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
Upon substantial completion of the audit, the audi<strong>to</strong>r is required <strong>to</strong> use analytical procedures <strong>to</strong> assist in
evaluating the overall financial statement presentation.
The purpose of using analytical procedures at or near the end of the audit is <strong>to</strong> determine whether the
financial statements as a whole are consistent with the audi<strong>to</strong>r’s understanding of the entity.
These procedures would address questions such as:
• Do the conclusions drawn from such procedures corroborate the conclusions formed during the
audit of individual components or elements of the financial statements?
Analytical procedures may reveal that certain financial statement items differ from expectations formed
by the audi<strong>to</strong>r based on knowledge of the entity’s business and other information accumulated during the
audit. Such differences would need <strong>to</strong> be investigated using procedures such as those described above. This
investigation may indicate the need for changes in presentation or disclosure in the financial statements.
• Is there a risk of material misstatement that has not been previously recognized?
If additional risks are identified, the audi<strong>to</strong>r may need <strong>to</strong> re-evaluate the planned audit procedures <strong>to</strong>
respond appropriately.
10.5 Tests of Controls
Paragraph #
Relevant Extracts from ISAs
330.8 The audi<strong>to</strong>r shall design and perform tests of controls <strong>to</strong> obtain sufficient appropriate audit
evidence as <strong>to</strong> the operating effectiveness of relevant controls if:
(a) The audi<strong>to</strong>r’s assessment of risks of material misstatement at the assertion level includes
an expectation that the controls are operating effectively (that is, the audi<strong>to</strong>r intends
<strong>to</strong> rely on the operating effectiveness of controls in determining the nature, timing and
extent of substantive procedures); or
(b) Substantive procedures alone cannot provide sufficient appropriate audit evidence at the
assertion level. (Ref: Para. A20-A24)
330.9 In designing and performing tests of controls, the audi<strong>to</strong>r shall obtain more persuasive audit
evidence the greater the reliance the audi<strong>to</strong>r places on the effectiveness of a control. (Ref: Para.
A25)
330.10 In designing and performing tests of controls, the audi<strong>to</strong>r shall:
(a) Perform other audit procedures in combination with inquiry <strong>to</strong> obtain audit evidence
about the operating effectiveness of the controls, including:
(i) How the controls were applied at relevant times during the period under audit;
(ii) The consistency with which they were applied; and
(iii) By whom or by what means they were applied. (Ref: Para. A26-A29)
(b) Determine whether the controls <strong>to</strong> be tested depend upon other controls (indirect
controls) and, if so, whether it is necessary <strong>to</strong> obtain audit evidence supporting the
effective operation of those indirect controls. (Ref: Para. A30-A31)
330.11 The audi<strong>to</strong>r shall test controls for the particular time, or throughout the period, for which the
audi<strong>to</strong>r intends <strong>to</strong> rely on those controls, subject <strong>to</strong> paragraphs 12 and 15 below, in order <strong>to</strong>
provide an appropriate basis for the audi<strong>to</strong>r’s intended reliance. (Ref: Para. A32)