Guide to Using International Standards on Auditing in - IFAC

<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
The confirmation requirements can be summarized as set out below.
Exhibit 10.3-2
Address
Maintain Control
over Confirmation
Process
Are Responses
Reliable?
When No Response
Is Received
Evaluate Overall
Results
Description
This includes:
• Considering the information <strong>to</strong> be confirmed or requested;
• Selecting the appropriate confirming party;
• Evaluating reasons for any refusal by management <strong>to</strong> allow sending of
confirmations. This includes consideration of the implications on assessed risks,
the possibility of fraud, and what further audit procedures will now be required;
• Designing the confirmation requests;
• Determining that requests are properly addressed and contain return
information for responses <strong>to</strong> be sent directly <strong>to</strong> the audi<strong>to</strong>r; and
• Sending the requests, including follow-up requests when applicable, <strong>to</strong> the
confirming party.
If fac<strong>to</strong>rs give rise <strong>to</strong> doubts about the reliability of the response:
• Obtain further audit evidence <strong>to</strong> resolve or confirm doubts;
• Consider fraud and other impacts on assessed risks; and
• Investigate exceptions <strong>to</strong> determine if these are indicative of misstatements.
Perform alternative audit procedures (if possible) <strong>to</strong> obtain relevant and reliable audit
evidence.
Did the results of the external confirmation procedures provide the relevant and
reliable audit evidence required?
10.4 Substantive Analytical Procedures
Paragraph #
Relevant Extracts from ISAs
520.5 When designing and performing substantive analytical procedures, either alone or in
combination with tests of details, as substantive procedures in accordance with ISA 330, the
audi<strong>to</strong>r shall: (Ref: Para. A4-A5)
(a) Determine the suitability of particular substantive analytical procedures for given
assertions, taking account of the assessed risks of material misstatement and tests of
details, if any, for these assertions; (Ref: Para. A6-A11)
(b) Evaluate the reliability of data from which the audi<strong>to</strong>r’s expectation of recorded amounts
or ratios is developed, taking account of source, comparability, and nature and relevance
of information available, and controls over preparation; (Ref: Para. A12-A14)
(c) Develop an expectation of recorded amounts or ratios and evaluate whether the
expectation is sufficiently precise <strong>to</strong> identify a misstatement that, individually or when
aggregated with other misstatements, may cause the financial statements <strong>to</strong> be materially
misstated; and (Ref: Para. A15)
(d) Determine the amount of any difference of recorded amounts from expected values that
is acceptable without further investigation as required by paragraph 7. (Ref: Para. A16)
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Substantive analytical procedures involve a comparison of amounts or relationships in the financial