2015 AUDIT AND ASSURANCE STUDY TEXT CAF-09 ICAP P Audit and Assurance Second edition published by Emile Woolf International Bracknell Enterprise & Innovation Hub Ocean House, 12th Floor, The Ring Bracknell, Berkshire, RG12 1AX United Kingdom Email: info@ewiglobal.com www.emilewoolf.com © Emile Woolf International, February 2015 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, without the prior permission in writing of Emile Woolf International, or as expressly permitted by law, or under the terms agreed with the appropriate reprographics rights organisation You must not circulate this book in any other binding or cover and you must impose the same condition on any acquirer Notice Emile Woolf International has made every effort to ensure that at the time of writing the contents of this study text are accurate, but neither Emile Woolf International nor its directors or employees shall be under any liability whatsoever for any inaccurate or misleading information this work could contain © Emile Woolf International ii The Institute of Chartered Accountants of Pakistan Certificate in Accounting and Finance Audit and Assurance C Contents Page Syllabus objective and learning outcomes v Chapter Concept and need for assurance Obtaining an engagement 25 Planning and risk assessment 37 Evidence and sampling 71 Internal control 95 Flowcharts and IT concepts 127 Tests of controls 143 Introduction to substantive procedures 175 Substantive procedures: non-current assets 197 10 Substantive procedures: current assets 209 11 Substantive procedures: other areas 239 12 Related party transactions 261 13 Reliance on others 271 14 Professional ethics and codes of conduct 291 15 Audit finalisation and reporting 307 16 International standards on review engagements 365 Index © Emile Woolf International 377 iii The Institute of Chartered Accountants of Pakistan Audit and Assurance © Emile Woolf International iv The Institute of Chartered Accountants of Pakistan Certificate in Accounting and Finance Audit and Assurance S Syllabus objective and learning outcomes CERTIFICATE IN ACCOUNTING AND FINANCE AUDIT AND ASSURANCE Objective To acquire knowledge of theory, skill, techniques of auditing and to enable the students to understand International Standards on Auditing, Assurance and Ethics Learning Outcome On the successful completion of this paper candidates will be able to: Demonstrate knowledge of general concepts governing an audit Demonstrate working knowledge in respect of performance of simple audit procedures and understand the audit report requirements under the Companies Ordinance, 1984 and under the International Standards for Auditing (ISAs) Understand the requirement and application guidelines relating to some of the specific areas of audit procedures including external confirmation, review of subsequent event etc Comprehend nature of engagements of review of financial statements Demonstrate familiarity with computer programming and IT controls relevant to financial reporting Respond on audit matters in the light of fundamental principles given in the Code of Ethics © Emile Woolf International v The Institute of Chartered Accountants of Pakistan Audit and Assurance Grid Weighting General concepts and principles of audit 15-20 Performance of audit and reporting 25-35 Specific areas 20-25 Computer programming and IT controls 10-15 Professional Ethics 10-15 Total Syllabus Ref A Contents Level 100 Learning Outcome General concepts and principles of audit Introduction to International Federation of Accountants LO1.1.1: Briefly describe the organizational overview encompassing History; Vision and mission Introduction to international auditing and assurance standard setting body LO1.2.1: Briefly describe the objectives and functions of IAASB Objective and general principal governing an audit (ISA 200) LO1.3.1: Describe the objectives of audit including concepts of accountability, stewardship, agency, independence and fair presentation LO1.3.2: Describe the overall objectives of the independent auditor LO1.3.3: Describe the concepts of assurance and levels of assurance i.e absolute, reasonable and limited assurance including elements of an assurance engagement, assurances provided by audit and review engagement LO1.3.4: Explain the requirement of an external audit, eligibility and ineligibility of auditor LO1.3.5: Describe the rights and duties of auditors LO1.3.6: Explain the nature and scope of an audit designed to enable the independent auditor to meet those objectives © Emile Woolf International vi The Institute of Chartered Accountants of Pakistan Syllabus and study guide Syllabus Ref Contents Level Learning Outcome LO1.3.7: Outline the requirements establishing the general responsibilities of the independent auditor applicable in all audits including consideration of inherent limitation of an audit LO1.3.8: Discuss the concept of professional scepticism