Training for auditors of financial statements.

1. RISK BASED APPROACH TO
FINANCIAL STATEMENTS AUDITING
WITH CASE STUDY
Presented by
Ransford Armah
ACCA, MSc, BSc, CA
Audit Quality Assurance Manager

2. OBJECTIVE OF THE TRAINING
Participants are expected to gain practical knowledge on
• The meaning and reason for financial statements auditing
• The meaning of professional skepticism
• The legal & regulatory framework of auditing
• Key stages of an audit
• Financial Statements audit process
• Planning the audit
• Permanent Audit File
• Audit risk assessment
• Overall Materiality, Performance Materiality & Triviality
• The planning meeting
• Engagement Quality Control Review / Monitoring
• Auditor independence
• IC Systems documentation

3. OBJECTIVE OF THE TRAINING
Participants are expected to gain practical knowledge on
• Test of controls, compliance testing,
substantive test using PCAS
• Preparation of lead schedules and other
test documentations.

4. Meaning and reasons for financial statements
auditing
A financial statements audit is the examination of an entity's financial
statements and accompanying disclosures by an independent auditor.
The result of this examination is a report by the auditor, attesting to the
fairness of presentation of the financial statements and related
disclosures.
The auditor's report must accompany the financial statements when
they are issued to the intended recipients.
The purpose of a financial statements audit is to add credibility to the
reported financial position and performance of a business

5. Meaning and reasons for financial statements auditing
What is true and fair view?
 True
 information is factual and conforms with reality, not false.
 In addition the information conforms with required standards and
law.
 The accounts have been correctly extracted from the books and
records.
 Fair
 information is free from discrimination and bias and
 in compliance with expected standards and rules.
 The accounts should reflect the commercial substance of the
company’s underlying transactions.

6. Meaning and reasons for financial statements auditing
Objectives of Auditing
 Primary Objective (main objective)
 To produce a report by the auditor of his opinion of the truth and
fairness of financial statements so that any person reading or using
them can have belief in them.
 Secondary
 To detect errors and fraud ( Consider materiality)
 To prevent errors and fraud by the deterrent effect of the audit
 To provide spin- off effects. The auditor will be able to assist his
clients with accounting , systems, taxation , financial , and other
problems.

7. PROFESSIONAL SCEPTICISM
 In carrying out his work the auditor should adopt an attitude of
professional skepticism, recognizing that circumstances may exist
which cause the financial statements to be materially misstated, i.e.
professional skepticism, ISA, makes it clear that, even where auditors
assess that the risk of litigation or adverse publicity are very low,
they must still perform sufficient procedures according to auditing
standards, i.e. there can never be a reason for carrying out an
audit of a lower quality than that required by the ISA’s, not
even fee pressure.
 The purpose of the independent audit is to ensure that the financial
statements are OBJECTIVE, FREE from BIAS and MANIPULATION and
RELEVANT to the need of users.

8. LEGAL FRAMEWORK OF AUDITING
 The work of an auditor is regulated by the following;
 Statues, the Companies Act 1963 (Act 179), The New Companies Act 2019 (Act 992)
 International Standards on Auditing (issued by IAASB of the IFAC)
 Other standards issued by the IAASB
 The professional standards and ethical principles that govern auditors’
responsibilities are
 Integrity
 Objectivity
 Independence
 Professional competence and due care
 Professional behavior
 Confidentiality
LEGAL & REGULATORY FRAMEWORK OF AUDITING

