights to company information and attendance at meetings. They
This document summarizes the key points of an International Standard on Auditing (UK) regarding audit documentation:
1) It establishes requirements for audit documentation relating to the timing of preparation, documentation of procedures performed and evidence obtained, and assembly of the final audit file.
2) Audit documentation provides evidence of the audit work performed and conclusions reached, and promotes quality and consistency in the audit.
3) The auditor must document significant matters, judgments made, and any departures from audit standards. Audit documentation must be sufficient to allow an experienced auditor to understand the nature, timing and extent of procedures performed.
Auditor evaluates several matters before forming an opinion on financial statements, including whether misstatements or scope limitations exist, and if so, whether their effects are material or pervasive. The auditor must conclude that the financial statements present a true and fair view, include adequate disclosures, and have reasonable accounting estimates and policies selected, applied and disclosed in accordance with accounting standards. If a change in accounting policy occurs, the auditor will note the exception to consistent application in the report and refer to the related disclosure in the financial statements, stating whether concurrence with the change exists. When a misstatement is identified, the auditor accumulates all misstatements, evaluates whether uncorrected misstatements are material, and determines the effect on the audit report.
This document provides an overview of compliance with ethical requirements for auditing. It discusses the following key points in 3 paragraphs:
Paragraph 1 discusses the fundamental principles of ethics for auditors, which are integrity, objectivity, confidentiality, professional competence and due care, and professional behavior. It explains what each principle entails.
Paragraph 2 defines and provides examples of threats to the fundamental principles, including self-interest threats, familiarity threats, self-review threats, intimidation threats, and advocacy threats. Common examples of each threat are outlined.
Paragraph 3 discusses safeguards to the fundamental ethical principles, including procedures to address threats like segregation of duties, using staff with sufficient training and experience for assignments,
This document provides an overview of compliance with legal requirements for auditing in Pakistan. It covers the authority for appointing and removing statutory auditors, the procedures for appointment and removal, the powers and duties of statutory auditors, qualifications and disqualifications for the role, and requirements for auditing cost accounting records. The key points are:
- Appointment of first auditor is by directors, subsequent auditors are appointed by members at the AGM. SECP appoints if they fail to.
- Removal of auditors requires notice and they have rights to make representations.
- Statutory auditors have rights to access documents and require information from the company. Their duties include reporting on financial statements and
The document discusses the auditor's responsibility to inquire from management about subsequent events that may affect the financial statements according to SA 560. It lists 9 specific inquiries the auditor should make, including inquiries about new commitments or borrowings, sales or acquisitions of assets, changes in capital, events affecting estimates or provisions, and events affecting asset recoverability. Maintaining an attitude of professional skepticism is important when evaluating management's responses to such inquiries.
1) The document discusses the origin, advantages, and disadvantages of assurance services. Assurance services originated to enhance the credibility of financial statements prepared by management for shareholders, as management may not provide a true and fair view due to incentives or pressures.
2) It defines an assurance engagement and its key elements - a three party relationship between intended users, responsible party, and practitioner. It also discusses the subject matter, suitable criteria, evidence, and written assurance report.
3) It explains the different levels of assurance - reasonable assurance provided in an audit, and limited assurance provided in a review. Absolute assurance cannot be provided due to inherent limitations of assurance engagements, such as some accounts involving estimates, the use of sampling
The document discusses International Standards on Review Engagements (ISREs) for conducting review engagements. It defines a review engagement as providing moderate assurance, with procedures deliberately reduced from an audit. Key differences from an audit are the level of assurance is limited rather than reasonable, and procedures are inquiries and analytical reviews rather than tests of controls or other substantive procedures.
The document outlines the objectives, procedures, and report for a review engagement. The objective is to obtain limited assurance to provide a negative conclusion about whether anything has come to the auditor's attention that causes them to believe the financial statements are not fairly presented. Procedures include inquiry of management, analytical reviews, agreeing amounts to records, and obtaining
This document summarizes International Standard on Auditing (UK) 210 (Revised June 2016) which deals with the auditor's responsibilities in agreeing the terms of an audit engagement. Key points include:
- The auditor must determine if the financial reporting framework to be applied is acceptable and obtain management's acknowledgement of its responsibilities for preparing the financial statements, internal controls, and providing access to information.
- The agreed terms of the audit engagement must be documented in writing, including the objectives and scope of the audit, responsibilities of the auditor and management, and expected form of any reports.
- For recurring audits the auditor assesses if the terms need revising. The auditor will not agree to changes in the
Legal requirements (revised practice set) - COMPLIANCE WITH LEGAL REQUIREMENTS MUHAMMAD HUZAIFA CHAUDHARY
This document contains questions related to compliance with legal requirements regarding company auditors under the Companies Act, 2017 of Pakistan. It includes questions on the appointment, removal, rights and duties of auditors. Some key points addressed are who can appoint the first auditor of a company, how auditor vacancies are filled, requirements for auditor signatures on reports, and circumstances under which auditors can be removed before the end of their term.
The document discusses final matters related to auditing, including written representations, subsequent events, and facts discovered after the auditor's report.
It defines written representations as written statements from management to confirm certain matters or support audit evidence. It outlines the representations required by ISAs regarding management responsibilities, financial statements, and specific assertions.
It describes the auditor's course of action if oral or written representations are provided, including evaluating the reliability of written representations. It also outlines steps the auditor would take if written representations are not provided.
The document explains the auditor's responsibility regarding events between the financial statement date and the auditor's report date. It lists procedures for the auditor to fulfill this responsibility, such as inquiring with management
1. The document discusses fraud, including the types of fraud (fraudulent financial reporting and misappropriation of assets), fraud risk factors, and the responsibilities of management and auditors regarding fraud.
2. It describes risk assessment procedures auditors perform to identify risks of material misstatement due to fraud, such as making inquiries of management and testing journal entries.
3. The document also discusses procedures to respond to the risk of management override of controls, such as reviewing accounting estimates and understanding the business rationale for significant unusual transactions.
This document outlines the steps of an auditing assignment submitted by four students to their professor. It describes the six main phases of an audit: 1) planning, 2) gathering evidence, 3) evaluating evidence, 4) field work, 5) issuing a report, and 6) follow up. Key aspects of each phase are defined, such as preparing an audit program during planning, obtaining sufficient and competent evidence during field work, and verifying resolution of findings during follow up.
The group auditor is responsible for expressing an opinion on the group financial statements. A group audit involves auditing the financial statements of a holding company and its subsidiaries. It is considered high risk due to consolidation adjustments and involvement of component auditors. The group auditor must obtain an understanding of components, assess risk, determine materiality and decide the type of work to be performed on each component. The group auditor relies on work of component auditors and must evaluate their competence and independence before placing reliance. Effective communication between group and component auditors is important.
ISQC 1 (Revised) Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements
This document discusses the audit of property, plant, and equipment (PPE). It outlines the main objectives of controlling PPE which include ensuring acquisitions are authorized, assets are safeguarded and recorded properly, assets are depreciated over their useful lives, and profits and losses on disposals are accounted for correctly. It also describes internal controls over PPE, inherent risk factors, disclosure requirements, and analytical and verification audit procedures to audit PPE balances and transactions.
The document provides an overview of audit reports, including:
- The objectives of an audit report are to form an opinion on the financial statements based on audit evidence and to express this opinion through a written report.
- The report must state the scope and limitations of the audit and separate facts from opinions.
- The nature of the audit examination, management responsibilities, and standards of auditing like SA 700 all impact the structure and wording of the audit report.
Planning an audit involves establishing the overall audit strategy and developing an audit plan. The audit strategy sets the scope, timing, and direction of the audit at a high level. The audit plan includes the nature, timing, and extent of specific audit procedures. There are additional considerations for initial audit engagements, such as obtaining an understanding of opening balances and predecessor auditor communications. Interim audits are performed before the year-end and allow for earlier issue identification, while final audits conclude with an opinion on the full-year financial statements.
The document provides an overview of key concepts in auditing based on a study notes chapter. It discusses:
1) The components of a complete set of financial statements including the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes to the accounts.
2) The two main types of financial reporting frameworks - compliance frameworks and fair presentation frameworks - and the concept of a true and fair view.
3) The responsibilities of various parties in an audit including management, those charged with governance, auditors, and stakeholders. It also discusses the expectation gap faced by auditors.
4) The scope of an audit and essentials for proper audit conduct including professional judgement, professional
Isa240 the auditor’s responsibilities relating to fraud in an audit of financ...JUAN LUIS PINEDO SANDOVAL
This document is the International Standard on Auditing 240 which outlines the auditor's responsibilities relating to fraud in a financial statement audit. It discusses key characteristics of fraud, and that while management is primarily responsible for fraud prevention and detection, the auditor is responsible for obtaining reasonable assurance that financial statements are free from material misstatement due to fraud or error. The auditor aims to identify and assess fraud risks, obtain sufficient evidence regarding those risks, and appropriately respond to any suspected or identified frauds.
