Audit an Introduction

8/16/2019 Audit an Introduction

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AUDITING

: an introduction: an introduction

Quantum Consulting

New Comers Training

13 March 2008


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ACCOUNTING SERVICE vs AUDITING

Transaction

.

Document

.

Journal

Voucher

General

Ledger

Trial

Balance

Balance

Sheet

Income

Statement

Listings &

Schedules

Accounting Flow: Upwar

Auiting Flow : !ac"war


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ACCOUNTING SERVICE vs AUDITING

Determined ProcedureNo Determined

Procedure

Sufficient Persuasive

Evidence

Proper Evidence

FairnessTrue

PSA standard

SPAP standard

!APEPA" std

PSA standard

#icensed Si$ned ReportNo #icensed Si$ned

Report

AUDITINGACCOUNTING

SERVICE


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RIS !ASED AUDIT % Ris&

#N$%&%NT '(

C)NT&)* '(

+%T%CT#)N '(

A& , #& - C& - +&

AU+#T '(


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RIS !ASED AUDIT '

"ateria(it)


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RIS !ASED AUDIT '

"ateria(it) AUDIT MATERIALITY

P" ' P(anin$ "ateria(it)

TE ' To(era*(e Error

SAD ' Summar) of Audit Differences


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RIS !ASED AUDIT %

"ateria(it)+ P" is our pre(iminar) estimate of materia(it) made durin$p(annin$, and is used in deve(opin$ t-e overa(( scope of

our audit procedures.

+ TE is a percenta$e of P" and a((o/s us to ta&e P" tot-e (eve( of t-e individua( account or $roup of accounts

+ As a team, /e a(so set a Summar) of Audit Differences

0SAD1 nomina( amount. Differences a*ove t-is amount

are inc(uded as audit differences on t-e SAD, and /estron$() encoura$e t-e c(ient to record t-e ad2ustment.

+ If a difference is *e(o/ t-is amount, it is not inc(uded on

t-e SAD.


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RIS !ASED AUDIT ' P"

For Companies /it- pu*(ic() traded de*t, *ut

not pu*(ic() traded s-ares, or /-en ana()sts

focus on E!ITDA.

E!ITDA34%54

6-en operatin$ resu(ts are so poor t-at(i7uidit) or so(venc) are more critica(

concerns, or /-en financia( statement user

focus more on e7uit) rat-er t-an on resu(ts of

operations.

S-are-o(der8sE7uit)

94 % 54

If operatin$ resu(ts at or near *rea& even, or

f(uctuates *et/een net profits and net (osses

from )ear to )ear, or persistent operatin$

(osses, *ut operatin$ (osses is an appropriate

*asis for P".

Gross "ar$in94 % 34

If operatin$ resu(ts at or near *rea& even, or

f(uctuates *et/een net profits and net (osses

from )ear to )ear, or persistent operatin$

(osses, *ut operatin$ (osses is an appropriate

*asis for P".

Sa(es:,54 % 94

For continuin$ operationsPreta; Income54 % 9:4


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RIS !ASED AUDIT ' TE

6-en /e e;pect a(( $ross audit differences

0recorded and unrecorded1 for t-e /-o(e auditto *e 354 or (ess of P". TE -i$-er t-an 5:4

is reva(uated /-en errors are found

P(annin$

"ateria(it)


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RIS !ASED AUDIT ' SAD

Post a(( errors to SAD%%

Genera( Ru(esTo(era*(e Error 54


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DATA PROCESS

DATA PROCESS % *rief Routine data processes Purc-ase = Account Pa)a*(e 0de*it side1

Cost of Good So(d = Inventor) 0credit side1

Non%routine data processes

P-)sica( countin$ Accountin$ Estimate A((o/ance for o*so(esces = s(o/%movin$


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"ANAGE"ENT ASSERTIONS

Assertions

E;istence

Comp(eteness Va(uation

Ri$-t = O*(i$ation

Presentation = Disc(osures


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< CONTRO# O!>ECTIVES

Rea(

Recorded

Va(uationTime(iness

Comp(eteness

Summari?ationPresentation = Disc(osures


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< CONTRO# O!>ECTIVES '

E;amp(ePossible Error – Cash ReceiptsControl

Objectives

Debits to cash accounts are not for cashreceipts.

Completeness

Subsequent cash receipts are recorded in thecurrent period.

Timeliness

Cash receipts information is not correctlyposted to thecash receipts register.

Presentation& Disclosures

Totals in cash receipts register not correctlyposted to general ledger

Presentation& Disclosures

Cash receipts register is not correctly totaledSummarization

All cash receipts are not debited to cashaccounts.

Completeness

Current cash receipts are recorded insubsequent period.

Timeliness

Recorded cash receipts do not agree ith theamount deposited.

!aluation

Actual cash receipts are not recorded.Recorded

Debits to cash accounts are not represented byactual cash receipts.

Real


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AUDIT APPROAC@

Transactions Approac-

!a(ance Approac-


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!A#ANCE APPROAC@ %

Testin$Test of Transactions

Su*tantive Test of TransactionTest of Detai(s of !a(ances


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!A#ANCE APPROAC@ %

Sections A ' Permanent

! ' Contro(

C ' Cas- = !an&s

D ' Time Deposits E ' Receiva*(es

F ' Inventor)

G ' Prepa)ments =

Advances

@ ' Investment

I ' Intercompan)

> ' Ot-er Assets

' Fi;ed Assets

# ' Intan$i*(e Assets

N ' Accounts Pa)a*(es

O ' Ta;ations P ' Accrua(s ' #oan S ' Commitments =

Conti$encies

T ' E7uit) U9 ' Revenue

U3 ' E;penses

V ' Su*se7uent Event


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T@AN BOU

Documents

Audit an Introduction