Académique Documents
Professionnel Documents
Culture Documents
Advice is free
Disputes between directors can be resolved
Ethics
Fundamental principle (OPTIC) Objectivity Professional behavior Technical competence Integrity Confidentiality Threats to independence (FULLSTOP)- (Self review, Self interest, Familiarity,
intimidation, Advocacy)
Family and friends Undue dependence in fee Loans to and from client Litigation Shares in client Taking gifts from client Overdue frees Provision of other services Pre Appointment (PLACE)-The things we need to do before taking a client. Professional clearance Legal Consideration Auditor consideration Commercial consideration Ethical consideration Engagement Letter (SOFAR)
b) Procedural based
Materiality and tolerate error Analytical procedures Risk Audit (IR*Cr*Dr) Knowledge of business Staff Audit approach Timing Documentation of planning process
PAF CAF 2 Main files Permanent Audit file Current audit file
Internal Control
Objective of company Maximize profit +
Accurate accounting records Safe guards the assets of company Prevent fraud and error Internal policies followed Efficient running of company
Control System
a) Control environment procedures b) Control
General Overall approach to controls Management by example Attitude Awareness Action Good Recruitment Entry e.g. sage
Specific
Authorization Computer controls Comparisons Arithmetic/adding Maintain a trail balance Accounting reconciliation Physical Controls Segregation of duties
Limitations of controls (FAME) Fraudulent collusion Abuse of authority Management override Error Control test: Substantive:
Testing (Procedures) that control is working. Testing (Numbers) that a balance in amount is T&F (True & Fair)
Stock Count (PACE) People Administration Counting End of Count General Test: (AEIOU) Analytical procedures Enquiring Inspection Observation U > Re -Calculation
+ General test for any balance in B/S or P&L
Confirmation Re performance What the Auditor Needs to Test: (DADA 3) Documents + records Assets Directors + Staff
Accounting Statements 3rd parties (Outside Clients) Auditors objectives/assertions: (V COD RACE) Valuation Cut off Occurrence Disclosure Rights and Obligation Accuracy Completeness Existence Audit Procedures: (A TOAD) General tests: Add up Trail balance Opening balance Audit software Disclosure check Bank & Cash: (2Bs) Bank Letter Bank reconciliation Receivables: (3Cs) Circulation Cash paid after the year end Cut off
Financial statement Assertions
Bad debt provision: ( PAPA ) Prior year comparison + investigate any difference Ask management about each provision Post balance sheet events Analytical procedures
Payables: (CRAP) Cut off testing Reconcile Analytical procedures Post year end invoice review Inventory: (STOCK without K) Sales price at the year end Trace the cost to the invoice Observe the stock count Cut off testing Subsequent event review: (MAPLE)
Minutes of the board meeting after the year end Accounts prepared after the year end Procedures the client has picking up post B/S event
Letter of representation
Written confirmation from the directors to the auditors confirming certain matters
Relying on internal auditor/experts: (STRIP) Scope of work Technical competence Report Quality Independence Professionalism Difference between Internal auditors and External auditors: (I SO REAL) Independence Scope of work Objective Responsible to Employed