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.
ISA 701 (New) Overview
Communicating Key Audit Matters in the Independent Auditor’s Report
المعيار الدولي للتدقيق 701 (جديد)
إيصال أمور التدقيق الرئيسية في تقرير المدقق المستقل
ISA 701 (New) Detailed
Communicating Key Audit Matters in the Independent Auditor’s Report
المعيار الدولي للتدقيق 701 (جديد)
إيصال أمور التدقيق الرئيسية في تقرير المدقق المستقل
ISA 701 (New) Overview
Communicating Key Audit Matters in the Independent Auditor’s Report
المعيار الدولي للتدقيق 701 (جديد)
إيصال أمور التدقيق الرئيسية في تقرير المدقق المستقل
ISA 701 (New) Detailed
Communicating Key Audit Matters in the Independent Auditor’s Report
المعيار الدولي للتدقيق 701 (جديد)
إيصال أمور التدقيق الرئيسية في تقرير المدقق المستقل
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This presentation speaks about SAs 700 (Revised), 701, 705 (Revised) and 706 (Revised) in the context of an Independent Auditor's Report for companies incorporated in India
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Happy Reading
Client Evaluation and Planning the Audit Lecture slide chapter 8
Describe the steps involved in client acceptance and continuance.
State the purpose and content of an engagement letter.
Explain the steps in planning an audit.
Identify the risks of misstatement through understanding the entity and its environment.
Explain the role of analytical procedures in audit planning.
Describe the requirements to consider the risk of fraud in the audit planning process.
Explain the purpose and function of audit working papers.
Audit company - Audit for companies - PKC Management ConsultingPKCIndia2
An audit company is usually hired to perform the audit process. The auditor will work closely with the company's finance team to review financial statements, internal controls, and other relevant documents. we will provide an overview of how audits work, including the different stages and levels involved in the process. Whether you are a business owner or a professional looking to learn more about auditing practices, this article will serve as a useful guide. In conclusion, PKC Management Consulting is a reputable audit company that offers comprehensive and efficient auditing services for companies of all sizes. With their team of experienced auditors and consultants, they provide valuable insights and recommendations to improve business operations and financial management. Their commitment to integrity, professionalism, and customer satisfaction sets them apart in the industry. If you're looking for an audit partner that can help you achieve your business goals, PKC Management Consulting is the right choice. Contact them today to learn more about their services and how they can add value to your organization.
Audit Reports and Relevant Standards on Auditing (2019)Rohan Tauro
This presentation speaks about SAs 700 (Revised), 701, 705 (Revised) and 706 (Revised) in the context of an Independent Auditor's Report for companies incorporated in India
SA 706," Emphasis of Matter Paragraph and Other Matter Paragraph in the Indep...Dipendra Prasad Poudel
The very precise presentation regarding SA 706. It was prepared for technical session of Article Assistants in N.Kochhar and Co ( Chartered Accountants). Hope it will help you.
Happy Reading
Client Evaluation and Planning the Audit Lecture slide chapter 8
Describe the steps involved in client acceptance and continuance.
State the purpose and content of an engagement letter.
Explain the steps in planning an audit.
Identify the risks of misstatement through understanding the entity and its environment.
Explain the role of analytical procedures in audit planning.
Describe the requirements to consider the risk of fraud in the audit planning process.
Explain the purpose and function of audit working papers.
Audit company - Audit for companies - PKC Management ConsultingPKCIndia2
An audit company is usually hired to perform the audit process. The auditor will work closely with the company's finance team to review financial statements, internal controls, and other relevant documents. we will provide an overview of how audits work, including the different stages and levels involved in the process. Whether you are a business owner or a professional looking to learn more about auditing practices, this article will serve as a useful guide. In conclusion, PKC Management Consulting is a reputable audit company that offers comprehensive and efficient auditing services for companies of all sizes. With their team of experienced auditors and consultants, they provide valuable insights and recommendations to improve business operations and financial management. Their commitment to integrity, professionalism, and customer satisfaction sets them apart in the industry. If you're looking for an audit partner that can help you achieve your business goals, PKC Management Consulting is the right choice. Contact them today to learn more about their services and how they can add value to your organization.