Audit of other assets (and related items)Khalid Aziz
This document discusses auditing procedures for various asset accounts including prepaid expenses, intangible assets, and property, plant and equipment. It provides details on assessing inherent and control risks, substantive analytical procedures, and tests of details for transactions in these accounts. Key aspects covered include confirming prepaid insurance policies, assessing valuation of intangible assets, and procedures over the property management process such as authorizing capital expenditures and taking physical inventories.
Audit evidence is gathered through all stages of an audit from source documents, accounting records, and corroborating information. It serves three main purposes: to confirm the auditor's understanding of the client's system; to assess how the system fits within the organization; and to provide a basis for evaluating internal controls. There are several types of audit evidence, including physical examination, confirmation, documentation, analytical procedures, inquiries, reperformance, and observation.
This document defines audit evidence and describes the types and sources of evidence an auditor obtains to form an opinion on financial statements. It discusses that audit evidence includes all information used to arrive at audit conclusions, such as accounting records and other information gathered. The auditor must obtain sufficient and appropriate evidence to provide reasonable assurance and issue an opinion. Evidence is gathered through tests of controls, substantive procedures like testing transactions and balances, and analytical procedures. The quality and quantity of evidence depends on the level of assurance being provided.
This document provides an overview of compliance with ethical requirements for auditing. It discusses the following key points in 3 paragraphs:
Paragraph 1 discusses the fundamental principles of ethics for auditors, which are integrity, objectivity, confidentiality, professional competence and due care, and professional behavior. It explains what each principle entails.
Paragraph 2 defines and provides examples of threats to the fundamental principles, including self-interest threats, familiarity threats, self-review threats, intimidation threats, and advocacy threats. Common examples of each threat are outlined.
Paragraph 3 discusses safeguards to the fundamental ethical principles, including procedures to address threats like segregation of duties, using staff with sufficient training and experience for assignments,
This document provides an overview of compliance with legal requirements for auditing in Pakistan. It covers the authority for appointing and removing statutory auditors, the procedures for appointment and removal, the powers and duties of statutory auditors, qualifications and disqualifications for the role, and requirements for auditing cost accounting records. The key points are:
- Appointment of first auditor is by directors, subsequent auditors are appointed by members at the AGM. SECP appoints if they fail to.
- Removal of auditors requires notice and they have rights to make representations.
- Statutory auditors have rights to access documents and require information from the company. Their duties include reporting on financial statements and
The document discusses the auditor's responsibility to inquire from management about subsequent events that may affect the financial statements according to SA 560. It lists 9 specific inquiries the auditor should make, including inquiries about new commitments or borrowings, sales or acquisitions of assets, changes in capital, events affecting estimates or provisions, and events affecting asset recoverability. Maintaining an attitude of professional skepticism is important when evaluating management's responses to such inquiries.
1) The document discusses the origin, advantages, and disadvantages of assurance services. Assurance services originated to enhance the credibility of financial statements prepared by management for shareholders, as management may not provide a true and fair view due to incentives or pressures.
2) It defines an assurance engagement and its key elements - a three party relationship between intended users, responsible party, and practitioner. It also discusses the subject matter, suitable criteria, evidence, and written assurance report.
3) It explains the different levels of assurance - reasonable assurance provided in an audit, and limited assurance provided in a review. Absolute assurance cannot be provided due to inherent limitations of assurance engagements, such as some accounts involving estimates, the use of sampling
The document discusses International Standards on Review Engagements (ISREs) for conducting review engagements. It defines a review engagement as providing moderate assurance, with procedures deliberately reduced from an audit. Key differences from an audit are the level of assurance is limited rather than reasonable, and procedures are inquiries and analytical reviews rather than tests of controls or other substantive procedures.
The document outlines the objectives, procedures, and report for a review engagement. The objective is to obtain limited assurance to provide a negative conclusion about whether anything has come to the auditor's attention that causes them to believe the financial statements are not fairly presented. Procedures include inquiry of management, analytical reviews, agreeing amounts to records, and obtaining
This document summarizes International Standard on Auditing (UK) 210 (Revised June 2016) which deals with the auditor's responsibilities in agreeing the terms of an audit engagement. Key points include:
- The auditor must determine if the financial reporting framework to be applied is acceptable and obtain management's acknowledgement of its responsibilities for preparing the financial statements, internal controls, and providing access to information.
- The agreed terms of the audit engagement must be documented in writing, including the objectives and scope of the audit, responsibilities of the auditor and management, and expected form of any reports.
- For recurring audits the auditor assesses if the terms need revising. The auditor will not agree to changes in the
Legal requirements (revised practice set) - COMPLIANCE WITH LEGAL REQUIREMENTS MUHAMMAD HUZAIFA CHAUDHARY
This document contains questions related to compliance with legal requirements regarding company auditors under the Companies Act, 2017 of Pakistan. It includes questions on the appointment, removal, rights and duties of auditors. Some key points addressed are who can appoint the first auditor of a company, how auditor vacancies are filled, requirements for auditor signatures on reports, and circumstances under which auditors can be removed before the end of their term.
The document discusses final matters related to auditing, including written representations, subsequent events, and facts discovered after the auditor's report.
It defines written representations as written statements from management to confirm certain matters or support audit evidence. It outlines the representations required by ISAs regarding management responsibilities, financial statements, and specific assertions.
It describes the auditor's course of action if oral or written representations are provided, including evaluating the reliability of written representations. It also outlines steps the auditor would take if written representations are not provided.
The document explains the auditor's responsibility regarding events between the financial statement date and the auditor's report date. It lists procedures for the auditor to fulfill this responsibility, such as inquiring with management
1. The document discusses fraud, including the types of fraud (fraudulent financial reporting and misappropriation of assets), fraud risk factors, and the responsibilities of management and auditors regarding fraud.
2. It describes risk assessment procedures auditors perform to identify risks of material misstatement due to fraud, such as making inquiries of management and testing journal entries.
3. The document also discusses procedures to respond to the risk of management override of controls, such as reviewing accounting estimates and understanding the business rationale for significant unusual transactions.
This document outlines the steps of an auditing assignment submitted by four students to their professor. It describes the six main phases of an audit: 1) planning, 2) gathering evidence, 3) evaluating evidence, 4) field work, 5) issuing a report, and 6) follow up. Key aspects of each phase are defined, such as preparing an audit program during planning, obtaining sufficient and competent evidence during field work, and verifying resolution of findings during follow up.
The group auditor is responsible for expressing an opinion on the group financial statements. A group audit involves auditing the financial statements of a holding company and its subsidiaries. It is considered high risk due to consolidation adjustments and involvement of component auditors. The group auditor must obtain an understanding of components, assess risk, determine materiality and decide the type of work to be performed on each component. The group auditor relies on work of component auditors and must evaluate their competence and independence before placing reliance. Effective communication between group and component auditors is important.
ISQC 1 (Revised) Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements
This document discusses the audit of property, plant, and equipment (PPE). It outlines the main objectives of controlling PPE which include ensuring acquisitions are authorized, assets are safeguarded and recorded properly, assets are depreciated over their useful lives, and profits and losses on disposals are accounted for correctly. It also describes internal controls over PPE, inherent risk factors, disclosure requirements, and analytical and verification audit procedures to audit PPE balances and transactions.
The document provides an overview of audit reports, including:
- The objectives of an audit report are to form an opinion on the financial statements based on audit evidence and to express this opinion through a written report.
- The report must state the scope and limitations of the audit and separate facts from opinions.
- The nature of the audit examination, management responsibilities, and standards of auditing like SA 700 all impact the structure and wording of the audit report.
Planning an audit involves establishing the overall audit strategy and developing an audit plan. The audit strategy sets the scope, timing, and direction of the audit at a high level. The audit plan includes the nature, timing, and extent of specific audit procedures. There are additional considerations for initial audit engagements, such as obtaining an understanding of opening balances and predecessor auditor communications. Interim audits are performed before the year-end and allow for earlier issue identification, while final audits conclude with an opinion on the full-year financial statements.
The document provides an overview of key concepts in auditing based on a study notes chapter. It discusses:
1) The components of a complete set of financial statements including the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes to the accounts.
2) The two main types of financial reporting frameworks - compliance frameworks and fair presentation frameworks - and the concept of a true and fair view.
3) The responsibilities of various parties in an audit including management, those charged with governance, auditors, and stakeholders. It also discusses the expectation gap faced by auditors.