Responsibility for the financial statements LO1.4.1: Understand the responsibility of management and those charged with governance for financial reporting and related internal control on financial reporting Auditors responsibility to consider fraud (ISA 240) LO1.5.1: Distinguish between the terms ‘error’, ‘fraud’ and misstatement’ LO1.5.2: Compare the respective responsibilities of management and auditors for fraud LO1.5.3: Describe the matters to be considered and procedures to be carried out to assist the auditor in identifying, assessing and detecting the risks of material misstatement due to fraud LO1.5.4: Identify the fraud risk factors in the simple scenario as given in the appendix of ISA 240 LO1.5.5: Identify the circumstances that indicate the possibility of fraud in the simple scenario as given in the appendix of ISA 240 Legal consideration relating to appointment and removal of auditors (sections 252 to 260 of the Companies Ordinance 1984) LO1.6.1: Explain how the first and subsequent auditors are appointed LO1.6.2: Explain how the first and subsequent auditors are removed LO1.6.3: Explain the procedure of resignation of auditors LO1.6.4: Describe qualification and disqualification of the auditor LO1.6.5: Describe the powers and duties of auditors LO1.6.6: Describe the concept of audit of cost accounts © Emile Woolf International vii The Institute of Chartered Accountants of Pakistan Audit and Assurance Syllabus Ref Contents Level Learning Outcome LO1.6.7: Discuss the additional matters to be included in the auditor’s report LO1.6.8: Discuss the auditor’s responsibilities with respect to attendance at general meeting and access to books and records Terms of Audit engagements (ISA 210) LO1.7.1: Describe the preconditions for an audit and upon which it is necessary for the auditor and the entity’s management to agree LO1.7.2: Respond if preconditions are not present or limit is imposed on scope of audit in well explained simple situations LO1.7.3: State the contents of an audit engagement letter LO1.7.4: Discuss the requirement of issuance of engagement letter and factors that necessitate the issuance of engagement letter in case of recurring audit LO1.7.5: Discuss the circumstances of acceptances of changes in terms of engagement by the auditor B Performance of audit and reporting Planning an audit (ISA 300) LO2.1.1: Discuss the need for planning an audit including contents of an audit plan and its relation with risk assessment LO2.1.2: Discuss the contents of overall audit strategy and audit plan LO2.1.3: State who should be involved in planning and what preliminary engagement activities are necessary LO2.1.4: Discuss overall planning and the audit plan for a recurring audit LO2.1.5: Outline the additional considerations that should be identified while planning the initial audit © Emile Woolf International viii The Institute of Chartered Accountants of Pakistan Audit and Assurance 1.4 Engagements to review financial information (ISRE) 2400 Objectives of ISRE 2400 ISRE 2400 Engagements to review financial information sets out the objective of a review of financial statements as follows The objective of such a review is: ‘…to enable an auditor to state whether, on the basis of procedures which not provide all the evidence that would be required in an audit, anything has come to the auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with an identified financial reporting framework.’ (This quote is © International Federation of Accountants and is reproduced with kind permission.) Note that a review: requires less evidence than an audit, and has an opinion that is expressed in negative terms: (it gives ‘negative assurance’) Because a review engagement provides a lesser form of assurance than an audit, the work for the review will usually be limited to analytical review and other review procedures Detailed verification work (for example, substantive tests) will not usually be carried out This will usually mean that fewer accountancy staff, but more experienced staff, will be required for a review engagement than for an audit Principles to apply to review engagements ISRE 2400 set outs the following general principles that should be applied to a review engagement The practitioner should: comply with relevant codes of ethics plan and perform the work with an attitude of professional scepticism, recognising that material misstatements may exist in the information that is subject to review obtain sufficient and appropriate evidence, primarily through inquiry and analytical procedures The actual terms of a review engagement should be agreed with the client, and set out in an engagement letter Procedures for a review of financial statements Procedures for the review of financial statements will usually include the following: The practitioner should obtain an understanding of the entity’s business and the industry in which it operates The