Session 1 Module 2INTRODUCTION TO AUDITING .docxklinda1
Session 1 Module 2
INTRODUCTION TO AUDITING
1
LEARNING OBJECTIVES
After this module you should be able to:
Define auditing
Differentiate between different levels of assurance
Appreciate different audit opinions (covered in depth in session11)
Differentiate between the different role of the preparer of financial statements and the auditor.
Explain the reasons for the demand for audit and assurance services
Appreciate the Corporations Act requirements for company audits
Explain the audit expectation gap.
These are the objectives that students are expected to understand and be able to explain and apply.
Students will only be assessed within the learning objectives provided for each module of the course.
2
AUDITING AND ASSURANCE DEFINED
An audit is an assurance engagement defined as ‘an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.’
This is a definition of an audit highlighting the main parties involved and their roles
3
1-4
Diagram of assurance engagement
4
*Comment on : main parties and their roles
Jaq (J) - add figure 1-1
1-5
Five elements ofassurance
engagement
Three-party relationships:
assurance practitioner (auditor)
responsible party (preparer)
intended user
Subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report
Audit engagement has 5 elements
These are explained on following slides
5
AUDITING AND ASSURANCE DEFINED
‘intended users’ - the people for whom the auditor prepares their report.
Example: shareholders, creditors, employees
‘responsible party’ - the person or organisation responsible for preparing the financial statements. Example: company management
‘subject matter’ – that which the auditor is expressing a conclusion on. i.e. financial reports
‘criteria’ – the rules or principles by which the subject matter is being evaluated. i.e. Accounting standards and interpretations and Corporations laws
Comment on explanations of terms
6
AUDITING AND ASSURANCE DEFINED cont’d.
Sufficient appropriate evidence
The quantity and quality of evidence the auditor requires in order to express a conclusion on the subject matter
*Written assurance report
Written report from the auditor expressing the auditor’s conclusion on the subject matter
Comment on explanations of terms
7
DIFFERENT LEVELS OF ASSURANCE
AUDITORS MAY PROVIDE VARYING LEVELS OF ASSURANCE WHEN CONDUCTING ASSURANCE ENGAGEMENTS.
Reasonable assurance
Limited assurance
No assurance
There are 3 levels of assurance which are described on next slide
8
DIFFERENT LEVELS OF ASSURANCELEVEL OF ASSURANCE
EXAMPLE
THE ASSURANCE EXPRESSIONREASONABLE
Highest level of assurance but not absolute assurance on the reliability of the subject matterFinancial Statement AuditThe auditor has conducted sufficient tests and.
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1. GENERAL CONCEPTS OF AUDIT
PRESENTER:
MUHAMMD OMER IQBAL – CAF, AFA, MIPA
SYED SALAHUDDIN BOKHARI - CAF, AFA, MIPA
TRAINING SESSION
2. CONTENTS
1. AUDIT AND ASSURANCE
2. AUDIT PLAN AND STRATEGY
3. ACCEPTANCE AND CONTINUANCE OF CLIENT
4. FUNDAMENTAL PRINCIPLES OF ETHICS IN AUDIT
5. ENGAGEMENT TEAM
6. ASSERTIONS
7. AUDIT EVIDENCE
8. GOING CONCERN
8. MATERIALITY
9. AUDIT SAMPLING
10. AUDIT RISKS
RISK ASSESSMENT PROCEDURES ANDPage 2
3. Audit is an independent examination,
AUDIT
AUDIT AND ASSURANCE
Page 3
When such an examination is conducted with a view to express an opinion
thereon.
Of any entity whether profit making or not, irrespective of its size & legal
structure,
Of financial information,
ASSURANCE
A positive declaration intended to give confidence; a promise.
4. Examples of ‘non-audit’ assurance engagements might include reports on
matters such as:
Corporate social responsibility
Environmental policy
Employment policies
Non-financial performance indicators
Review engagements on half-yearly financial statements
Prospective financial information
EXAMPLE OF NON-AUDIT ASSURANCE ENGAGEMENT
AUDIT AND ASSURANCE
Page 4
5. Audit-related services are engagements undertaken by an
accountant or firm of accountants, to perform such assignments as:
Review of data
Agreed upon Procedures
Compliance
Other Audit Related Services
AUDIT AND ASSURANCE
Page 5
6. A REVIEW provides a low (moderate) level of assurance that the
information under review is free from any material misstatement.