9. ISA 200: Overall Objectives of the Independent Auditor
and the
Conduct of an Audit in Accordance with
International
Standards on Auditing
ISA 210: Agreeing the Terms of Audit Engagements
ISA 220: Quality Control for an Audit of Financial
Statements
ISA 230: Audit Documentation
ISA 240: The Auditor’s Responsibilities Relating to Fraud in
an Audit
of Financial Statements
ISA 250: Consideration of Laws and Regulations in an
Audit of
Financial Statements
ISA 260: Communication with Those Charged with
Governance
ISA 265: Communicating Deficiencies in Internal Control to
Those
Charged with Governance and Management
ISA 300: Planning an Audit of Financial Statements
ISA 315: Identifying and Assessing the Risks of Material
Misstatement through Understanding the Entity
and Its
Environment
ISA 510: Initial Audit Engagements-Opening Balances
ISA 520: Analytical Procedures
ISA 530: Audit Sampling
ISA 540: Auditing Accounting Estimates, Including Fair
Value
Accounting Estimates, and Related Disclosures
ISA 550: Related Parties
ISA 560: Subsequent Events
ISA 570: Going Concern
ISA 580: Written Representations
ISA 600: Special Considerations-Audits of Group Financial
Statements (Including the Work of Component
Auditors)
ISA 610: Using the Work of Internal Auditors
ISA 620: Using the Work of an Auditor’s Expert
ISA 700: Forming an Opinion and Reporting on Financial
Statements
ISA 705: Modifications to the Opinion in the Independent
Auditor’s
Report
ISA 706 Emphasis of Matter Paragraphs and Other Matter
Paragraphs in the Independent Auditor’s Report
ISA 710: Comparative Information-Corresponding Figures
and
Comparative Financial Statements

10. ISA 805: Special Considerations-Audits of Single Financial
Statements
and Specific Elements, Accounts or Items of a
Financial
Statement
ISA 810: Engagements to Report on Summary Financial
Statements
International Standard on Quality Control (ISQC) 1,
Quality Controls for Firms that Perform Audits and
Reviews of
Financial Statements, and Other Assurance and Related
Services Engagements
Pronouncement Application
International Standards on Auditing (ISA) Audit of historical financial information
International Standards on Review
Engagements (ISRE)
Review of historical financial information
International Standards on Assurance
Engagements (ISAE)
Assurance engagements dealing with subject matter other than
historical financial information
International Standards on Related Services
(ISRS)
Compilation engagements, engagements to apply agreed upon
procedures to information and other related services engagements
International Standards on Quality Control
(lSQC)
All services falling under ISAs, ISAEs and ISRSs
International Auditing Practice Notes (IAPN) Provide practical assistance to professional accountants in
implementing ISAs and to promote good practice by providing
OTHER IAASB
PRONOUNCEME
NTS

11. KEY STAGES OF AN AUDIT
Client acceptance and
continuance, ISQC 1.
Establish the terms of the
engagement, ISA 210
Plan the audit,
ISA300 - 450
Consider internal control & other
regulatory frameworks, ISA 250a
Obtain audit evidence,
ISA500 - 620
Report findings
ISA 700 – 720, ISA 250b-265
follow firm’s A&C procedures in firms ISQC 1
documentation.
ToR, fees considerations, follow firms ISQC 1
engagement procedures.
analytical review, risk assessment, materiality,
Risk response, evaluate misstatements etc.
ICQ, test of controls, consider best practice,
company’s regulatory framework etc.
analytical review, ledgers, transaction, acct.
balances, reconciliations, confirmations, fair
valuation, related parties, going concern etc.
Opinion letter, management letter.

12. THE FINANCIAL STATEMENTS AUDIT PROCESS
Planning the
audit
• Understanding
the
organisation
• Risk
assessment
• Materiality
Document
accounting &
internal
controls
systems
• Systems
Documentation
• Gain physical
assess to
systems
Test the
accounting
and internal
controls
systems
• Test of controls
• Compliance
tests
Test the
financial
statements
• Substantive
testing
• Third party
confirmations
• Expert opinion
Review the
financial
statements
• Hot file review
• Second
reviewer
• Proof reading
• Disclosure
checklist
• EQCR
Express an
opinion
• Unqualified
• Qualified
• Disclaimer /
denial
• Adverse

13. PLANNING THE AUDIT
understanding the organization
Planning the
audit
• Understanding
the
organisation
• Risk
assessment
• Materiality
For first time audit, complete the Permanent Audit File (PAF)
and attach all relevant and available documentary evidences.
For subsequent audits, update the PAF with the necessary
changes and sign off. Reviewer should also sign off.
All changes must be discussed at the team briefing meeting
and documented.
Other information such as newspaper publications,
correspondences, meeting notes, extracts from board minutes
must also be kept in the PAF and referenced to the “Current
Audit File”.
Understanding
the
organisation

14. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF) INDEX
PERMANENT AUDIT FILE INDEX
1 General information
1.1 Background information (PAF02)
1.2
Details of bankers and professional
advisors
(PAF03)
1.3 Know Your Client Checklist (PAF04)
1.4 Register of laws and regulations (PAF05)
1.5 Details of related parties (PAF06)
1.6 Significant accounting policies (PAF07)
1.7 Significant accounting estimates (PAF13)
1.8 Copy of current detailed risk assessment
1.9

15. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
2 Engagement details
2.1 Letter of engagement
2.2 Authorisations
2.3 Special instructions from client
2.4 Special instructions from group auditors
2.5 Copy of resolution re: appointment
2.6 New client checklist (PAF08)
2.7 Register of non audit services (PAF10)
2.8 Register of involvement in the audit (PAF11)
2.9

16. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
3 Accounting systems
3.1 Organisation chart
3.2
Review of design and
implementation of controls
3.3 Internal Control Questionnaire
3.4 Systems notes (PAF09)
3.5 Letters of comment (copies)
3.6

17. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
4 Statutory information
4.1 List of shareholders
4.2 Details of mortgages/charges
4.3
Directors’ interests in shares and
debentures
4.4 Copy annual return
4.5 Copy elective resolutions
4.6
Memorandum and Articles of
Association
4.7
Specified asset locked bodies (for CIC clients
only)
(PAF12)
4.8

18. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
5 Taxation (if no separate tax permanent file)
5.1 Direct tax elections
5.2 Indirect tax elections and certificates
5.3
Market values 6 April 1965 and 31 March
1982
5.4 Advance Corporation Tax details
5.5 PAYE dispensations
5.6 Relief claims (e.g. rollover)
5.7

19. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
6 Assets
6.1 Details of freehold/leasehold properties
6.2 Details of location of title deeds
6.3
Details of plant etc. (where no fixed asset register
exists)
6.4 Details of intangible assets
6.5
Investments in subsidiaries and associated
undertakings
6.6 Details of professional valuations
6.7
Details of insurance values and
cover
6.8

20. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
7 Contracts and agreements
7.1 Details of contracts and agreements with index
7.2 Details of share options
7.3 Bank overdraft or loan facilities, security and covenants
7.4
Details of other
loans
7.5

21. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
8 Correspondence and information of continuing interest
8.1 Index
9 Accounts
9.1 Signed copies of full accounts
9.2 Signed copies of abbreviated accounts
9.3 Company accounts disclosure checklist

22. LEGAL FRAMEWORK OF AUDITING
THE PERMANENT AUDIT FILE (PAF)
10 Review
Year File updated by Reviewed by

23. Did the company qualify as a
small company last year or is
this the first year?
Did the company satisfy two
or more of the criteria limits
last year?
Did the company satisfy two or
more of the criteria limits last
year or during the first year?
Does the company satisfy two
or more of the criteria limits
this year?
Was the company ineligible (plc
etc. or a member of an ineligible
group etc.,) at any time during
the year?*
Is the company a parent
undertaking of a medium-sized
or large group?
THE COMPANY IS A SMALL
COMPANY
THE COMPANY IS NOT A SMALL
COMPANY
Yes
No
Yes
Yes
No
No
No
No
Yes
Yes
Yes
SMALL COMPANY / LLP FLOWCHART
For accounting
purposes
Companies
House defines a
small business
as employing
less than 50
people and a
turnover under
£6.5 million and
a medium
business as
less than 250
employees and
a turnover
under £25.9
million.

24. PLANNING THE AUDIT
assessing risk
Planning the
audit
• Understanding
the
organisation
• Risk
assessment
• Materiality
C8.1 – General Risk Assessment
C8.2 – Financial Statements Risk Action
Plan
C8.3 - Assertions Risk Action Plan
C8.4 – Risk Response Summery
C9.1 – Fraud Risk Factor
Risk Assessment