practitioner should make inquiries into: the entity’s accounting policies, practices and procedures, including the preparation of financial statements material assertions in the financial statements that are subject to the review © Emile Woolf International 370 The Institute of Chartered Accountants of Pakistan Chapter 16: International standards on review engagements decisions taken at board meetings and other meetings of the entity that may affect the financial statements the completeness of the accounting records that were used to prepare the financial statements The practitioner will use analytical procedures These should be designed to identify unusual relationships between items in the financial statements, and individual items that appear unusual Analytical procedures would include: comparing the financial statements under review with financial statements for prior periods comparing the financial statements with the anticipated results and financial position of the entity a study of the relationships between elements in the financial statements that should be expected to conform to a predictable pattern (based on the entity’s past experience or normal ratios/relationships for the industry as a whole) Other procedures that will usually be carried out in a review of financial statements include: discussions with the company’s auditors (if the audit firm is not the firm of accountants that is performing the review engagement) obtaining representations from management considering the appropriateness of the accounting policies employed by the entity making inquiries into subsequent events (after the date of the statement of financial position) making a review of the statements as a whole If the practitioner finds information indicating that misstatements might exist in the financial statements, the scope of the work should be extended 1.5 Reporting at the end of a review engagement The outcome of a review engagement will be a report from the practitioner The report will be in one of two main forms, depending on whether: no matters have come to the attention of the practitioner, which indicate that a true and fair view is not presented some matters have come to the attention of the practitioner, indicating that a true and fair view might not be presented (outside the scope of this exam) No matters have come to the attention of the auditor In this situation the auditor will issue a report giving a clear expression of negative assurance An example of such a report, based on ISRE 2400, is given below © Emile Woolf International 371 The Institute of Chartered Accountants of Pakistan Audit and Assurance REVIEW REPORT We have reviewed the accompanying balance sheet of ABC Company at December 31, 20XX, and the income statement, statement of changes in equity and cash flow statement for the year then ended These financial statements are the responsibility of the Company’s management Our responsibility is to issue a report on these financial statements based on our review We conducted our review in accordance with the International Standard on Review Engagements 2400 This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit We have not performed an audit and, accordingly, we not express an audit opinion Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial statements not give a true and fair view (or are not presented fairly, in all material respects) in accordance with International Accounting Standards PRACTITIONER Date Address Note the negative assurance that is given in the report – nothing has come to the attention of the practitioner to indicate that a material misstatement exists 1.6 Review of Interim Financial Information (ISRE) 2410 ISRE 2410 Review of interim financial information performed by the independent auditor of the entity deals with a more specific topic than ISRE 2400 It deals with the review carried out by a company’s external auditors of the interim financial statements (mid-year financial statements), where companies are required to produce interim statements The interim financial statements are not subject to a full audit; however, they are subject to a review On the whole general auditing principles apply to this type of review, as set out below The auditing firm that reviews interim financial information (IFI) is normally the external auditor for the end-of-year accounts The audit firm should: comply with the same ethical requirements as it does for the main audit implement appropriate quality control procedures plan and perform the review with an attitude of professional scepticism agree the terms of engagement with the client in an engagement letter prepare documentation sufficient to support the auditor’s review conclusions and to provide evidence that the review was conducted in accordance with ISRE 2410 © Emile Woolf International 372 The Institute of Chartered Accountants of Pakistan Chapter 16: International standards on