Seminar02

- Using an entity’s assets for personal use Refer Appendices 1 & 3 for examples of fraud risk factors, and 6 factors that may indicate the possibility of fraud.
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ASA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report
Fraudulent Financial Reporting - Recording fictitious journal entries to manipulate operating results - Inappropriate assumptions/judgements used to estimate account balances - Omitting, advancing or delaying recognitions of events or transactions - Concealing or not disclosing facts - Engaging in complex transactions structured to misrepresent - altering records Misappropriation of Assets - embezzling/misappropriating receipts - stealing physical assets or intellectual property - Paying for goods and services not received
5 Continuous activities
5.5 5.6 5.7
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LEVELS OF RISK
ENGAGEMENT RISK (Litigation Risk) BUSINESS RISK AUDIT RISK
(Financial Report Level and Assertion per ASA200 and ASA315)
The identified significant risks (BRs / IRs) need to be assessed and addressed by auditor through appropriate audit strategy / procedures (DR) at the assertion level.
Some BRs (IR) may increase risk of material misstatement in the financial report being audited.
Auditor needs to understand ICs (CR) and evaluate’whether they effectively address/ Minimise BRs / IRs.
3பைடு நூலகம்
ASA 315 Understanding the Entity and Its Environments and Assessing Risk of Material Misstatements Industry, regulatory, and other external factors Nature of the entity Objectives and strategies and related business risks that may result in a material misstatements Measurement and review of the entity’s financial performance Internal control
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A U D IT P R O C E S S M O D E L
1 Pre-engagement activities
1.1 1.2 1.3 2.1 2.2 2.3 2.4
Accept / reject new client Established terms of engagement Engagement letter Obtain knowledge of the business – ASA 315 (including ASA 250) 2.1.1 Preliminary analytical procedures – ASA 520 Appraisal of risk, including fraud risk (ASA 240) going concern (ASA 570) – ASA 315 Estimate of materiality– ASA 320 Review of control components – ASA 315 2.4.1 Preliminary evaluation of control environment – ASA 315 Develop overall audit plan (ie develop as audit strategy) in response to risks - – ASA 330 2.5.1 Determine reliance on internal controls – ASA 330 2.5.2 Determine extent and nature of testing – ASA 330 2.5.3 Write audit plan Assignment of staff Tests of control – ASA 500 3.1.1 Conducts tests 3.1.2 Make final evaluation of internal control 3.1.3 Modify audit approach – ASA 330 Substantive testing activities – ASA 500 3.2.1 Conduct substantive tests of transactions and balances 3.2.2 Conduct substantive analytical procedures – ASA 520 3.2.3 Evaluate results of substantive procedures 3.2.4 Modify audit approach – ASA 330 Obtain representations 3.3.1 Management 3.3.2 Solicitors 3.3.3 Bank Review financial report– ASA 520 Review audit results Subsequent events– ASA 560 Fraud and error– ASA 240 Related party transactions Formulate audit opinion– ASA 700 / ASA 701 Draft and issue reports Supervise conduct of examinations Review work of assistants Consider appropriateness of continuing relationship with client Make required special communication 5.4.1 Material weaknesses of internal accounting control 5.4.2 Material errors or irregularities Consult with appropriate persons in connection with special problems Document work performed, findings, and conclusions in appropriate working papers Consider going concern –ASA 570
Including the Likelihood of Fraud ASA 240 and NonCompliance with Laws and Regulations (ASA 250)
At Financial Statement Level per ASA 200, ASA 330
ASA 330 ASA 500
2 Planning activities ASA 300
2.5
2.6 3.1
3. Audit evidence ASA 500
3.2
3.3
4 Opinion formulation and reporting activities
4.1 4.2 4.3 4.4 4.5 4.6 4.7 5.1 5.2 5.3 5.4
University of New South Wales School of Accounting Auditing and Assurance Services 2008
SEMINAR 2 Introduction to the Audit Process – Understanding the Entity and Assessing Risk
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THE AUDIT PROCESS
UNDERSTAND THE BUSINESS ASSESS BUSINESS RISK ASSESS CLIENT CONTROLS DETERMINE RESIDUAL AUDIT RISK RESPOND TO AUDIT RISK
Respond to Audit Risks by Linking Risks to Specific Procedures that Address the Risk at the account and assertion level after considering compensating controls ASA 315