4) The scope of an audit and essentials for proper audit conduct including professional judgement, professional
Isa240 the auditor’s responsibilities relating to fraud in an audit of financ...JUAN LUIS PINEDO SANDOVAL
This document is the International Standard on Auditing 240 which outlines the auditor's responsibilities relating to fraud in a financial statement audit. It discusses key characteristics of fraud, and that while management is primarily responsible for fraud prevention and detection, the auditor is responsible for obtaining reasonable assurance that financial statements are free from material misstatement due to fraud or error. The auditor aims to identify and assess fraud risks, obtain sufficient evidence regarding those risks, and appropriately respond to any suspected or identified frauds.
Audit of other assets (and related items)Khalid Aziz
This document discusses auditing procedures for various asset accounts including prepaid expenses, intangible assets, and property, plant and equipment. It provides details on assessing inherent and control risks, substantive analytical procedures, and tests of details for transactions in these accounts. Key aspects covered include confirming prepaid insurance policies, assessing valuation of intangible assets, and procedures over the property management process such as authorizing capital expenditures and taking physical inventories.
Audit evidence is gathered through all stages of an audit from source documents, accounting records, and corroborating information. It serves three main purposes: to confirm the auditor's understanding of the client's system; to assess how the system fits within the organization; and to provide a basis for evaluating internal controls. There are several types of audit evidence, including physical examination, confirmation, documentation, analytical procedures, inquiries, reperformance, and observation.
This document defines audit evidence and describes the types and sources of evidence an auditor obtains to form an opinion on financial statements. It discusses that audit evidence includes all information used to arrive at audit conclusions, such as accounting records and other information gathered. The auditor must obtain sufficient and appropriate evidence to provide reasonable assurance and issue an opinion. Evidence is gathered through tests of controls, substantive procedures like testing transactions and balances, and analytical procedures. The quality and quantity of evidence depends on the level of assurance being provided.
Here are the types of evidence gathered for each audit procedure:
1. Sending a written request to the client’s customers requesting that they report the amount owned to the client.
- Confirmation
2. Examining large sales invoices for period of two days before and after year- end to determine sales recorded in the proper period
- Inspection of documentation
3. Agreeing the total of account receivable subsidiary ledger to account receivable gerneral ledger account
- Recalculation
4. Comparing the current year gross profit percentage with the gross profit percentage for the last year.
- Analytical procedures
5. Watching the client’s warehouse personel count of the
The document discusses audit evidence and the types of evidence available to auditors. It begins by defining evidence as any information used by auditors to determine if financial statements are fairly stated. There are eight broad categories of evidence: physical examination, confirmation, documentation, analytical procedures, inquiries, recalculation, reperformance, and observation. The appropriateness and sufficiency of evidence determines its persuasiveness. Appropriateness relates to relevance and reliability, while sufficiency relates to sample size and individual items tested. By combining evidence from all audit procedures, auditors can determine if they are persuaded that the financial statements are fairly stated.
The document discusses audit evidence and documentation. It covers topics such as the auditor's responsibility to obtain sufficient appropriate audit evidence, management's assertions regarding financial statements, audit risk, analytical procedures, audit documentation, and working papers. Some key points include:
- Auditors must obtain sufficient evidence to provide a reasonable basis for their opinion on the financial statements.
- Management implicitly asserts that financial statement accounts and disclosures exist/occurred, are complete, accurate, and in accordance with GAAP.
- Audit risk is the risk that auditors issue an unqualified opinion when statements are materially misstated. It consists of the risks of material misstatement and detection risk.
- Analytical procedures involve evaluating financial information
Which of the following pieces of audit evidence would most likely be .pdfssuser8308881
Which of the following pieces of audit evidence would most likely be considered the most
reliable? Evidence prepared by a party related to the audit client. Evidence verbally spoken to the
auditor by the client. Evidence collected by the auditor, directly from an independent third party,
such as a confirmation. Evidence prepared by the client in written format. Question 8 ( 3.5
points) Which of the following scenarios would most likely INCREASE the INHERENT RISK
of an audit The audit client's staff is well trained and highly educated. The audit client engages in
mostly routine transactions which are relatively easy to account for. The audit client establishes a
strong set of internal controls over financial reporting. The audit client engages in a significant
number of extremely complex transactions where there is little to no guidance on how to
properly account for those transactions..
The document discusses audit evidence and procedures for gathering evidence. It defines audit evidence and its basic principles of independence, integrity, and objectivity. It describes the sources of audit evidence, including physical examination, confirmations, documentation, analytical procedures, inquiries, reperformance, and observation. It discusses factors like audit risk, reliance on controls, materiality, and reliability that influence evidence. It also covers the appropriateness, relevance, reliability, and direction of testing for audit evidence. Finally, it discusses substantive procedures used to detect material misstatements.
YanelysConfirmation is the process of obtaining and evaluatin.docxherminaprocter
Yanelys
"Confirmation is the process of obtaining and evaluating a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions".(aicpa.org). Confirmation requests, if properly designed by the auditor. Accounts receivable confirmations are likely to be more effective for the existence assertion than for the completeness and valuation assertions. So, when obtaining evidence for assertions not adequately addressed by confirmations, auditors should consider other audit procedures to complement confirmation procedures or to be used instead of confirmation procedures. (aicpa.org). During the performance of confirmation procedures, the auditor should maintain control over the confirmation requests and responses. Also, the auditors should maintain communication between the intended recipient and the auditor to minimize the possibility that the results will be biased because of interception and alteration of the confirmation requests or responses.
References
AICPA. The Confirmation Process - aicpa. Retrieved February 7, 2018 from http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00330.pdf
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This document is a presentation from Group 13 for an audit and inspection course. It discusses the nature of audit evidence and different types of audit evidence including physical examination, confirmation, documentation, observation and inquiries of clients, reperformance and recalculation, and analytical procedures. It provides details on the purpose and timing of analytical procedures, noting they are used in the planning, testing, and completion phases of an audit to understand the client's business, assess going concern, identify possible misstatements, and reduce detailed testing.
The document discusses audit evidence and audit documentation. It covers four key audit evidence decisions needed to create an audit program, characteristics that determine the persuasiveness of evidence, and eight types of audit evidence used in auditing. It also discusses the purposes and organization of audit documentation, and how e-commerce affects audit evidence and documentation.
The document provides an introduction to the principles of auditing. It discusses the objectives of an external audit including obtaining reasonable assurance and expressing an opinion on a company's financial statements. The development of auditing is based on the concept of agency theory, where auditors provide assurance to shareholders that a company's directors have presented financial statements that show a true and fair view. The document also outlines the key elements of an assurance engagement, differences between reasonable and limited assurance, and limitations of an audit.
1 2Week 4 Evidence and Standards ACC49142020Week .docxpoulterbarbara
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Week 4 Evidence and Standards ACC/491
4/20/20Week 4 Evidence and Standards
Comparison of Audit, Scientific and Legal Evidence Standards.
According to "Investopedia" (2020), generally accepted auditing standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies' financial records. GAAS helps to ensure the accuracy, consistency, and verifiability of auditors' actions and reports. The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) created GAAS. (para 1).
Scientific evidence is information gathered from scientific research, which takes a lot of time to conduct. But there are a few things that all this research needs to have in common to make it possible for businesses to accept it as "evidence" ("The Conversation," 2020).
Legal evidence is represented by what is lawful to be proven by law to be valid or invalid, true or untrue.
Consideration of Sample Sizes and Methods (random, haphazard, monetary unit sample, judgmental) and how sampling affects evidence.
Evidence gathered should be representative of the population. The chances that the sample taken is not representative of the population is sampling risk, which should be controlled by using proper sample size and appropriate selection. (Arens, Elder, & Beasley, 2014, p. 476)
The selection of a sample is made using the following methods: random, haphazard, monetary unit, and judgmental.
Random sample selection is made by giving all items in a population the same chance of being selected. Sample selection is used when there is no need to emphasize some items in the population. (Arens, Elder, & Beasley, 2014, p. 478)
Haphazard sample selection is made without any distinguishing characteristics such as size or source. (Arens, Elder, & Beasley, 2014, p. 480)
Monetary unit sampling is a statistical method used for testing details of balances. Samples are selected based on the probability proportional to size sample selection. (Arens, Elder, & Beasley, 2014, pp. 566-567)
Judgmental sampling is based on the auditor's decision on which items from the population to review. It's based on auditor's knowledge of the business and industry, as well as their experience in auditing.
Relevance, Reliability and Sufficiency of Evidence.
Our company's control over financial reporting is a process that's designed to assure the reliability of financial reporting and the preparation of financial statements for external purposes under generally accepted accounting principles. Management is responsible for establishing and maintaining internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). They assess the effectiveness of the internal control over financial reporting based on the criteria that were set forth in the Internal Control-Integrated Framework that was issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Managem.