review engagements 1.7 Procedures for the review of interim financial information Procedures for the review of interim financial information (IFI) should include the following: The auditor should obtain an understanding of the entity and its environment, including its internal controls, in order to: assess the risk of misstatement in the financial statements select appropriate ‘audit’ procedures for the review The auditor should make inquiries and perform analytical procedures sufficient to reach a conclusion for the review This conclusion should be about whether anything has come to the auditor’s attention to indicate that the IFI has not been prepared, in all material respects, in accordance with the applicable financial reporting framework (As with ISRE 2400, the auditor’s opinion is expressed in negative terms.) If any such matters come to the auditor’s attention, the auditor should make additional inquiries or perform other procedures in order to obtain more information The auditor should check that the IFI agrees or reconciles to the underlying accounting records The auditor should discover whether management has: taken subsequent events into account, and made an assessment of the entity’s ability to continue as a going concern The auditor should evaluate any uncorrected misstatements in the IFI, both individually and in aggregate (This is the same as for the annual audit.) The auditor should obtain written representations from management that: they acknowledge their responsibility for internal controls the IFI has been prepared and presented in accordance with the applicable financial reporting framework they believe the effect of any uncorrected misstatements are immaterial, both individually and in aggregate there has been full disclosure of all significant facts, risk assessment, possible or actual non-compliance with laws and regulations, and subsequent events The auditor should ensure that any other information issued with the IFI is materially consistent with the IFI 1.8 Reporting on the review of interim financial information The auditor should issue a written report on the review of the IFI This report should consist of the following elements: Title: Review of the IFI Addressee Identification of the IFI that has been reviewed This should include the title of each of the financial statements in the set of financial statements subject to review, and the end-of-period date and the period covered by the IFI © Emile Woolf International 373 The Institute of Chartered Accountants of Pakistan Audit and Assurance A statement that management is responsible for preparing the IFI in accordance with the applicable financial reporting framework, and for its fair presentation When the IFI consists of a complete set of general-purpose financial statements that should be prepared in accordance with a financial reporting framework, and the statements are designed to achieve fair presentation, the review report should include an auditor’s conclusion This conclusion should state whether anything has come to the auditor’s attention that causes him to believe that the IFI does not give a true and fair view in accordance with the applicable financial reporting framework A statement that the auditor is responsible for expressing a conclusion on the IFI, based on the review that the auditor has carried out A statement that the review of the IFI was conducted in accordance with ISRE 2410, and a statement that that this review consisted of making inquiries and applying analytical procedures and other review procedures A statement that a review is substantially less in scope than an audit conducted in accordance with ISAs Consequently the review does not enable the auditor to obtain assurance that he would become aware of all significant matters that might be identified in an audit Accordingly, no audit opinion is expressed (and the auditor expresses a negative opinion rather than a positive opinion) Date of the report Location in the country or jurisdiction where the accountancy firm practises Signature of the auditor Example: Shown below is an example of an unmodified report, based on ISRE 2410 The report relates to IFI comprising a complete set of general purpose financial statements prepared in accordance with IFRSs (In other words, the report relates to a review of IFI that uses a financial reporting framework designed to achieve fair presentation.) Note that ISRE 2410 has not yet been updated for the changes in terminology introduced by the revision of IAS Presentation of financial statements © Emile Woolf International 374 The Institute of Chartered Accountants of Pakistan Chapter 16: International standards on review engagements REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION (Appropriate addressee) Introduction We have reviewed the accompanying balance sheet of ABC Entity as of March 31, 20XX and the related statements of income, changes