1 / 17

Training Seminar: Students of Small and Medium Sized Practices February 17, 2007

Training Seminar: Students of Small and Medium Sized Practices February 17, 2007. BDO International. Outline of the Day. Introduction to Risk ISA 315 “ Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement” Responses to Risk

enye
Download Presentation

Training Seminar: Students of Small and Medium Sized Practices February 17, 2007

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Training Seminar:Students of Small and Medium Sized PracticesFebruary 17, 2007 BDO International

  2. Outline of the Day • Introduction to Risk • ISA 315 “Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement” • Responses to Risk • ISA 330 “Responses to Risk” • Practical aspects of Planning the Audit Work • ISA 300/320 The Future is Here…

  3. ISA 240/315 What could go wrong? ISA 330 What are we going to do about it? In other words… The Future is Here…

  4. Why? Risk of Material Misstatement Fraud Error The Future is Here…

  5. Our Responsibilities • ‘An auditor is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog but not a bloodhound.’ Re: Kingston Cotton Mill CO (No 2) 1896 The Future is Here…

  6. Completion Mandatory team discussion to be held (ISA 300) Execution Professional Scepticism Fraud should be considered in context of errors/testing results Planning May want to hold final discussion at completion? The Standard & The Audit The Future is Here…

  7. Risk of Material Misstatement Definition of Risk Audit Risk = Inherent Risk x Control Risk x Detection Risk The Future is Here…

  8. ISA 315 - Overview (Para 2, ISA 315) “The auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures” The Future is Here…

  9. Requirements of ISA 315 OVERALL REQUIREMENTS Risk assessment procedures and sources of information about the entity and its environment, including IC Understanding the entity and its environment including IC Assessing the risks of material misstatement Communicating with those charged with governance and management Documentation The Future is Here…

  10. Risk Assessment • “…continuous, dynamic process of gathering, updating and analysing information throughout the audit” (Para 6, ISA 315) • Planning Meeting • Risk assessment procedures: • Enquiries of management and others within the entity • Analytical procedures • Observation and inspection The Future is Here…

  11. ISA 330 - requirements • Overall responses to risks of material misstatement at the financial statement level • Audit procedures responsive to risks of material misstatement at the assertion level • Evaluating the sufficiency and appropriateness of audit evidence obtained • Documentation The Future is Here…

  12. Assertions – how much do you know? • P&L • Occurrence • Completeness • Accuracy • Cutoff • Classification • BS • Existence • Completeness • Rights & Obligations • Valuation • Presentation & Disclosure The Future is Here…

  13. Assessing the risk of material misstatement Identify risk Risk of material misstatement at FS and assertion level Relate risk to what can go wrong at the assertion level Consider magnitude of risks Likelihood of risks General Risk Specific Risk The Future is Here…

  14. General Risks and GeneralControls General Risks are those risks that affect multiple financial statement areas or tend to be pervasive to the financial statements. General Controls are those controls that are pervasive to the organisation Information Gathering The Future is Here…

  15. Nature of Procedures ToCs SAPs OSPs ASSURANCE Risk The Future is Here…

  16. ISA 300 • Preliminary engagement activities • Planning activities • Initial audit engagements “The auditor should plan the audit so that the engagement will be performed in an effective manner.” The Future is Here…

  17. ISA 320 – Audit Materiality Planning Materiality • Materiality refers to the size or nature of a misstatement that, in the light of the surrounding circumstances, makes it probable that the judgement of a reasonable user of the financial statements would have been changed or influenced as a result of the misstatement. • Only material misstatements and uncertainties will affect our audit opinion. Our audit procedures should not therefore be concerned with detecting misstatements that could not be material; they need to be focused on obtaining assurance that material misstatements do not exist The Future is Here…

More Related