25. The Entity and Its Environment
11. The auditor shall obtain an understanding of the following:
(a) Relevant industry, regulatory, and other external factors
including the applicable financial reporting framework. (Ref:
Para. A17–A22)
Risk Assessment through Understanding of the Entity and Its Environment, Including
the Entity’s Internal Control
(b) The nature of the entity, including:
(i) its operations;
(ii) its ownership and governance structures;
(iii) the types of investments that the entity is making and
plans to make, including investments in special-purpose
entities; and
(iv) the way that the entity is structured and how it is
financed, to enable the auditor to understand the classes
of transactions, account balances, and disclosures to be
expected in the financial statements. (Ref: Para. A23–A27)
(c) The entity’s selection and application of accounting policies,
including the reasons for changes thereto. The auditor shall
evaluate whether the entity’s accounting policies are
appropriate for its business and consistent with the applicable
financial reporting framework and accounting policies used in
the relevant industry. (Ref: Para. A28)
(d) The entity’s objectives and strategies, and
those related business risks that may result in
risks of material misstatement. (Ref: Para. A29–
A35) (e) The measurement and review of the
entity’s financial performance. (Ref: Para. A36–
A41)

26. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d
C8.1 – General Risk Assessment
Any risks that are assessed as 'medium' or 'high' should normally be carried forward to C8.2 or C8.3 as
appropriate. Where this is not the case a full explanation should be given as to how the risk will be managed.

27. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d

28. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d

29. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d

30. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d

31. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d
Note. An explanation must be given where the risk of fraud in relation to revenue
recognition is not assessed as high.

32. PLANNING THE AUDIT
assessing risk, the PCAS approach cont’d

33. PLANNING THE AUDIT
assessing risk, the alternative approach
PCAS UNIVERSITY
FINANCIAL RISK ASSESSMENT TEMPLATES
FY2013 FY2012
FS Item
(Use details from notes) GH¢ GH¢ Difference
%'tage
change
Management
Response
Risk
(H,M,L)
Justification for
risk Audit Approach WP Ref.
FS & assession level risks

34. PLANNING THE AUDIT
assessing risk, the alternative approach
PCAS UNIVERSITY
FINANCIAL RISK ASSESSMENT TEMPLATES
FY2013 FY2012
FS Item
(Use details from notes) GH¢ GH¢ Difference
%'tage
change
Management
Response
Risk
(H,M,L)
Justification for
risk Audit Approach WP Ref.
Tuition Revenue 1
Tuition Fees 3,000,241 2,751,747 248,494 8% Increase in fees L
8% increase in
tuition fees was
effected in 2013
Check number of new
students admitted.
Examination Fees 56,506 44,044 12,462 22%
Admission Fees 28,631 10,761 17,870 62%
Project Work Fees 39,090 8,413 30,677 78%
Computer User Fees 52,107 28,737 23,370 45%
Registration Fees 53,712 45,794 7,918 15%
Graduation Fees 120,712 45,681 75,031 62%
FS & assession level risks

36. PLANNING THE AUDIT
materiality
Planning the
audit
• Understanding
the
organisation
• Risk
assessment
• Materiality
According to ISA 320:
Information is material if its omission or misstatement could
influence the economic decisions of users taken on the basis of
the financial statements.
Materiality depends on the size of the item or error judged in the
particular circumstances of its omission or misstatement.
Thus, materiality provides a threshold or cut-off point rather than
being a primary qualitative characteristic which information must
have if it is to be useful.
Materiality

37. PLANNING THE AUDIT
materiality
Golden rule:
The higher the risk, the lower the materiality level and the higher the
percentage coverage.
Thus:
The threshold (materiality) should be lowered for high risk areas in order to
achieve a greater coverage of that particular risk area.
The threshold (materiality) should be raised for low risk areas in order to avoid
spending too much time on particular low-risk area.

38. PLANNING THE AUDIT
materiality, the PCAS approach

39. PLANNING THE AUDIT
materiality, the PCAS approach

40. PLANNING THE AUDIT
materiality, the PCAS approach

41. PLANNING THE AUDIT
materiality, the PCAS approach

42. PLANNING THE AUDIT
materiality, the PCAS approach

43. PLANNING THE AUDIT
materiality, the PCAS approach

44. PLANNING THE AUDIT
the planning meeting, the PCAS checklist (C5.1)
The engagement partner and other key members of the
engagement team shall be involved in the planning, including
participating in the discussion among engagement team
members; ISA 300.5.
The engagement team discussion must include specific
consideration of the susceptibility of the financial statements to
material misstatement due to fraud or error that could result from
the entities related party relationships and transactions.
ISA 550.12