in equity and cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory notes Management is responsible for the preparation and fair presentation of this interim financial information in accordance with [indicate applicable financial reporting framework] Our responsibility is to express a conclusion on this interim financial information based on our review Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit Accordingly, we not express an audit opinion Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with [applicable financial reporting framework, including a reference to the jurisdiction or country of origin of the financial reporting framework when the financial reporting framework used is not International Financial Reporting Standards] AUDITOR Date Address © Emile Woolf International 375 The Institute of Chartered Accountants of Pakistan Audit and Assurance CHAPTER REVIEW Chapter review Before moving on to the next chapter check that you now know how to: Distinguish between audit and audit-related services such as reviews Describe different types of review engagements Discuss what is involved in a due diligence engagement Explain the requirements of ISRE 2400 Engagements to review financial information Explain the requirements of ISRE 2410 Review of interim financial information © Emile Woolf International 376 The Institute of Chartered Accountants of Pakistan Certificate in Accounting and Finance Audit and Assurance I Index Attestation engagement Audit approach documentation ISA 230 evidence reliability ISA 500 file plan procedures - reserves programmes report sampling - ISA 530 software strategy trail working papers Audit of equity liabilities prepayments Audit risk approach assessment model Audit work after the count: follow up before the count during the count Auditing standards a Accepting an audit appointment: ethical matters 29 Accountability Accounting controls 108 Accounting for purchases 156 Accruals 244 Accuracy and Valuation 179 Accuracy controls 109 Adjusting events 310 Advertising and publicity 27 Advocacy threat 295, 297 Agency Analytical procedures in substantive testing 191 Analytical procedures 46, 77, 188 Annual review of the engagement letter 34 Application controls 108 Appropriate audit evidence 74 Arithmetic controls 108 Assertion level 51 Assessment of risk 97 Assurance engagement Assurance provided by audit review Assurance © Emile Woolf International 377 368 98 81 81 73, 183 75 73 81 39, 42 252 43 4, 321 86 180 42 124 81 252 241 234 51, 52 48 121 51, 52 223 220 221 17 The Institute of Chartered Accountants of Pakistan Audit and Assurance Auditor opinion Audit-related services Authorisation controls 323 367 108 Contingencies Contingent assets liabilities Continuity of operations Control activities environment risk totals Counting procedures Current file Customer ordering Cut-off b Bank and cash balances system Bank balances -confirmation of balances Bank confirmation letter Batch totals Business and materiality Business risks 235 164 235 236 113 45 46 247 247 107 103 51, 101 53 112 217 83 149 179, 219, 233 d Debt ratios 194 Despatch of goods and invoicing 151 Detection risk 53 Direct confirmation 225 of balances 225 Direct reporting engagement 368 Directional testing 185, 241 Directors’ emoluments 254 Documentary evidence 185 Due care 294 diligence 368 skill and care 294 Duties of the auditor 13 Duty of confidentiality 302 c CAATs 145 Check digits 112 Circularisation 225 Classification and Understandability 179 Client screening 29 Closing inventory 211 Code of Ethics for Chartered Accountants 293 Common ratios 193 Communication with component auditors 277 Companies Ordinance 1984 27, 330 Completeness controls 108 Completeness 178 Component auditors 274, 276 Computer-assisted audit techniques (CAATs) 145 Computer-based audit working papers 85 Conceptual framework 295 Confidentiality 294, 302 Confirmation exercise 227, 230 Confirmation of receivables balances 225 Constructive obligation 246 Content of engagement letter 34 © Emile Woolf International 249 e Electronic data interchange (EDI) 125 Elements of an assurance engagement Embedded audit facilities 181, 182 Emphasis of matter 357 Engagement letter 34 (ISA 210) 33 Entity’s risk assessment process 102 Error 57 378 The Institute of Chartered Accountants of Pakistan Index Ethical conflict resolution Evaluating controls Evaluation of controls process Existence check Expectation gap Expected misstatement or rate of deviation Expenses Expert Exposure draft External and internal audit audit confirmation Extrapolating Group audits and the audit of individual group companies Group audits possible problems preliminaries Group engagement partner team 305 121 121 121 179 113 321 91 258 288 18 Haphazard sampling 281 77 92 © Emile Woolf International 90 i IAASB (International Auditing and Assurance Standards Board) 18 IAPS 1000 Inter-bank confirmation procedures 235 IAS 