The document discusses audit evidence, which is information used by an auditor to arrive at conclusions to support the audit opinion. It should be sufficient and appropriate. Sufficiency refers to quantity and appropriateness to quality and relevance. The auditor considers inherent risk, control risk, materiality, and other factors to judge sufficient and appropriate evidence. Evidence comes from tests of controls, substantive procedures, and inquiries. It is used to evaluate financial statement assertions like existence, completeness, and valuation of assets and liabilities.
This document provides an overview of general concepts related to auditing. It discusses key topics such as the definitions of audit and assurance, audit planning and strategy, client acceptance and continuance, fundamental principles of ethics, engagement teams, audit evidence, going concern, materiality, audit sampling, and audit risks. The document is a training presentation that covers these fundamental audit concepts over 33 pages with definitions, explanations, and examples for each topic.
What are the major steps in a financial statement audit.pdfsarikabangimatam
A Financial Statement Preparation in Delaware consists of three main written records: the cash flow statement, the income statement, and the balance sheet. Companies issue financial statements to provide information about their financial performance and well-being. Financial statements are audited before they are released to the public. Verifying conformity with various regulations is done through auditing.
1 2Week 4 Evidence and Standards ACC49142020Week .docxsmithhedwards48727
1
2
Week 4 Evidence and Standards ACC/491
4/20/20Week 4 Evidence and Standards
Comparison of Audit, Scientific and Legal Evidence Standards.
According to "Investopedia" (2020), generally accepted auditing standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies' financial records. GAAS helps to ensure the accuracy, consistency, and verifiability of auditors' actions and reports. The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) created GAAS. (para 1).
Scientific evidence is information gathered from scientific research, which takes a lot of time to conduct. But there are a few things that all this research needs to have in common to make it possible for businesses to accept it as "evidence" ("The Conversation," 2020).
Legal evidence is represented by what is lawful to be proven by law to be valid or invalid, true or untrue.
Consideration of Sample Sizes and Methods (random, haphazard, monetary unit sample, judgmental) and how sampling affects evidence.
Evidence gathered should be representative of the population. The chances that the sample taken is not representative of the population is sampling risk, which should be controlled by using proper sample size and appropriate selection. (Arens, Elder, & Beasley, 2014, p. 476)
The selection of a sample is made using the following methods: random, haphazard, monetary unit, and judgmental.
Random sample selection is made by giving all items in a population the same chance of being selected. Sample selection is used when there is no need to emphasize some items in the population. (Arens, Elder, & Beasley, 2014, p. 478)
Haphazard sample selection is made without any distinguishing characteristics such as size or source. (Arens, Elder, & Beasley, 2014, p. 480)
Monetary unit sampling is a statistical method used for testing details of balances. Samples are selected based on the probability proportional to size sample selection. (Arens, Elder, & Beasley, 2014, pp. 566-567)
Judgmental sampling is based on the auditor's decision on which items from the population to review. It's based on auditor's knowledge of the business and industry, as well as their experience in auditing.
Relevance, Reliability and Sufficiency of Evidence.
Our company's control over financial reporting is a process that's designed to assure the reliability of financial reporting and the preparation of financial statements for external purposes under generally accepted accounting principles. Management is responsible for establishing and maintaining internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). They assess the effectiveness of the internal control over financial reporting based on the criteria that were set forth in the Internal Control-Integrated Framework that was issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Managem.
This document provides an overview of an audit and investigation course. The course aims to equip students with the necessary information to understand auditing and investigation practices. It covers 6 modules, including the audit framework and regulation, audit planning and risk assessment, audit evidence, and forensic investigation topics like fraud and money laundering. The document defines auditing and its objectives, compares it to investigation, and outlines assurance engagements and their key elements. It also discusses professional ethics principles, threats to independence, and auditors' rights, appointment, removal and regulation.
The document discusses various topics related to assurance engagements and auditing:
1. It defines two levels of assurance engagements - reasonable assurance and limited assurance. Reasonable assurance requires more evidence and a positive report while limited assurance requires less evidence and a negative report.
2. It outlines the key elements of an assurance engagement including the three party relationship between the user, responsible party, and practitioner. It also discusses the subject matter, suitable criteria, evidence, and written report.
3. It explains the importance of independence for auditors. Independence requires being free from bias, conflicts of interest, and undue influence in order to maintain objectivity and issue an unbiased opinion. Safeguards like removing individuals from
The document provides an overview of screening and vetting procedures according to British Standard BS 7858:2019. It discusses topics such as:
- The screening process and why companies complete screening
- Top management commitment to screening
- Risk management considerations for roles requiring screening
- Training and qualifications for screening staff
- The screening process, including preliminary checks, limited screening, verification of information, and completion of full screening
- Record keeping and retention requirements
- Considerations for outsourced screening, subcontractors, and acquisitions
The goal of the screening process is to obtain information about candidates to assess suitability and reduce risks, following the recommendations of the British standard.
The Auditor’s Responsibility To Consider Fraud And Error...Tina Jordan
Here is a draft essay about the case of Surfer Dude Duds, Inc:
Surfer Dude Duds, Inc. faced significant challenges due to mismanagement and lack of proper financial controls. As the company grew rapidly, the founders Joe and Bob failed to implement accounting systems and oversight to ensure the financial statements accurately reflected the business. This led to several issues.
First, without an inventory tracking system, it was impossible for Surfer Dude Duds to know the true value of its inventory or cost of goods sold. Relying on estimates and manual records left huge room for error. With thousands of items flowing through multiple retail locations, an accurate count was nearly impossible without technology support. This likely resulted in material
Similar to External Confirmation is a tool used in substantive procedures. (20)
The 21st century has proven to be as economically tumultuous as the two preceding centuries. Between a pandemic, wars, technological developments, progress in civil rights, and breakthroughs in science and medicine, the old order has been swept away, sometimes giving way to freer forms of governing and sometimes not. This period has seen multiple financial crises striking nations, regions, and—in the case of the Great Recession—the entire global economy. All financial crises share certain characteristics, but each tells its own unique story with its own unique lessons for the future. Due to these lessons we were able to experience a smoothened run of economy during the covid-19 syndemic that halted the logistics industry at once and created bottle-necks, hurdles and even complete shut-downs in other sectors while creating a need of overtime for front-line workers who are fighting against the virus on the forefront.
Cpec will galvanize industrailization and employment in pakistanAyesha Majid
China-Pakistan Economic Corridor is a framework of regional
connectivity. Through CPEC China aims to connect its eastern side through
Kashgar to the warm waters of Arabian Sea through Pakistan as it will be
shorter and safer for china to transport goods via this route than through the
china sea to the Arabian Peninsula and surrounding areas. CPEC will not only
benefit China and Pakistan but will have positive impact on Iran, Afghanistan,
India, Central Asian Republics, and the region. Through the enhancement of
geographical linkages having improved road, rail and air transportation system
with frequent and free exchanges of growth and people to people contact,
enhancing understanding through academic, cultural and regional knowledge
and culture, activity of higher volume of flow of trade and businesses, producing
and moving energy to have more optimal businesses and enhancement of cooperation by the win-win model will result in well connected, integrated region
of shared destiny, harmony and development.
Infrastructural issues being addressed in the energy sector of pakistanAyesha Majid
Pakistan is facing key challenges and issues in
the development of social sector mainly in
education, health, energy, security and the
environment due to lack of policy framework,
lack of governance, lack of technological
advancement, unstable strategies, lack of
leadership, poor project management, lack of
innovation and inefficient utilization of
resources. Pakistan’s world ranking as per GCI
is as follows infrastructure (121st)—particularly
for electricity (135th)—remains in a dire state.
Moreover, the country displays some of the
lowest education enrolment rates in the world
and basic education is poor (137th).
An overview of Mercantile Law in PakistanAyesha Majid
This overview of business laws of Pakistan is a very brief description of common forms of businesses adopted by private and public sector investors in Pakistan. An attempt has also been made to outline general requirements and regulatory regimes for each of these forms of businesses in Pakistan.
Microfinance service in pakistan over the decadeAyesha Majid
Pakistan has made considerable developments in Microfinance though a late starter in this
industry. The sector formally started to develop from 1999 although; semiformal sectors since the 1980s
are providing micro-credit in Pakistan. Including Non-Government Organizations (NGOs) and Rural
Support Programs (RSPs). Subsidies have played an important role in the growth and promotion of the
microfinance sector’s growth phase. Now the sector is in its maturity phase. MFBs funding structure
suggests lack of own-resource base through deposits mobilization. For long-term sustainability, Financial
Self Sufficiency is vitally important for microfinance institutions.
Presentation: Philip Morris (Pakistan) Limited: Business Strategy Ayesha Majid
Phillip Morris international is one of the leading cigarette manufacturing companies in the world
with the current share price of $73.78 (Philip Morris International). The organization is known
for the making of cigarettes, other tobacco products and nicotine-containing products in
countries outside of the United States. Its portfolio comprises of both global and local brands.