45. PLANNING THE AUDIT
the planning meeting, the PCAS checklist (C5.1)
Comments WP Ref
1 Record the names of all audit staff in attendance.
2 Record the date of the meeting.
3 Discuss the susceptibility of the entity's financial statements to material statement,
recording:
a) the risks identified;
b) the financial statements assertion(s) impacted; and
c) its reference in the Identified Risks database.
4 Discuss the susceptibility of the entity's financial statements to material misstatement,
the Fraud Risk Factors checklist if required, recording:
C9.1
a) the risks identified;
b) the financial statements assertion(s) impacted; and
c) its reference in the Identified Risks database.
5 Confirm that the discussion included consideration of the possibility of fraud in relation
a) Revenue recognition;
b) Management override of controls;
c) Related party relationships and transactions;
6 Record any other matters raised by the engagement team that impact the audit

46. PLANNING THE AUDIT
the planning meeting, the PCAS checklist (C5.1)

47. PLANNING THE AUDIT
quality control, the PCAS approach (C12)
Comments WP Ref
1 Consider whether there is a need under the firm's
procedures or ethical requirements for an engagement
quality control review by a second partner or external
consultants.
2 Agree the timing and scope of the review with the partner
(or other external consultants) who will be undertaking it.
3 Confirm that the time budget and completion timetable
have been updated accordingly.
4 Where applicable, have points raised in a cold review of
the previous year been incorporated into this period's

48. PLANNING THE AUDIT
sample size planning, the PCAS approach (C13.2)
SAMPLE SIZE PLANNING
Objectiv
e
number
Extensive
analytical
review to
be used?
Tests of
effective-
ness of
internal
controls
to be
used?
Effective-
ness of
internal
controls
sample
size
Substantiv
e
procedure
s to be
used?
Substantiv
e
procedure
s sample
size
Comments
E Intangible assets
F Tangible fixed assets
G Investments to group
and associated
undertakings
H Other investments
I Stock

49. PLANNING THE AUDIT
independence, the PCAS checklist (C2.1)
Firms independence on clients:
Before any engagement is agreed, the firm must assess her independence of the
client and on the engagement. This can be done by using the checklist C2.1
provided in the PCAS.
Audit team independence on the audit client:
The team must confirm their independence on the client and the audit
engagement.
Employees independence on firms audit clients:
All other client facing staff must complete and submit the annual independent
declaration form and submit
same to the managing partner.

50. SYSTEMS DOCUMENTATION
Document
accounting &
internal
controls
systems
• Systems
Documentation
• Gain physical
assess to
systems
In order to document internal controls effectively, the
auditors must understand the flow of transactions, how
they are initiated, recorded, authorized, processed, and
reported.
Auditors must also identify and document the risks
within the process, including fraud risk, and the controls
that should be implemented to manage those risks.
auditors must also determine which controls are
necessary to the process, activity, or system under
review in light of the risk profile.

51. Document
accounting &
internal
controls
systems
• Systems
Documentatio
• Gain physical
assess to
systems
Systems
documentation
SYSTEMS DOCUMENTATION
Where the organisation does not have an Internal Controls
Manual, document existing internal controls systems using
the:
1. Internal Controls Questionnaires (PCAS C5.2)
2. Flow Charts (refer to templates)
3. Narrative Descriptions (refer to templates)
(through interview with management / schedule officers)
Review documented controls against standard controls or
best practice in light of the organisations risk profile and note
observations.

52. SYSTEMS DOCUMENTATION

53. SYSTEMS DOCUMENTATION
Example of flow chart

54. Document
accounting &
internal
controls
systems
• Systems
Documentatio
• Gain physical
assess to
systems
Gain physical access to
the computerized
system
SYSTEMS DOCUMENTATION
Note:
If your client uses a computerized accounting system, always,
obtain a special access to the system and check the internal
controls embedded in the system.
If you do not have expertise in the use of your client’s
accounting system, consult.
If in doubt consult!!!

55. TESTING THE INTERNAL CONTROLS
Test of controls, compliance testing
Test the
accounting
and internal
controls
systems
• Test of controls
• Compliance
tests
Test documented internal controls through observation and
enquiries and document any adverse findings.
Review controls against statutory and standard procedures and
note any adverse findings.
Check controls against identified fraud risks in specific trust areas
and ensure that the risks are mitigated by the controls and note
any adverse findings for management discussions.
Test the organization compliance with their own internal controls
by testing selected transactions against the documented controls.

56. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
Test the
financial
statements
• Substantive
testing
• Third party
confirmations
• Expert opinion
In respect of audit evidence ISA 500.9 states:
When using information produced by the entity, the auditor shall
evaluate whether the information is sufficiently reliable for the
auditor's purposes, including as necessary in the circumstances:
(a)Obtaining audit evidence about the accuracy and
completeness of the information; and
(b) Evaluating whether the information is sufficiently
precise and detailed for the auditor's purposes.

57. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
ISA 500.6:
Assertions used by the auditor are as follows:
1. Assertions about classes of transactions and events for the period under audit:
a. Occurrence - transactions and events that have been recorded have occurred and
pertain to the entity.
b. Completeness - all transactions and events that should have been recorded have been
recorded.
c. Accuracy - amounts and other data relating to recorded transactions and events have
been recorded appropriately.
d. Cut-off - transactions and events have been recorded in the correct accounting period.
e. Classification - transactions and events have been recorded in the proper accounts.

58. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
ISA 500.6:
Assertions used by the auditor are as follows:
2. Assertions about account balances at the period end:
(i) Existence - assets, liabilities, and equity interests exist.
(ii) Rights and obligations - the entity holds or controls the rights to assets, and liabilities
are the obligations of the entity.
(iii) Completeness - all assets, liabilities and equity interests that should have been
recorded have been recorded.
(iv) Valuation and allocation - assets, liabilities, and equity interests are included in the
financial statements at appropriate amounts and any resulting valuation or allocation
adjustments are appropriately recorded.

59. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
ISA 500.6:
Assertions used by the auditor are as follows:
3. Assertions about presentation and disclosure:
(i) Occurrence and rights and obligations - disclosed events, transactions, and other
matters have occurred and pertain to the entity.
(ii) Completeness - all disclosures that should have been included in the financial
statements have been included.
(iii) Classification and understandability - financial information is appropriately
presented and described, and disclosures are clearly expressed.
(iv) Accuracy and valuation - financial and other information are disclosed fairly and at
appropriate amounts. (ISA 315.A111)

60. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
KEY POINTS:
Audit objectives are the auditor's method of defining and testing those assertions.
Audit tests must be designed to meet each of the above financial statements
assertions.
Some of these assertions are often more inherently risky than others.
For example, it is often the case that the 'Completeness' and 'Valuation' assertions
are more risky from an auditing point of view than (say) the 'Existence' assertion.
Accordingly, specific risk assessments should not be restricted to just considering
the balance as a whole.
The key to an efficient audit lies in appreciating where the risks truly lie in
terms of the underlying assertions within a particular balance and focussing

61. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations & expert opinion
KEY POINTS:
• At the commencement of each audit programme section there is a summary
sheet setting out the audit objectives for that audit area and how the audit tests
are assigned to meet those objectives.
• By keeping specific audit objectives in mind, audit tests can be efficiently
directed to meet them.
• If any tailoring of the programme is done, the audit objectives should be cross-
referenced to the tailored programme to ensure that they continue to be met
by the revised/new programme.
• If additional or alternative tests are carried out, these should likewise be cross-
referenced to the audit objectives.
• This should ensure that these tests also meet the objectives set.

62. OBTAINING AUDIT EVIDENCE
substantive testing, third party confirmations &
expert opinion
KEY POINTS:
• A conclusion should be drawn for each
audit area. This is vitally important. Not
only should the summary sheet be
concluded upon, but for each main test
within each area there should be stated:
the aim of the tests;
the work performed;
the results obtained; and
the conclusion reached.

63. OBTAINING AUDIT EVIDENCE
substantive test, third party confirmations & expert opinion
1. Prepare lead schedules to agree with draft FS, trial balance and Nominal
Ledgers.
2. Prepare subsidiary schedules to agree with Nominal ledgers and trial
balance.
3. Conduct detailed test of transactions on ledger using the test criteria
provided in the PCAS audit programme.
4. Where the need be, obtain confirmations from third party, e.g. debtors,
creditors etc.
5. For highly technical areas, obtain expert opinions.

64. CASE STUDY