Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
ISAs 240 and 330 outline some possible overall responses <strong>to</strong> risks identified at the financial statement level.
Some examples are set out below.
Exhibit 9.2-1
Possible Overall Responses <strong>to</strong> Assessed Risks at the Financial Statement Level
Engagement
Management
Incorporate
Unpredictability
in Selection of
Further Audit
Procedures
Emphasize <strong>to</strong> the audit team the need <strong>to</strong> maintain professional skepticism.
Assign more experienced staff or those with special skills such as forensic, valuation,
and IT specialists.
Provide more ongoing supervision <strong>to</strong> staff as they perform the work.
Incorporate an element of unpredictability in the selection of the nature, timing, and
extent of further audit procedures <strong>to</strong> be performed. This is particularly important
when addressing fraud risks, because individuals within the entity may be familiar
with audit procedures normally performed, and therefore more able <strong>to</strong> conceal
fraudulent financial reporting.
Unpredictability can be achieved by:
• Performing substantive procedures on selected account balances and assertions
not otherwise tested due <strong>to</strong> their materiality or risk;
• Adjusting the timing of audit procedures from that otherwise expected;
• <strong>Using</strong> different sampling methods; and
• Performing audit procedures at different locations, or at locations on an
unannounced basis (such as inven<strong>to</strong>ry counts).
Revise the
Planned Audit
Procedures
Make changes <strong>to</strong> the nature, timing, or extent of audit procedures. For example:
• Perform substantive procedures at the period end instead of at an interim date;
• Perform a physical observation or inspection of certain assets;
• Perform further review of inven<strong>to</strong>ry records <strong>to</strong> identify unusual items,
unexpected amounts, and other items for follow-up procedures;
• Perform further work <strong>to</strong> evaluate the reasonableness of management estimates
and the underlying judgments and assumptions;
• Increase sample sizes or perform analytical procedures at a more detailed level;
• Use computer-assisted audit techniques (CAATs) <strong>to</strong>:
− Gather more evidence about data contained in significant accounts or
electronic transaction files,
− Perform more extensive testing of electronic transactions and account files,
− Select sample transactions from key electronic files,
− Sort transactions with specific characteristics, and
− Test an entire population instead of a sample;
• Request additional information in external confirmations. For example, on a
receivables confirmation, the audi<strong>to</strong>r could ask for confirmation on the details of
sales agreements, including date, any rights of return, and delivery terms; and
• Modify the nature and extent of audit procedures <strong>to</strong> obtain more substantive
audit evidence.