Philip Morris (Pakistan) Limited (“PMPKL”), is a public limited company and is listed on the
Pakistan Stock Exchange. PMPKL is affiliated with Philip Morris International (“PMI”), which
is listed on the New York Stock Exchange and has operational Headquarters in Lausanne and
Corporate Headquarters in New York. The company is one of the largest manufacturers of
cigarettes in Pakistan and contributes in many charitable projects where they source and
manufacture their tobacco. Some of these projects are provision of economic opportunities,
women empowerment and making education available. It currently has 739 employees in 15
offices with 1 cigarette factory and 1 tobacco leaf plant in Pakistan (PMI - Pakistan). Philip Morris Pakistan follows the business model of Profit Pyramid Model.
Philip Morris (Pakistan) Limited: Business Strategy Ayesha Majid
Phillip Morris international is one of the leading cigarette manufacturing companies in the world
with the current share price of $73.78 (Philip Morris International). The organization is known
for the making of cigarettes, other tobacco products and nicotine-containing products in
countries outside of the United States. Its portfolio comprises of both global and local brands.
Philip Morris (Pakistan) Limited (“PMPKL”), is a public limited company and is listed on the
Pakistan Stock Exchange. PMPKL is affiliated with Philip Morris International (“PMI”), which
is listed on the New York Stock Exchange and has operational Headquarters in Lausanne and
Corporate Headquarters in New York. The company is one of the largest manufacturers of
cigarettes in Pakistan and contributes in many charitable projects where they source and
manufacture their tobacco. Some of these projects are provision of economic opportunities,
women empowerment and making education available. It currently has 739 employees in 15
offices with 1 cigarette factory and 1 tobacco leaf plant in Pakistan (PMI - Pakistan). Philip Morris Pakistan follows the business model of Profit Pyramid Model.
Philip Morris Pakistan (PMPKL) is a subsidiary of Philip Morris International that manufactures and sells tobacco products in Pakistan. It has two factories and distributes products through a network of warehouses, distributors, and over 256,000 retailers. PMPKL uses a push strategy to sell all produced cigarettes and focuses on existing smokers rather than acquiring new customers. It aims to meet retailer demand through a sales force structure that moves products from the factory to distributors to retailers on a daily basis. PMPKL also works to optimize its supply chain costs and distribution incentives to motivate partners while ensuring product availability.
Apple INC.: Managing a Global Supply ChainAyesha Majid
As part of her analysis of Apple’s stock, she wanted to look at the company’s supply chain to see if she could gain some insight into the pros and cons of Apple as a key holding in BXE’s fund. When. Apple Computer was founded on April 1, 1976, by Steve Jobs, Steve Wozniak and Mike Markkula to manufacture and distribute desktop computers.
While claiming to learn from the Chinese way of handling the crisis, there is no on-ground action in Pakistan that supports the claim. The Prime Minister denies national lock down despite the fact that without proper lock-down the virus spread trajectory can be rapid resulting in collapse of national health facilities which can bring the national economy to a halt.
Pakistan is an important maritime state in the Indian Ocean blessed with approximately 1,050 km long coastline and the Exclusive Economic Zone covering about 240,000 sq. The vast coastline of Pakistan naturally offers the option of deep sea water ports which means a much bigger volume of ship could be stationed along the coastline.
Factors Affecting Consumer Purchase Intention When Buying Toyota Corolla in P...Ayesha Majid
The economy of Pakistan and the consistent increase in dollar rates has taken a huge toll on the sales of the multinational manufacturer. Focus group analysis show that majority of the people preferred Honda over Toyota due to several reasons including near to none change in the designs of Toyota Corolla’s variants. Another factor was that Toyota was seen more as a car for the rural areas which was best suited for a rugged terrain. Although the general perception is that Toyota has better car suspension and fuel efficiency, people would still prefer Honda and other Japanese cars. Respondents said that advertisements played a crucial role but they do not compel the customer to buy a product like a car, there are other factors that are taken under consideration. Pakwheels and olx were the first two online platforms that they mentioned when asked about their go to online source. Family and friends advice played a major role in deciding which car to buy. According to the research conducted by our group through questionnaire, a regression was done and seen that the general perception that a reduction in prices will increase sales was not true because people usually associate low prices with low quality products. According to the regression, only advertisement and product have a significant result. All the variables are positively correlated with each other and less than one and positive indicating a formative relationship to the dependent variable. Branding has an insignificant positive relationship with purchase intention because consumers are only considering three competitors; Honda, Suzuki and Japanese cars.
Factors Affecting Consumer's Purchase Intention When Buying Toyota Corolla in...Ayesha Majid
Toyota is a name almost everyone is familiar with. It has been the market leader in automobiles specially hybrid and electric automobiles. It has been operational in Pakistan since 1989.
Toyota is a one of a kind Japanese multinational automotive manufacturer. As of September 2018, it was the sixth largest company in the world in terms of revenue. The economic conditions however have not been very favorable for the automotive industry. The economy of Pakistan and the consistent increase in dollar rates has taken a huge toll on the
sales of the multinational manufacturer. Focus group analysis show that majority of the people preferred Honda over Toyota due to several reasons including near to none change in the designs of Toyota Corolla’s variants.
Another factor was that Toyota was seen more as a car for the rural areas which was best suited for a rugged terrain. Although the general perception is that Toyota has better car suspension
and fuel efficiency, people would still prefer Honda and other Japanese cars. Respondents said that advertisements played a crucial role but they do not compel the customer to buy a product like a car, there are other factors that are taken under consideration. Pakwheels and olx were the first two online platforms that they mentioned when asked about their go to online source. Family and friends advice played a major role in deciding which car to buy. According to the research conducted by our group through questionnaire, a regression was done
and seen that the general perception that a reduction in prices will increase sales was not true because people usually associate low prices with low quality products. According to the regression, only advertisement and product have a significant result. All the variables are positively correlated with each other and less than one and positive indicating a formative relationship to the dependent variable. Branding has an insignificant positive relationship with purchase intention because consumers are only considering three competitors; Honda, Suzuki and Japanese cars.
This document discusses K3 Agro Solutions' corn silage product. It describes the manufacturing process which involves harvesting corn from fields, cutting and compressing it into a final packaged product. It provides details on packaging, pricing, sales terms, competitors and customers. The document appears to be a sales presentation for K3 Agro Solutions' corn silage product.
Netflix was founded in 1997 by Reed Hastings and Marc Randolph. It initially started as a DVD rental service called Kibble and was launched in 1998. In 2007, Netflix introduced streaming services and is now available in over 190 countries with over 148 million paid subscribers. Netflix competes in the online streaming market against competitors like HBO, Amazon Prime, Disney+, and Hulu. It has experienced exponential growth and relies on original content and a global customer base as strengths, but also faces challenges like increasing costs and competitive pressures.
The British Rule's lasting sway on lives of PakistanisAyesha Majid
The British rule still has a sway on us and we still unconsciously see them as our masters/ or a better race than us in terms of looks, language, traditions clothing style and hobbies. Though the Britishers only enforced their norms through law and schooling but its impact was long-lasting and deep-rooted amongst the young natives.the current architectural format of Pakistani buildings is inspired from British architecture as opposed to local designs and aesthetics specially regarding room aeration and lightening. Many of the botanical flowers and ferns that we see in Pakistan were introduced by Britishers which were than made part of the gardening aesthetics by the then influential Pakistanis to show-off their civilised family background.
Reko-Diq and Saindaq Reserves Similarities and DifferencesAyesha Majid
The Reko-Diq and Saindak mines are both located in Baluchistan, Pakistan and contain significant copper and gold reserves. Reko-Diq has estimated reserves of 5.9 billion tons of ore grading 0.41% copper and 41.5 million ounces of gold. Saindak had estimated reserves of 412 million tons averaging 0.5 grams of gold and 1.5 grams of silver per ton. While Saindak has been mined by MCC since 2002, development of Reko-Diq was halted in 2011 when the Baluchistan government denied Tethyan Copper Company a mining license, leading to a $5.8 billion international arbitration award against Pakistan in 2019.
The document discusses cyber crimes and related laws in Pakistan. It provides definitions of cyber crimes and examples. It summarizes the Electronic Transactions Ordinance of 2002, which recognized electronic records and transactions. It also discusses the Electronic/Cyber Crime Bill of 2007 and Prevention of Electronic Crimes Act of 2016, which defined additional cyber crimes and penalties. Key sections from these laws are outlined dealing with issues like data damage, electronic fraud, and cyber terrorism.
The Basel III regulations are devised to mitigate damage to the economy caused by banks that take on excess risk. This third instalment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the financial crisis of 2007–08. It is aimed at improving the banking sector's ability to deal with financial stress, improve risk management, and strengthen the banks' transparency. It is part of the continuous effort to enhance the banking regulatory framework and builds on the Basel I and Basel II documents.
