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Audit Procedures

The document discusses audit procedures and concepts including analytical procedures, controls, evidence and important topics like quality management, NOCLAR and fraud. It provides definitions and explanations of terms as well as responsibilities and procedures auditors should follow regarding non-compliance, fraud and quality management.

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akhil.ng6
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9 views

Audit Procedures

The document discusses audit procedures and concepts including analytical procedures, controls, evidence and important topics like quality management, NOCLAR and fraud. It provides definitions and explanations of terms as well as responsibilities and procedures auditors should follow regarding non-compliance, fraud and quality management.

Uploaded by

akhil.ng6
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ASSERTIONS

Procedures
A – Analytical procedures
E – Enquire
I – Inspect
O – Observe (Mostly inventory related)
U – Undersstanding
Recalculation (To check mathematical accuracy) and Reperformance (To confirm the working is correct
or controls are correct)
Confirmation

SOFP

R – Rights and obligations


E – Existence – Perform circularization of receivables to ensure existence
V - Valuation
A - Allocation
C -Completeness, Classification

SOPL
O – Occurrence
C3 – Completeness, cutoff, Classification
A - Accuracy
P – Presentation

Existence – Is checked to confirm the assts are not overstated and liabilities are not understated
Physical verification,
Rights – Title deed
Obligation – Loan document - It can be checked whether there is an obligation or event to whether the
recorded obligation is accurate as per records.
Valuation – he recorded assets and liabilities are accurate.
Analytical Procedures
Compare – Previous years, Forecasts/Budgets , Standard industry practices

CONTROLS
Effective – Objective is being met
Efficient – works at the right time
EVIDENCES

Whenever we are reaching a conclusion, evidence collected should be sufficient and appropriate.
Sufficient – Quantity of evidence
Sufficiency is based on risk of company, Materiality , control (weak controls more evidence)
New client - more evidence
Evidences should be in past. Like- ‘Was performed to ensure’

Procedure – Recalculate the depreciation charge to confirm mathematical accuracy


Evidence Work paper on which the recalculation was performed on the depreciation charge to confirm
mathematical accuracy.

SKILLS and TIPS TO write procedures


1. Use of audit verbs – Review, Re calculate and perform, Enquire, Obtain, Trace, Evaluate, Verify

IMPORTANT

QUALITY MANAGEMENT for firms that perform audit (IMPORTANT)


1. Risk assessment process - Firms must design and implement a risk assessment process that sets
quality objectives and identifies risks. It should be an ongoing monitoring process rather than
one-off, enabling the SoQM (System of quality management) to adapt with any changes.
2. Governance and Leadership – The tone at the top should focus on quality of audit rather than
client retention or profit. Trainings should be provided to et the tone
3. Relevant ethical requirements – The firm must ensure its understanding of ethical requirements
through trainings. It should be ensured that the component auditors understand and apply
ethical regulations appliable to group auditor.
4. Acceptance and continuance of client relationship –Assess integrity and ethical values of the
client and management. Audit firms ability to perform engagement. Whether has KTE –
Knowledge, Training, Experience to perform
5. Engagement Performance:
o Ensure good quality audit
o Direction, supervision, Consultation, review and resolution of disputes.
o High materiality in risk audit – Bad quality
o No review by audit engagement partner - bad quality
o Time pressurised audit – bad quality
6. Human Resources –
 Resource in timely manner
 Employees with required KTE
 Sufficient level of seniority for complex areas
 Independant experts hired whenever necessary
7. Information and communication – Information and communication are vital for the functioning
of the SoQM. This involves obtaining, generating, and utilizing information, as well as internal
communication within the firm, sharing audit findings with an engagement quality reviewer.
External communication, such as with the TCWG or regulators, is also crucial
8. Monitoring – Throughout the audit, Process put in place to asses SOQM’s effectiveness.

ISA 240 – NOCLAR


Auditors responsibility

 Management has the responsibility for compliance with laws and regulations.
 Auditors have responsibility to identify the effects of NOCLAR on the FS.
 Auditors should Obtain in-depth understanding about the laws and regulations.
 If a NOCLAR is identified auditors should identify and gather evidences regarding the nature and
circumstances of the Event and how does it impact the FS.
 Whom to report to: TCWG, Third party (Higher authorities - Disclosing the NOCLAR to higher
authority or government officials does not create a confidentiality breach as the matter overrides
the threat), Legal Advisors
Indications of non compliance
Lots of cash outflow – maybe bribe to cover NOCLAR

Auditors responsiility on FRAUD (IMORTANT)

 The primay responsiility is wwith management.


 Auditor is in all circumstance migh not be able to identtify the fraud even if auditor works in his
best qualityas the intention of the perpetrator is to cover the fraud.
 Management is responsible for prevention of fraud and If the they are involved then it will be
etremely difficult.
 Also the evidence collected by auditor will be presuasive but not conclusive (Auditor cannot
guartee 100% that a fraud has occurred as the evidence give only a reasonable assurnce not
certaain) also(Only samples ae not tested not 100% transactions)
 All that auditor can do if a fraud is suspected or identified is to be professionally skeptical and
enquires with management going on regarding any unusual transaction or contraictory evience.
 Auditor has responsibility to identfy the effects of fraud on FS. So, if auditor has lacked hiis duty
of care to perform substantive procedures on risky/material areas then yes upto some exent
auditor is responsible for the fraud

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