2. Evidence
SOURCES
Audit Previous Quality In and out
Procedures Audits Procedures of company
3. TYPES
Inspect Observe Confirm
Analytical
Recalculate Reperform
Procedures
INQUIRY ALONE IS NOT ENOUGH
4. ASSERTIONS - ISA 500
NOT INDIVIDUALLY ASSESSED - OFTEN SIMULTANEOUSLY
5. ASSERTIONS - ISA 500
OCCUR
COMPLETE Transactions
ACCURATE
CLASSIFICATION in the year
NOT INDIVIDUALLY ASSESSED - OFTEN SIMULTANEOUSLY
6. ASSERTIONS - ISA 500
OCCUR
COMPLETE Transactions
ACCURATE
CLASSIFICATION in the year
EXIST
RIGHTS & OBLIGATIONS Y/E
COMPLETE
VALUATION & ALLOCATION Balances
NOT INDIVIDUALLY ASSESSED - OFTEN SIMULTANEOUSLY
7. ASSERTIONS - ISA 500
OCCUR
COMPLETE Transactions
ACCURATE
CLASSIFICATION in the year
EXIST
RIGHTS & OBLIGATIONS Y/E
COMPLETE
VALUATION & ALLOCATION Balances OCCUR
COMPLETE
Disclosure UNDERSTANDABLE
ACCURATE
NOT INDIVIDUALLY ASSESSED - OFTEN SIMULTANEOUSLY
8. Management
Representation Letter
Reasonable & Competent
Consistent Individual?
WHEN SUFFICIENT EVIDENCE CAN’T REASONABLY EXIST
10. Using the work of an
EXPERT
UNDERSTAND THEIR WORK
EVALUATE APPROPRIATENESS
11. Using the work of an
EXPERT
Understand their field Capable?
Agree engagement terms Objective?
Reasonable Conclusions Cost/benefit?
Reasonable Assumptions
Relevance of source data
UNDERSTAND THEIR WORK
EVALUATE APPROPRIATENESS
12. Using the work of an
EXPERT
UNDERSTAND THEIR WORK
EVALUATE APPROPRIATENESS
13. Using the work of an
EXPERT
not referred to
in audit report
Same as any other evidence
UNDERSTAND THEIR WORK
EVALUATE APPROPRIATENESS
17. RELATED PARTIES
CONTROL SIGNIF. INFLUENCE
OWNER
DIRECTOR
RELATED
OWNERS Daughter
Common Control
18. AUDIT PROCEDURES
ISA 550
PRIOR YEAR WORKING PAPERS
ENTITY PROCEDURES FOR IDENTIFYING RP’S
SHAREHOLDER RECORDS & MEETINGS
INCOME TAX RETURNS
INDICATORS
ABNORMAL TERMS
NO BUSINESS LOGIC
SUBSTANCE DIFFERENT TO FORM
NON-ROUTINE
HIGH VOLUMES WITH SINGLE PERSON
THE POSSIBILITY OF UNDISCLOSED RELATED PARTIES
19. Requirements of ISA 550
Risk of failure to disclose RPs and their transactions
20. Requirements of ISA 550
Risk of failure to disclose RPs and their transactions
1
Consider Risk
of material misstatement
21. Requirements of ISA 550
Risk of failure to disclose RPs and their transactions
1 2
Consider Risk Enquire of
of material misstatement Management
22. Requirements of ISA 550
Risk of failure to disclose RPs and their transactions
1 2 3
Consider Risk Enquire of Understand
of material misstatement Management Controls
23. Related Party
Auditor Response
BIG RP DEALINGS
Find new RP’s? OUTSIDE OF NORMAL BUSINESS
GET MANAGEMENT TO IDENTIFY ALL TRANSACTIONS
SEE WHY CONTROLS FAILED
APPROPRIATE SUBSTANTIVE TESTS
REAPPRAISE RISK FOR FRAUD PURPOSES?
INTENTIONAL? EFFECT ON AUDIT CONTRACTS CONSISTENT WITH MANAGEMENT EXPLANATIONS?
TRANSACTIONS AUTHORISED?
24. Related Party
Auditor Response
BIG RP DEALINGS
Find new RP’s? OUTSIDE OF NORMAL BUSINESS
GET MANAGEMENT TO IDENTIFY ALL TRANSACTIONS
SEE WHY CONTROLS FAILED
APPROPRIATE SUBSTANTIVE TESTS
REAPPRAISE RISK FOR FRAUD PURPOSES?
INTENTIONAL? EFFECT ON AUDIT CONTRACTS CONSISTENT WITH MANAGEMENT EXPLANATIONS?
TRANSACTIONS AUTHORISED?
25. Related Party
Auditor Response
BIG RP DEALINGS
Find new RP’s? OUTSIDE OF NORMAL BUSINESS
GET MANAGEMENT TO IDENTIFY ALL TRANSACTIONS
SEE WHY CONTROLS FAILED
APPROPRIATE SUBSTANTIVE TESTS
REAPPRAISE RISK FOR FRAUD PURPOSES?
INTENTIONAL? EFFECT ON AUDIT CONTRACTS CONSISTENT WITH MANAGEMENT EXPLANATIONS?
TRANSACTIONS AUTHORISED?
28. Relying on Internal Auditors
Evaluate IA
1 Objectivity
Operational
Appropriate work? Independence
2
29. Relying on Internal Auditors
Evaluate IA
1 Objectivity
Operational
Appropriate work? Independence
2
Technical
Competence
& Due care
3
30. Relying on Internal Auditors
Evaluate IA
1 Objectivity
Operational
Appropriate work? Independence
2
Technical
Effective Competence
Communication & Due care
4 3
31. Relying on Internal Auditors
Evaluate IA
1 Objectivity
Evaluate Operational
each specific Independence
Appropriate work?
work
5 2
Technical
Effective Competence
Communication & Due care
4 3