Matthew Professional CV experienced Government LiaisonMattGardner52
As an experienced Government Liaison, I have demonstrated expertise in Corporate Governance. My skill set includes senior-level management in Contract Management, Legal Support, and Diplomatic Relations. I have also gained proficiency as a Corporate Liaison, utilizing my strong background in accounting, finance, and legal, with a Bachelor's degree (B.A.) from California State University. My Administrative Skills further strengthen my ability to contribute to the growth and success of any organization.
सुप्रीम कोर्ट ने यह भी माना था कि मजिस्ट्रेट का यह कर्तव्य है कि वह सुनिश्चित करे कि अधिकारी पीएमएलए के तहत निर्धारित प्रक्रिया के साथ-साथ संवैधानिक सुरक्षा उपायों का भी उचित रूप से पालन करें।
Guide on the use of Artificial Intelligence-based tools by lawyers and law fi...Massimo Talia
This guide aims to provide information on how lawyers will be able to use the opportunities provided by AI tools and how such tools could help the business processes of small firms. Its objective is to provide lawyers with some background to understand what they can and cannot realistically expect from these products. This guide aims to give a reference point for small law practices in the EU
against which they can evaluate those classes of AI applications that are probably the most relevant for them.
Defending Weapons Offence Charges: Role of Mississauga Criminal Defence LawyersHarpreetSaini48
Discover how Mississauga criminal defence lawyers defend clients facing weapon offence charges with expert legal guidance and courtroom representation.
To know more visit: https://www.saini-law.com/
This document briefly explains the June compliance calendar 2024 with income tax returns, PF, ESI, and important due dates, forms to be filled out, periods, and who should file them?.
What are the common challenges faced by women lawyers working in the legal pr...lawyersonia
The legal profession, which has historically been male-dominated, has experienced a significant increase in the number of women entering the field over the past few decades. Despite this progress, women lawyers continue to encounter various challenges as they strive for top positions.
Genocide in International Criminal Law.pptxMasoudZamani13
Excited to share insights from my recent presentation on genocide! 💡 In light of ongoing debates, it's crucial to delve into the nuances of this grave crime.
Lifting the Corporate Veil. Power Point Presentationseri bangash
"Lifting the Corporate Veil" is a legal concept that refers to the judicial act of disregarding the separate legal personality of a corporation or limited liability company (LLC). Normally, a corporation is considered a legal entity separate from its shareholders or members, meaning that the personal assets of shareholders or members are protected from the liabilities of the corporation. However, there are certain situations where courts may decide to "pierce" or "lift" the corporate veil, holding shareholders or members personally liable for the debts or actions of the corporation.
Here are some common scenarios in which courts might lift the corporate veil:
Fraud or Illegality: If shareholders or members use the corporate structure to perpetrate fraud, evade legal obligations, or engage in illegal activities, courts may disregard the corporate entity and hold those individuals personally liable.
Undercapitalization: If a corporation is formed with insufficient capital to conduct its intended business and meet its foreseeable liabilities, and this lack of capitalization results in harm to creditors or other parties, courts may lift the corporate veil to hold shareholders or members liable.
Failure to Observe Corporate Formalities: Corporations and LLCs are required to observe certain formalities, such as holding regular meetings, maintaining separate financial records, and avoiding commingling of personal and corporate assets. If these formalities are not observed and the corporate structure is used as a mere façade, courts may disregard the corporate entity.
Alter Ego: If there is such a unity of interest and ownership between the corporation and its shareholders or members that the separate personalities of the corporation and the individuals no longer exist, courts may treat the corporation as the alter ego of its owners and hold them personally liable.
Group Enterprises: In some cases, where multiple corporations are closely related or form part of a single economic unit, courts may pierce the corporate veil to achieve equity, particularly if one corporation's actions harm creditors or other stakeholders and the corporate structure is being used to shield culpable parties from liability.
Synopsis On Annual General Meeting/Extra Ordinary General Meeting With Ordinary And Special Businesses And Ordinary And Special Resolutions with Companies (Postal Ballot) Regulations, 2018
Sangyun Lee, 'Why Korea's Merger Control Occasionally Fails: A Public Choice ...Sangyun Lee
Presentation slides for a session held on June 4, 2024, at Kyoto University. This presentation is based on the presenter’s recent paper, coauthored with Hwang Lee, Professor, Korea University, with the same title, published in the Journal of Business Administration & Law, Volume 34, No. 2 (April 2024). The paper, written in Korean, is available at <https://shorturl.at/GCWcI>.
External Confirmation is a tool used in substantive procedures.
1. Lahore School of Economics
External Confirmation is a tool used in
substantive procedures.
Topic 6
Ayesha Majid
Asad Tariq
Maheen Akhram
Mishael Khalil
Sajeel Azam
Syed Hassan Shah
10-5-2017
2. External Confirmation is a tool used in substantive procedures. 1
Table of Contents
Importance of external confirmation for audit: (Sajeel Azam) 3
Procedures for sending confirmation: (Mishael Khalil) 5
Possible Reasons for the difference in balance as per bank statement and as per bank confirmation:
(Syed Hassan Shah) 8
Possible solutions for avoiding and correcting misstatement in the balances: (M.Asad Tariq) 13
Results of the External Confirmation Procedures: (Maheen Akram) 14
Case Study: (Ayesha Majid) 16
Conclusion: (Ayesha Majid) 18
3. External Confirmation is a tool used in substantive procedures. 2
Introduction:
External confirmation – Audit evidence obtained as a direct written response to the auditor
from a third party (the confirming party), in paper form, or by electronic or other medium.
Substantive procedures (or substantive tests) are those activities performed by the auditor
to detect material misstatement or fraud at the assertion level.
Substantive procedures (or substantive tests) are those activities performed by the auditor
to detect material misstatement or fraud at the assertion level.
The different assertions of balances are:
existence,
rights and obligations,
validity, and
completeness.
Those for transactions are:
occurrence
completeness,
accuracy,
authorization,
cut-off,
classification.
4. External Confirmation is a tool used in substantive procedures. 3
Importance of external confirmation for audit: (Sajeel Azam)
External confirmation is a process through which audit evidence can be received. It is a direct
written response to the auditor by a third outside party, also known as the confirmation party.
It can be in paper form, electronic form or any other medium.
External confirmation is a commonly used procedure for confirmation of financial reports in
audit. In order to understand external confirmation it is important to understand what audit
evidence is. Audit evidence the information that an auditor needs in order to arrive at the
conclusions on which he gives his final opinion.
ISA 500 explains what constitutes audit evidence in an audit of financial statements and deals
with the auditor’s responsibility to design and perform audit procedures to obtain sufficient
appropriate audit evidence to be able to draw reasonable conclusions on which to base the
auditor’s opinion.
ISA 500 indicates that the reliability of audit evidence is influenced by its source and by its
nature, and is dependent on the individual circumstances under which it is obtained.
External confirmation is given more importance as to gather audit evidence in ISA, as:
Audit evidence is more reliable when it is obtained from independent sources
outside the entity.
Audit evidence obtained directly by the auditor is more reliable than audit evidence
obtained indirectly or by inference.
Audit evidence is more reliable when it exists in documentary form, whether
paper, electronic or other medium.
Accordingly, depending on the circumstances of the audit the auditor may send external
confirmation to gather audit evidence. The audit evidence is received by the auditor from the
5. External Confirmation is a tool used in substantive procedures. 4
confirming party which is more reliable than the evidence generated internally by the entity
that is being audited.
Other ISA’s also recognize the importance of external confirmation as audit evidence. ISA
330 indicates that external confirmation procedures may assist the auditor in obtaining audit
evidence with the high level of reliability that the auditor requires to respond to significant
risks of material misstatement, whether due to fraud or error.
ISA 240 indicates that the auditor may design confirmation requests to obtain additional
corroborative information as a response to address the assessed risks of material
misstatement due to fraud at the assertion level.
Different confirmations that the auditor may send for audit:
External Confirmation – It is the audit evidence that the auditor receives from a third
party/outside entity for confirmation in paper or electronic form, or by any other form.
Positive Confirmation request – Positive confirmation is when a third party/outside entity
responds directly to auditor whether they agree or disagree with the specific information that
has been requested, or give information regarding the query.
Negative Confirmation request – Negative confirmation is when a third party responds to the
auditor only in the situation where they disagree with the information provided in the request.
Non-response – When a third party/outside entity fails to respond or fully respond to a
positive confirmation request or when a confirmation request is returned undelivered.
Exception – It is the discrepancy between what the auditor has asked from the confirmation
party, or the information in the entity’s book and what the confirmation party has sent.