2: Inventories 213 IAS 10: Events after the reporting period 310 IAS 24: Related party disclosures 254, 263 IAS 37: Provisions, Contingent Liabilities and Contingent Assets 245 IFAC (International Federation of Accountants) 17 Independence 4, 301 Information processing 103 system 102 Inherent risk 52 Inquiry 77,183 Inspection 76,183 Intangible non-current assets 205 Integrated audit module 182 Integrity 293, 301 Interest paid and received 258 Interim audit 43 Interim financial information (IFI) 372,373 Internal audit 7, 278 Internal control - elements 100 Internal control evaluation questionnaire (ICEQ) 132 Internal control questionnaire (ICQ) 130 295, 298 15 28 78, 177 47,51 134 134 134 134 57 57 58 58 293 g Goodwill Group auditor responsibilities accepting an appointment 274 274 h f Fair presentation Familiarity threats Federal government Fees Financial statement assertions Financial statement level Flowcharts: Deployment Drawing flowcharts Linear Opportunity Fraud ISA 240 risk factors Fraudulent financial reporting Fundamental principles 273 274 273 274 205 273 274 274 379 The Institute of Chartered Accountants of Pakistan Audit and Assurance Internal control systems 47,100 limitations 115 small entities 115 Internal control systems: recording 129 systems flowcharts 129 Internal controls 97, 100 evaluation 121 International Standards on Auditing (ISAs) 17 International Standards on Quality Control (ISQCs) 19 Intimidation threats 298, 295 Inventory count 220 Inventory quantity - the physical inventory count 215 Inventory system 168 Inventory 213 Investor ratios 194 Involvement of the group auditor in the work performed by component auditors 277 ISA 200: Overall objectives of the independent auditor and the conduct of an audit in accordance with International Standards on Auditing 20 ISA 210: Agreeing the terms of audit engagements 33 ISA 220 275 ISA 230: Audit documentation 81 ISA 240: The auditor’s responsibilities relating to fraud in an audit of financial statements 57 ISA 300: Planning an audit of financial statements 40 ISA 315: Identifying and assessing the risks of material misstatement through understanding the entity and its environment 45, 120 ISA 320: Materiality in planning and performing an audit 48 ISA 330: The auditor’s responses to assessed risks 51 ISA 500: Audit evidence 73 ISA 501: Audit evidence – Additional considerations for specific items 216 ISA 505: External confirmations 226 ISA 530: Audit sampling 87 ISA 550: Related parties 263 © Emile Woolf International ISA 560: Subsequent events 310 ISA 610: Using the work of internal auditors 278, 282 ISA 620: Using the work of an auditor’s expert 288 ISA 700: The auditor’s report on financial statements 321 ISAs 17 ISRE 2400: Engagements to review financial information 370 ISRE 2410: Review of interim financial information performed by the independent auditor of the entity 372 Issuing 17 IT controls 105,111,112 Communications protocol 138 Controls over data transmission 140 Data encryption techniques 137 Open system interconnection (OSI) model 138 Physical access controls 137 System logs 139 IT systems 123 j Judgemental sampling 88 l Legal obligation Letter of instruction representation Levels of assurance materiality Liability Limitations of statutory audits Liquidity ratios Low-balling 380 246 277 316 48 245 22 193 29 The Institute of Chartered Accountants of Pakistan Index Output controls m Overall review of the Financial statements Ownership, custody and confidentiality Management controls 103 Management override of controls – auditor’s response 116 Management representations - ISA 580 315 Master files 109 Material risk of misstatement 48 Materiality concept Materiality level 49 Materiality 4, 48,276 Measuring a provision 246 Microcomputer systems 123 Misappropriation of assets 58 Modification to audit opinion 337 Monitoring of controls 111 © Emile Woolf International 85 Paper audit trail 125 Payroll costs 257 system 158 Penalty for non-compliance with the Companies Ordinance 1984 333 Performance reviews 103 Permanent file 82 Physical controls 104 count 237 Placing orders 154 Planning an audit - ISA 300 39 Planning and controlling a group audit 276 Positive assurance confirmation 228 Preconditions 33 Preface to International Standards 19 Prepaid expenses 234 Principal controls 150 Principal risks of misstatement 200 Procedures after accepting an appointment 30 Processing controls 109 Professional behaviour 27, 294 competence 294 ethics 293 scepticism 39, 57 Profitability ratios 193 Program changes 106 Provisions and contingencies: IAS 37 245 Provisions 245 Purchased goodwill 205 129 228 213 310 170, 199,205 250 87 277 88 66 o Objectivity Observation Obtaining audit work Occurrence Online systems On-screen prompts Other matter 320 p n Narrative notes Negative assurance Negative confirmation Net realisable value (NRV) Non-adjusting events Non-current assets liabilities