Guide to Using International Standards on Auditing in - IFAC

More documents

Recommendations

Info

110 <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 Management override and fraudulent revenue recognition are presumed <strong>to</strong> be significant risks (see Volume 2, Chapter 10 of this <strong>Guide</strong>) and addressed as such. As a result, there are certain audit procedures that would be performed in every audit. These are outlined in the ISA extracts quoted above. Some additional comments are included in the following exhibit. Exhibit 9.2-2 Journal Entries Estimates Significant Transactions Revenue Recognition Procedures <strong>to</strong> Address Management Override Identify, select, and test journal entries and other adjustments based on: • An understanding of the entity’s financial reporting process and design/ implementation of internal control; and • Consideration of the: − Characteristics of fraudulent journal entries or other adjustments, − Presence of fraud risk fac<strong>to</strong>rs that relate <strong>to</strong> specific classes of journal entries and other adjustments, and − Inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity. Review estimates relating <strong>to</strong> specific transactions and balances <strong>to</strong> identify possible biases on the part of management. Further procedures could include: • Reconsidering the estimates taken as a whole; • Performing a retrospective review of management’s judgments and assumptions related <strong>to</strong> significant accounting estimates made in the prior period; and • Determining whether the cumulative effect amounts <strong>to</strong> a material misstatement in the financial statements. Obtain an understanding of the business’ rationale for significant transactions that are unusual or outside the normal course of business. This includes an assessment as <strong>to</strong> whether: • Management is placing more emphasis on the need for a particular accounting treatment than on the underlying economics of the transaction; • The arrangements surrounding such transactions are overly complex; • Management has discussed the nature of, and accounting for, such transactions with those charged with governance; • The transactions involve previously unidentified related parties, or parties that do not have the substance or the financial strength <strong>to</strong> support the transaction without assistance from the entity under audit; • Transactions that involve non-consolidated related parties, including specialpurpose entities, have been properly reviewed and approved by those charged with governance; and • There is adequate documentation. Perform substantive analytical procedures. Consider computer-assisted audit techniques <strong>to</strong> identify unusual or unexpected revenue relationships or transactions. Confirm with cus<strong>to</strong>mers relevant contract terms (acceptance criteria, delivery and payment terms) and the absence of side agreements (right <strong>to</strong> return the product, guaranteed resale amounts, etc.).
111 <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 9.3 Response <strong>to</strong> Assessed Risks at the Assertion Level Paragraph # Relevant Extracts from ISAs 330.6 The audi<strong>to</strong>r shall design and perform further audit procedures whose nature, timing and extent are based on and are responsive <strong>to</strong> the assessed risks of material misstatement at the assertion level. (Ref: Para. A4-A8) The audi<strong>to</strong>r’s assessment of identified risks at the assertion level provides the starting point for: • Considering the appropriate audit approach; and • Designing and performing further audit procedures. Refer <strong>to</strong> Volume 1, Chapter 10 for a detailed description of further audit procedures. An Appropriate Audit Approach The audit approach for designing and performing further audit procedures will be based on the assessment of the identified risks at both the financial statement level and the assertion level. Because assessed risks will differ between the material classes of transactions, account balances, and disclosures, the most effective audit approach will vary. For example, it might be appropriate <strong>to</strong> test controls over sales completeness, and use substantive procedures for the other assertions. For payables, a substantive approach could be applicable for all assertions. The key is <strong>to</strong> develop audit procedures that respond appropriately <strong>to</strong> the risks identified. The following exhibit outlines some of the considerations in developing the appropriate audit approach for an account balance or class of transactions. Exhibit 9.3-1 Would substantive tests alone provide sufficient appropriate audit evidence at the assertion level? No Yes Tests of Controls Substantive Procedures Yes No Would it be more efficient <strong>to</strong> obtain the audit evidence through tests of controls (such as reducing the extent of substantive procedures)? Note: In smaller entities, reliable control activities may not exist or may be very limited. In these cases, a primarily substantive approach may be the only alternative.
Page 1 and 2:
Guide to</
Page 3 and 4:
3 Guide to
Page 5 and 6:
5 Guide to
Page 7 and 8:
Disclaimer This Guide</stro
Page 9 and 10:
9 Guide to
Page 11 and 12:
11 Guide t
Page 13 and 14:
13 2. Clarified ISAs In March 2009,
Page 15 and 16:
15 Guide t
Page 17 and 18:
17 Guide t
Page 19 and 20:
Volume 1 Core Concepts
Page 21 and 22:
21 Guide t
Page 23 and 24:
23 Guide t
Page 25 and 26:
25 Guide t
Page 27 and 28:
27 Guide t
Page 29 and 30:
29 Guide t
Page 31 and 32:
31 Guide t
Page 33 and 34:
33 Guide t
Page 35 and 36:
35 Guide t
Page 37 and 38:
37 Guide t
Page 39 and 40:
39 Guide t
Page 41 and 42:
41 Guide t
Page 43 and 44:
43 Guide t
Page 45 and 46:
45 Guide t
Page 47 and 48:
47 Guide t
Page 49 and 50:
49 Guide t
Page 51 and 52:
51 5. Internal Control — Purpose
Page 53 and 54:
53 Guide t
Page 55 and 56:
55 Guide t
Page 57 and 58:
57 Guide t
Page 59 and 60: 59 Guide t
Page 77 and 78: 77 6. Financial Statement Assertion
Page 101 and 102: 101 Guide
Page 109: 109 Guide
Page 115 and 116: 115 10. Further Audit Procedures Ch
Page 145 and 146: 145 12. Related Parties Chapter Con
Page 161 and 162:
161 14. Going Concern Chapter Conte
Page 163 and 164:
163 Guide
Page 165 and 166:
165 Guide
Page 167 and 168:
167 Guide
Page 169 and 170:
169 Guide
Page 171 and 172:
171 15. Summary of Other ISA Requir
Page 173 and 174:
173 Guide
Page 175 and 176:
175 Guide
Page 177 and 178:
177 Guide
Page 179 and 180:
179 Guide
Page 181 and 182:
181 Guide
Page 183 and 184:
183 Guide
Page 185 and 186:
185 Guide
Page 187 and 188:
187 Guide
Page 189 and 190:
189 Guide
Page 191 and 192:
191 Guide
Page 193 and 194:
193 Guide
Page 195 and 196:
195 Guide
Page 197 and 198:
197 Guide
Page 199 and 200:
199 Guide
Page 201 and 202:
201 Guide
Page 203 and 204:
203 Guide
Page 205 and 206:
205 16. Audit Documentation Chapter
Page 207 and 208:
207 Guide
Page 209 and 210:
209 Guide
Page 211 and 212:
211 Guide
Page 213 and 214:
213 Guide
Page 215 and 216:
215 Guide
Page 217 and 218:
217 Guide
Page 219 and 220:
219 Guide
Page 221 and 222:
221 Guide
Page 223 and 224:
223 Guide
Page 225 and 226:
225 Guide
Page 227 and 228:
227 Guide
Page 229 and 230:
229 Guide
Page 231 and 232:
231 Guide
Page 233 and 234:
233 Guide
Page 235 and 236:
235 Guide
show all

Guide to Using International Standards on Auditing in - IFAC

Create successful ePaper yourself

Delete template?

Save as template?