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INTRODUCTION QUALITATIVE CHARACTERSTICS OF A SMALL ENTITY Concentration of Ownership & Management Few Sources of Income and Operations Unsophisticated Record keeping Limited Internal controls – Management Override
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ACHIEVING EFFICIENCY WITH SMALLER CLIENT
AGARWAL & ITALIACHARTERED ACCOUNTANTS
SECUNDRABAD
PRESENTATION OUTLINE
•Introduction•Preliminary Approach•Audit Approach•Concluding the Audit•Conclusion
INTRODUCTION QUALITATIVE CHARACTERSTICS OF A SMALL
ENTITY
• Concentration of Ownership & Management• Few Sources of Income and Operations • Unsophisticated Record keeping• Limited Internal controls – Management
Override
PRELIMINARY APPROACH
•Knowledge of Clients Business•Engagement Letter•Quality Control•Planning•Assessment of Risk•Materiality
KNOWLEDGE OF CLIENTS BUSINESS
Understand the transactions that:• Significantly effect the financial statements• Enable the auditor in assessing inherent and
control risks
PRELIMINARY APPROACH
•Knowledge of Clients Business•ENGAGEMENT LETTER•Quality Control•Planning•Assessment of Risk•Materiality
QUALITY CONTROL
PLANNING
FIELD WORK
TESTING
Assignment of the team
Informing the team
Supervision
Consultation
Review
PLANNING THE AUDIT
•Consider clients expectations and requests•Review the available information or obtain information through discussion with the client•Designing Audit Procedures•Review of Planning document•Timing of Audit and Job Scheduling
RISK ASSESSMENT
Control RiskInherent Risk
•Attitude of the owner manager
•Going Concern Status of the entity
•Significant third party reliance
•Risk of less sophisticated internal controls
•Risk of fraud
ASSESSING MATERIALITY
•At planning stage
•When Evaluating the results of Audit Procedures
AUDIT APPROACH
•Test Checking•Analytical Procedures•Audit Sampling•Audit Evidence•Documentation•Related Party Transactions
AUDIT APPROACHTEST CHECKING
•100% of the population
•100% of the part of the population
applying analytical procedures
to the other part
• Sampling
OBTAINING
OTHER AUDIT EVIDENCE
•External Confirmation
• Review of Post Balance Sheet Events
DOCUMENTATION
• Audit Plan• Audit Programme• Results of Audit Procedures• Conclusions drawn from Audit Evidence• Working Papers• Update Permanent file• Partner’s Review points
CONCLUDING THE AUDIT
•SUBSEQUENT EVENTS•Test of Going Concern•Forming an Audit Opinion•Management Representation Letter
SUBSEQUENT EVENTS
Are Accounting
Records updated
NOReview Bank Statements/
other evidence
Is the Amount Material
YES
Seek Explanation and
document the same
YES
CONCLUDING THE AUDIT
•Subsequent Events•TEST OF GOING CONCERN•Forming an Audit Opinion•Management Representation Letter
CONCLUDING THE AUDIT
•Subsequent Events•Test of going concern•FORMING AN AUDIT OPINION•Management Representation Letter
CONCLUDING THE AUDIT
•Subsequent Events•Test of going concern•Forming an Audit Opinion•MANAGEMENT REPRESENTATION LETTER
CONCLUSION
THANK YOU
AGARWAL & ITALIAChartered Accountants
Surya towers, V floor,Sardar Patel Road
Secunderabad – 500 003INDIA
Contact : Percy Italia Mobile : +91 98480 31086Telephone : +91 40 2781 8165, 2784 8700Fax : +91 40 2781 8165.e-mail : [email protected]