Non-sampling risk Non-significant components Non-statistical sampling Not-for-profit organisations 109 293, 301 76 27 178 124 114 357 381 The Institute of Chartered Accountants of Pakistan Audit and Assurance Purchases and expenses system cut-off 256 154 220, 243 s Safeguards Sales cut-off Sales system Sample design Sample selection method Sampling risk unit Segregation of duties Self-interest threats Self-regulation by the audit profession Self-regulation Self-review threats Share capital Significant components Small company audit exemption Small entities – internal controls Specialised IT systems Specific IT controls Statistical sampling Statutory audits books requirement for audit Stewardship Stratified sampling Subsequent events - ISA 560 Substantive procedures additions and disposals trade receivables and prepayments Substantive approach procedures Substantive testing for inventory Sufficient Systematic sampling Systems approach flowcharts Systems-based approach q Questionnaires 130 r Random sampling selection Range check Reasonable assurance Recalculation Receiving goods and invoices Recognising a provision Recording and accounting for purchases and expenses Recording methods Recording sales and accounting Regulatory framework Related parties: ISA 550 Related party transactions Removal of auditors Remuneration of the auditor Reperformance Report of work performed Resident audit software Resignation of auditors Resolutions Responses to assessed risks Revenue Review engagements Review of financial statements Review Rights and duties of auditors Rights and obligations Risk and materiality Risk assessment Risk of misstatement Risk-based approach to auditing © Emile Woolf International 89 88 113 77 155 246 156 129 153 263 263 11 10 77 277 182 13 10 51 256 367 370 13 179 47 39 42 51 382 298 219 149 88 230 89 86, 87 87 89 104, 109 295, 296 15 15 295, 297 252 275 15 115 123 112 87, 88 22 253 89 310 202 225 48 98, 177 211 74 90 48 129 98 The Institute of Chartered Accountants of Pakistan Index t u Tangible non-current assets 199 substantive procedures 200 Tax and other deductions 160 Tendering 29 Test data 146 Testing the ‘reciprocal population’ 186 Tests of control 145, 150, 152 detail 51 Threats to the fundamental principles 295 Threats 296 Tolerable misstatement or deviation 90 Trade payables 241 Trade receivables 225 Transaction cycles 145 Transactions-based approach 98 True and fair view Turnbull Report 98, 100 Unmodified audit report – Companies ordinance 1984 Unmodified audit report - ISA 700 © Emile Woolf International 330 323 v Valuation of inventory - Substantive testing procedures 213 w Wages and salaries 158,160,161 Walk-through testing 101 Walk-through tests 112 Working capital efficiency ratios 193 383 The Institute of Chartered Accountants of Pakistan Head Office-Karachi: Chartered Accountants Avenue, Clifton, Karachi-75600 Phone: (92-21) 99251636-39, UAN: 111-000-422, Fax: (92-21) 99251626, e-mail: info@icap.org.pk Regional Office-Lahore: 155-156, West Wood Colony, Thokar Niaz Baig, Raiwind Road, Lahore Phone: (92-42) 37515910-12, UAN: 111-000-422, e-mail: lahore@icap.org.pk Islamabad Office: Sector G-10/4, Mauve Area, Islamabad UAN: 111-000-422, Fax: (92-51) 9106095, e-mail: islamabad@icap.org.pk Faisalabad Office: 36-Z, Commerical Center, Near Mujahid, Hospital Madina Town, Faisalabad Phone: (92-41) 8531028, Fax: (92-41) 8503227, e-mail: faisalabad@icap.org.pk Multan Office: 3rd Floor, Parklane Tower, Officers’ Colony, Near Eid Gaah Chowk, Khanewal Road, Multan Phone: (92-61) 6510511-6510611, Fax: (92-61) 6510411, e-mail: multan@icap.org.pk Peshawar Office: House No 30, Old Jamrud Road, University Town, Peshawar Phone: (92-91) 5851648, Fax: (92-91) 5851649, e-mail: peshawar@icap.org.pk Gujranwala Office: 2nd Floor, Gujranwala Business Center, Opp Chamber of Commerce, Main G.T Road, Gujranwala Phone: (92-55) 3252710, e-mail: gujranwala@icap.org.pk Sukkur Office: Admin Block Sukkur IBA, Airport Road, Sukkur Phone: (92-71) 5806109, e-mail: sukkur@icap.org.pk Quetta Office: Civic Business Center, Hali Road, Quetta Cantt Phone: (92-81) 2865533, e-mail: quetta@icap.org.pk Mirpur AJK Office: Basic Health Unit (BHU) Building Sector D, New City Mirpur, Azad Jammu and Kashmir e-mail: mirpur@icap.org.pk 2015 AUDIT AND ASSURANCE STUDY TEXT ... Accounting and Finance Audit and Assurance Concept and need for assurance Contents The meaning of audit The meaning of assurance Statutory audit - the regulatory framework International Standards on Auditing... ACCOUNTING AND FINANCE AUDIT AND ASSURANCE Objective To acquire knowledge of theory, skill, techniques of auditing and to enable the students to understand International Standards on Auditing, Assurance. .. of theory, skill and techniques of auditing and to enable the students to understand International Standards on Auditing, Assurance and Ethics General concepts and principles of audit LO On the