The practitioner’s opinion is usually expressed in the form of
negative assurance, which is an opinion that there is nothing
obviously wrong in the information. For example, the opinion might
be: ‘Nothing has come to our attention to suggest that the
information is materially misstated’.
Other Audit Related Services
AUDIT AND ASSURANCE
Page 6
7. AGREED-UPON PROCEDURES are adopted in an engagement where
the party (client) hiring the practitioner specifies the procedures
that should be followed by the accountant in performing the
engagement.
Other Audit Related Services
AUDIT AND ASSURANCE
Page 7
8. With a COMPILATION, the accountant is engaged to prepare
information for the client, rather than audit or check the
information prepared by someone else. For example, a firm of
accountants may be asked by a client to prepare a tax computation.
No assurance is provided in a compilation engagement.
Other Audit Related Services
AUDIT AND ASSURANCE
Page 8
11. The objective of the auditor is to plan the audit so that the audit is
conducted effectively.
Planning the audit includes establishing the overall audit strategy for the
engagement and developing an audit plan, which includes, in particular,
planned risk assessment procedures and planned responses to the risks
of material misstatement.
AUDIT PLAN AND STRATEGY
Page 11
The nature and extent of planning activities that are necessary depend
on the size and complexity of the company, the auditor's previous
experience with the company, and changes in circumstances that occur
during the audit.
12. Client Acceptance
Refers to an audit firm's decision to begin performing audit work for a
company with which it has not been associated in the past
Continuance of Client
Refers to the decision to continue performing audit work for a company
that is an ongoing client
ACCEPTANCE AND CONTINUANCE OF CLIENT
Page 12
13. Steps Before Audit Begin
Auditor proposal and client acceptance or continuance
ACCEPTANCE AND CONTINUANCE OF CLIENT
Page 13
Confirm and communicate auditor independence
Established understanding of terms of engagement
14. Professional Competence and due care
A professional accountant has a continuing duty to maintain professional
knowledge and skill at the level required to ensure that a client or
employer receives competent professional service based on current
developments in practice, legislation and techniques.
FUNDAMENTAL PRINCIPLES OF ETHICS
Page 14
Confidentiality
A professional accountant should respect the confidentiality of
information acquired as a result of professional or business relationships
and should not disclose any such information to third parties without
proper and specific authority unless there is a legal or professional right
or duty to disclose.
Objectivity
A professional accountant should not allow bias, conflict of interest or
undue influence of others to override his or her professional or business
judgements.
15. “All personnel performing an engagement, including any experts
contracted by the firm in connection with that engagement.”
• Engagement Partner
ENGAGEMENT TEAM
Page 15
• Detailed Reviewer
• Engagement Quality Control Reviewer
• Engagement Manager
• Initial Reviewer
• Job In charge for engagement
• Auditor Expert for engagement
17. Page 17
Audit Evidence refers to any information obtained by the auditor so
that he can draw conclusions & express opinion on the financial
statement.
AUDIT
AUDIT EVIDENCE
18. Page 18
TYPES OF AUDIT EVIDENCE:AUDIT
AUDIT EVIDENCE
Audit evidence could be data or information, physical or nonphysical.
For an example of audit evidence:
Bank accounts
Management Accounts
Fixed Assets Register
Payrolls Listing
Banks Statements
Bank confirmation
Invoices
Receipts
And others documents use by businesses to support financial
transactions or events in the financial statements.
20. Page 20
AUDIT EVIDENCE
SUFFICIENT
Sufficiency is the measure of the quantity of audit evidence. The quantity
of audit evidence needed is affected by the following:
Risk of material misstatement (in the audit of financial statements)
or the risk associated with the control (in the audit of internal
control over financial reporting).
As the risk increases, the amount of evidence that the auditor should
obtain also increases. For example, ordinarily more evidence is
needed to respond to significant risks
21. Page 21
AUDIT EVIDENCE
APPROPRIATE
Measure of the quality of audit evidence; that is, its relevance and its
reliability in providing support for the conclusions on which the
auditor’s opinion is based.