6. External Confirmation is a tool used in substantive procedures. 5
Procedures for sending confirmation: (Mishael Khalil)
External confirmation is sent though the following procedure.
Determining the Information to Be Confirmed or Requested:
External confirmation procedures frequently are performed to confirm or request information
regarding account balances and their elements. They may likewise be utilized to affirm terms
of understandings, contracts, or exchanges between an element and different gatherings, or
to affirm the nonappearance of specific conditions, for example, a "side agreement."
Selecting the Appropriate Confirming Party:
Responses to confirmation requests give more relevant and reliable audit evidence when
confirmation requests are sent to a confirming party the auditor believes is knowledgeable
about the information to be confirmed. For example, a financial institution official who is
knowledgeable about the transactions or arrangements for which confirmation is
requested may be the most appropriate person at the financial institution from whom to
request confirmation.
Designing Confirmation Requests:
The design of a confirmation request may specifically influence the confirmation
response rate, its reliability and the nature of the audit evidence.
Thus some factors need to be considered before designing the request, e.g.:
The assertions being addressed.
Specific identified risks of material misstatement, including fraud risks.
The layout and presentation of the confirmation request.
Prior experience on the audit or similar engagements.
7. External Confirmation is a tool used in substantive procedures. 6
The method of communication (for example, in paper form, or by electronic or
other medium).
Management’s authorization or encouragement to the confirming parties to respond to the
auditor. Confirming parties may only be willing to respond to a confirmation request
containing management’s authorization.
The ability of the intended confirming party to confirm or provide the requested
information.
A positive external confirmation asks for requests that the affirming party answer to the
auditor in all cases, either by demonstrating the affirming gathering's concurrence with the
given data, or by requesting that the affirming party give data. A reaction to a positive
confirmation ask for request is anticipated that would give reliable audit evidence. There is a
risk, nonetheless, that a confirming party may answer to the confirmation request without
confirming that the data is correct. The auditor can reduce the risk by designing the
confirmation request that don't express the sum (or other data) on the affirmation ask for,
and request that the affirming party fill in the sum or other data. Then again, using this kind
of "blank” confirmation request may bring about lower reaction rates in light of the fact that
extra exertion is required of the affirming parties.
Follow-Up on Confirmation Request:
The auditor may send an additional confirmation request when an answer to a past
demand has not answered within a reasonable time. For instance, the auditor may, having
re-confirmed the precision of the first address, send an extra or follow-up demand.
8. External Confirmation is a tool used in substantive procedures. 7
What items are usually confirmed in external bank confirmation:
Bank balances and other
information
Existence of amount Highly relevant because the bank responds directly to the
auditor confirming the bank balance
Completeness of Less relevant because confirming a bank balance does not
recording of transactions address recording of specific transactions, although they may
reveal discrepancies in recording of transactions
Transactions have been Less relevant because a bank confirmation does not provide
recorded in the correct cut-off information that the auditor can use to verify the
period recording of transactions in the correct period
Presentation and Highly relevant because a bank confirmation may identify the
disclosure existence of contingent liabilities, collateral lodged as security
and other items that require disclosure in the financial
statements
9. External Confirmation is a tool used in substantive procedures. 8
Possible Reasons for the difference in balance as per bank statement and as per bank
confirmation (Syed Hassan Shah)
There may be several reasons for the difference in balances as per bank statements and as per
bank confirmation. Described below are some of the reasons for the difference:
(i) Cheques issued but not yet presented for payment:
When a cheque is issued, the accountant of the enterprise record this transaction on the
credit side of the cash book under the bank column immediately. The effect of this recording
is that the bank balance in cash book will be reduced by the amount issued.
The bank on the other hand debits the account of the business enterprise only when the
concerned party presents the cheque for payment. It should be noted that there is an
expected gap between the date of issuance of cheque and the date of appearance of cheque
to the issuing bank. Sometimes the party intentionally presents the cheque after a
considerable delay for instance, after two months.
In this prevailing period, the bank statement issued by the bank shows a higher bank balance
than the balance shown by the bank column of cash book. On the other hand, the balance
shown by the bank column of cash book would be lower than the balance shown by the bank
statement to the extent of cheques not presented for payment.
(ii) Cheques paid into the Bank but not yet collected by the Bank:
The business enterprise immediately debits the bank column of the cash book after
depositing the cheques with bank. But the account of the business enterprise will be credited
by the bank only after these cheques have been collected through the clearing process.
Usually, two to three working days are taken in clearing of local cheques and in the case of
outstation cheques it takes four to five working days for clearing the cheques.
10. External Confirmation is a tool used in substantive procedures. 9
In this intervening period, the bank statement issued by the bank definitely shows lower bank
balance than the balance shown by the bank column of cash book. In other words, the balance
shown by the bank column of the cash book would be higher than the balance shown by the
bank statement to the extent of amount of cheques not cleared or collected.
(iii) Interest and Dividends Received by the Bank:
Sometimes, the interest on debentures or dividends on shares is given by the companies
directly to the accounts of debenture holders or shareholders as the case may be. This system
is called Electronic Clearing System (ECS). In this case, the advice regarding the interest or
dividend credited by bank has not been communicated to the business enterprise. So, there
will be a difference because the bank has credited the amount to the customer’s account but
it has not yet been recorded in bank column of cash book.
In this intervening period, the bank statement issued by the bank definitely shows higher
bank balance than the balance shown by the bank column of cash book. In other words, the
balance shown by the bank column of cash book would be lower than the balance shown
by the bank statement to the extent of interest and dividend directly received by the bank.
(iv) Direct Deposits Made by the Parties:
Direct payment in the bank account of the business enterprise can be made by the debtors or
the customers. As the business enterprise may not be aware of this receipt, so in this case,
only bank balance will increase by the amount of direct deposits made by the parties. There
will be a difference because the bank has credited the amount to the customer’s account but
it has not yet been recorded in bank column of cash book.
In this intervening period, the bank statement issued by the bank definitely shows higher bank
balance than the balance shown by the bank column of cash book. In other words, the
11. External Confirmation is a tool used in substantive procedures. 10
balance shown by the bank column of cash book would be lower than the balance shown
by the bank statement to the extent of direct payments received by the bank.
(v) Direct Payments Made by the Bank:
Under the ECS (Electronic Clearing System), bank on behalf of its customers pays a certain
payment to the third party. Usually, payment for an insurance premium, periodical
membership fees, or any Equated Monthly Installment (EMI) for repaying the loan amount
etc. can be made as and when the payment becomes due.
In this case, the bank will debit the party’s account immediately but the business enterprise
will record these transactions in the cash book only when the business enterprise receives
updated bank statement.
In this intervening period, the bank statement issued by the bank definitely shows lower bank
balance than the balance shown by the bank column of cash book. In other words, the
balance shown by the bank column of cash book would be higher than the balance shown by
the bank statement to the extent of direct payments made by the bank.
(vi) Credit Given by the Bank on Account of Interest:
The bank allows interest on the deposits made by the business enterprise periodically and
credit the bank account immediately on the date on which interest is due. However, the
business enterprise will record this transaction only on receipt of such advice from the bank.
In this intervening period, the bank statement issued by the bank definitely shows higher
bank balance than the balance shown by the bank column of cash book. In other words, the
balance shown by the bank column of cash book would be lower than the balance shown
by the bank statement to the extent of amount of interest credited by the bank.
12. External Confirmation is a tool used in substantive procedures. 11
(vii) Debit Given by the Bank on Account of Interest on Overdraft and Bank Charges
etc.:
For the services rendered to the customers, the bank charges some amount in the shape of
interest on overdraft and commission etc. These bank charges are debited to the customer’s
account from time to time. However, the business enterprise records these charges in the
bank column of the cash book only after receiving advice from the bank in this regard or after
obtaining updated bank statement.
The balance of cash book and balance of pass book will differ. In this intervening period;
the bank statement issued by the bank definitely shows lower bank balance than the balance
shown by the bank column of cash book. In other words, the balance shown by the bank
column of cash book would be higher than the balance shown by the bank statement to the
extent of amount of debit given by the bank.
(viii) Bills Collected by the Bank:
The bank on behalf of its customers can collect the amount due on bills as and when
the payment becomes due. The business enterprise record this transaction only on
receiving intimation from the bank in this regard.
The balances shown by the bank column of cash book and bank statement in the intervening
period will differ. The bank statement issued by the bank definitely shows higher bank
balance than the balance shown by the bank column of cash book. In other words, the
balance shown by the bank column of cash book would be lower than the balance shown by
the bank statement to the extent of amount of bills collected by the bank.
13. External Confirmation is a tool used in substantive procedures. 12
(ix) Dishonor of a Bill Discounted with the Bank:
Bank facilitates to discount the bill before its maturity. If the bill discounted by the bank is
dishonored on its due date, the bank will debit the customer’s account with the amount of
total bill. The business enterprise will record this transaction only on receiving intimation
from the bank in this regard.
In this intervening period, the bank statement issued by the bank definitely shows lower bank
balance than the balance shown by the bank column of cash book. In other words, the balance
shown by the bank column of cash book would be higher than the balance shown by the bank
statement to the extent of amount of bill dishonored.
(x) Dishonor of Cheque Deposited with the Bank:
If the cheque deposited with the bank is dishonored on presentation, the bank will debit the
customer’s account with the total amount of cheque. The business enterprise will record
this transaction only on receiving intimation from the bank in this regard.
In this intervening period, the bank statement issued by the bank definitely shows lower bank
balance than the balance shown by the bank column of cash book. In other words, the
balance shown by the bank column of cash book would be higher than the balance shown by
the bank statement to the extent of amount of dishonored cheque.
(xi) Errors and Omissions:
The difference between the bank balance shown by the cash book and the balance shown by
the bank pass book can also be caused due to error or omission either on the part of the
customer or the bank. Till the error/omission is detected, the difference on this ground
cannot be eliminated.
14. External Confirmation is a tool used in substantive procedures. 13
Customer may commit an error such as recording of a cheque twice in the cash book.
Sometimes, banks may also commit errors, e.g., wrongly debiting the customer’s account or
charging bank charges twice etc. In these cases, the balances appearing in both the books are
not the same.
Banks reports for audit purposes (bank confirmation) ¬ Consist of confirmation of bank
balances and other matters from the client’s bankers at the period end. ¬ Standard letters are
used to confirm information with the bank where the client has dealings.
Reasons for auditors to seek bank confirmation is that the bank confirmation provides
evidence in respect of existence, ownership, and accuracy. It is a third party, written in
relation to the balance sheet of assets and liabilities.
Possible solutions for avoiding and correcting misstatement in the balances (M.Asad
Tariq)
Verification and monitoring of bank reconciliations are key detective controls for cash and
banking operations. There are usually differences between the bank statement and accounting
records due to the timing differences when the data is recorded in the accounting books and
at the bank. The purpose of bank reconciliation is to check whether the differences are due to
timing rather than error. It is important that sufficient verification and monitoring takes place
so that immediate action can be taken on accounting errors or unusual transactions.
Policy should require the bank reconciliation to be submitted within ten working days of
the closing of the financial period.
Use appropriate means to headquarters to send the statement. Methods of submission, such
as sending scanned copies followed by originals.
15. External Confirmation is a tool used in substantive procedures. 14
Financial Operations, International (SMFF) should provide effective oversight of the
bank reconciliation process to ensure, to the extent possible, that errors, omissions, and
malfeasance are detected, by:
Developing, documenting, and implementing a monitoring plan for reliable assessments.
Ensuring that all bank reconciliations are completed and submitted as required.
Correct the current situation balances. Enforcing policies and
procedures Improve monitoring
Remind employees at missions with delegated authority under Sections 33 and 34 of the
importance of complying with the Financial Administration Act (FAA).
Awareness sessions should be
considered. Redesign the Record
Eliminate ambiguity.
To reduce risk by reducing the use of cash e.g Make payments using electronic funds
transfers when possible.
Results of the External Confirmation Procedures
Reliability of Responses to Confirmation Requests
(Maheen Akram)
The secure delivery of responses to confirmation requests is a very sensitive topic and
requires intensive care to be ensured. Since the introduction of the internet and electronic
mail services, e-mails have been widely used as a form to communicate, even in matters of
business, such as the response to confirmation requests. But this method of communication
may prove to be dangerous in this regard. The actual identity of the sender of an e-mail can
be easily disguised and receivers may fall prey to responses not sent by the actual authority.
16. External Confirmation is a tool used in substantive procedures. 15
Therefore, the proof of origin is a big issue in using this method of communication for
communicating responses. Also, there is a risk of information falling into the wrong hands.
Third parties may gain access to such information that may prove to be sensitive in one case
or another, through malware or even hacking. Even if the origin of the e-mail is determined
to be accurate, the response provided may still be inaccurate. The data can still be subject to
changes over the online distribution channel it goes through. However, using a safe and
secure network for the transfer of information may reduce the chances of such problems
taking place and also reduce the chances of any inaccuracies, making the response obtained
as reliable as it could be. The auditor should make sure that such a system is established
which ensures the security of such confidential information. A number of techniques can be
used to ensure this transfer of information may take place effectively. The use of data-
encryption and firewalls prevents hackers from obtaining access to the information. The use
of anti-spyware software on both the sending and receiving computer systems involved also
reduces the risk. Electronic digital signatures and the security provided to verify and
authenticate websites such as SSL (Secure Sack Layer) also help in taking care of this
problem. According to ISA 500, the auditor is supposed to determine either the modification
or addition of procedures to resolve doubts regarding the authenticity of information that is
used for audit evidence. The auditor can contact the confirming party in order to ensure the
authenticity of both the source and the information. An example of this is when a response is
sent by the confirming party over electronic mail, a telephone call may suffice to confirm if it
originated from the confirming party or not. Also, if the response is obtained indirectly,
through the entity who was sent the response accidentally, a request of the response to be
delivered in writing can be sent to make sure of the authenticity.
17. External Confirmation is a tool used in substantive procedures. 16
Case Study (Ayesha Majid)
The purpose of the audit as per the case was to assess the adequacy of key controls of the
management control framework for accounts receivable and revenue management. The
objectives of this audit were to determine:
whether the management control framework is effectively designed and operating as
intended; and
the degree to which the Department is in compliance with the applicable
accounting regulations, policies and standards.
Accounts receivable and revenue management are core financial management and reporting
processes that constitute a significant level of materiality to the Department in this case of
Rs. 30 million. The scope of the audit consists of an examination of the processes, controls
and supporting documentation from fiscal year in this case. The audit methodology will
consist of:
reviewing relevant documentation;
conducting interviews with management and staff;
questioning Sector Financial Providers (SFPs)
conducting a gap analysis between regional departments of the company
or competitors
identifying and assessing key risks associated with accounts receivable and revenue
management; and
sampling accounts receivable transactions
Audit criteria are reasonable standards of performance and control used by the Audit Branch to
assess the adequacy of the Department’s accounts receivable and revenue management
practices. The audit criteria is to be derived from Departmental and Treasury Board policies
18. External Confirmation is a tool used in substantive procedures. 17
and procedures of the company. Actual performance is to be assessed against the audit criteria,
which will result in either a positive finding or the identification of an area for improvement.
Management prior to the commencement of the audit reviews the audit criteria.
In this case to results are to be obtained either reconciliation of accounts balances or failure
of management to provide a sufficient explanation.
If the reconciliation is satisfactory, the auditor will give a true and fair remark to the financial
statements. On the other hand if the management fails to satisfy the auditor during the audit
analysis there are high chances of fraud or misrepresentation. Improper recognition of revenue -
either prematurely or of fictitious revenue – is the most common form of fraudulent earnings
management which in this case would have led to overvaluation of accounts receivable from
debtor X Limited. Premature recognition should be distinguished from recognition of fictitious
revenue derived from false sales or to false customers in this case.
To analyse the genuity of sales to X limited at a certain time particular attention should be
focused upon terms governing
(i) payment and shipment,
(ii) delivery and acceptance,
(iii) risk of loss,
(iv) terms requiring future performance on the part of the seller before payment,
(v) payment of up-front fees, and
(vi) other contingencies.
The auditor must consider timing – particularly as it relates to the company’s quarter
and year-end periods.
19. External Confirmation is a tool used in substantive procedures. 18
Conclusion (Ayesha Majid)
An external confirmation is audit evidence obtained as a direct written response to the auditor
from a third party (the confirming party), in paper form, or through electronic or other
medium. Requesting external confirmations is a commonly used audit procedure in an audit
of financial statements. It can be useful in obtaining audit evidence about relevant financial
statement assertions regarding such items as receivables and payables, bank and other third
party deposits and liabilities, investments, inventory, guarantees, contingent liabilities,
significant transactions outside the normal course of business.
External is governed by ISA 500 as discussed previously and confirmation is dependent upon
audit evidence received by third party. External confirmation procedure are given is ISA 330
and 240. Each external confirmation has its own method of request defined in audit procedure
and most common is bank confirmation, which was discussed in detail in the report.
External confirmation procedures can be an effective tool in obtaining relevant and reliable
audit evidence when used properly. Circumstances may exist where it may be difficult to
obtain responses to external confirmation requests or all the information requested. While
such difficulty should not dissuade auditors from sending confirmation requests in
appropriate circumstances, the auditor may discover that confirming parties will not respond
or provide all the information requested by the auditor and, therefore, may need to plan
alternative or additional procedures.