The quality of audit evidence is dependent mainly on the form and
source of the evidence. Here is the detail:
External Source
Internal Generated data
Obtain directly by Auditor
Written form
Original Form
22. Page 22
AUDIT EVIDENCE
Audit Procedures for Obtaining Audit Evidence
Audit procedures can be classified into the following categories:
(a) Risk assessment procedures,
(b) Further audit procedures,
Tests of controls, and
Substantive procedures, including tests of details
and substantive analytical procedures.
23. Page 23
INDENTIFYING AND ASSESSING RISK
AT PLANNING STAGE
Audit risk assessment procedures are performed to obtain an
understanding of your company and its environment, including your
company's internal control, to identify and assess the risks of
material misstatement of the financial statements, whether due to
fraud or error.
24. Page 24
INDENTIFYING AND ASSESSING RISK
Limitations of Internal Controls
Control
Activities
1. Segregation of
duties
2. Authorization of
transactions
3. Information
processing
4. Controls over
asset and records
Control
Environment
1.Integrity and Ethical
Values
2. Commitment to
Competence
3.Organisation Structure
4. Authority and
Responsibility
Risk
Assessment
Process
Monitoring
of Controls
Information
System
25. Page 25
AUDIT AND ASSURANCE
Specific Audit Procedures for Obtaining Audit Evidence
1. Inspection
2. Observation
3. Inquiry
4. Confirmation
5. Re-performance
6. Analytical Procedures
Analytical procedures consist of evaluations of financial information
made by a study of plausible relationships among both financial and
nonfinancial data. Analytical procedures also encompass the
investigation of significant differences from expected amounts.
RISK
ASSESSME
NT
PROCEDU
RES
26. Page 26
AUDIT AND ASSURANCE
Selecting Items for Testing to Obtain Audit Evidence
The auditor should determine the means of selecting items for testing
to obtain evidence that, in combination with other relevant evidence,
is sufficient to meet the objective of the audit procedure.
Selecting all items;
Selecting specific items; and
Audit sampling.
27. In representing that the financial statements are presented fairly in conformity
with the applicable financial reporting framework, management implicitly or
explicitly makes assertions regarding the recognition, measurement,
presentation, and disclosure of the various elements of financial statements
and related disclosures.
ASSERTIONS
Page 27
Existence or occurrence – Assets or liabilities of the company exist at a
given date, and recorded transactions have occurred during a given period.
Completeness – All transactions and accounts that should be presented in
the financial statements are so included.
Valuation or allocation – Asset, liability, equity, revenue, and expense
components have been included in the financial statements at appropriate
amounts.
28. Rights and obligations – The company holds or controls rights to the assets,
and liabilities are obligations of the company at a given date.
ASSERTIONS
Continued
Page 28
Presentation and disclosure – The components of the financial statements
are properly classified, described, and disclosed.
29. The going concern assumption means that the income
statement/statement of comprehensive income and statement of
financial position are prepared on the assumption that the entity
will continue in operational existence for the foreseeable future.
GOING CONCERN
Page 29
The auditor needs to be satisfied that the going concern
assumption is appropriate to the financial statements under audit.
This will involve an investigation of the financial and operating
position of the client before the end of the reporting period. If this
review indicates that the going concern assumption may not be
appropriate, further investigation will be needed.
30. In evaluating management’s assessment the auditor
must consider the same time period. If management
looked less than 12 months into the future, the auditor
should ask management to make a re-assessment
looking at least 12 months into the future. The auditor
must also inquire if management is aware of any
relevant events or conditions beyond this time period.
GOING CONCERN
Page 30
Time Period
31. GOING CONCERN
Page 31
FACTORS THAT RAISE QUESTIONS ABOUT THE GOING CONCERN ASSUMPTION
FINANCIAL
• Negative net
Assets
• Inability to
pay credits
• Adverse
Financial
Ratio
• Inability to
renew or
repayment
of loans
OPERATING
• Liquidation of
operations
• Labour
difficulties
• Successful
competitor
emerge
• Loss of key
customers or
suppliers
OTHERS
• Non
compliance
of statutory
requirement
• Pending
legal
litigations
• Change in
the law or
regulation