ISA 7 đánh giá rủi ro và kiểm soát chất lượng kiểm toán

Chapter Assessing Specific Business Risks and Materiality Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-1 Assessing risk of material misstatement • AUS 406/ASA 330 (ISA 330) points out that when considering assessment of risk of material misstatement at assertion level, an auditor must relate these back to account balances/classes of transactions/disclosures • Needs to consider both the particular characteristics of each class of transaction, account balance or disclosure (inherent risks) and whether the auditor’s assessment takes account of the entity’s controls (control risk) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-2 Learning Objective 1: Inherent Risk (IR) • Inherent risk: – • Susceptibility of account balance or class of transactions to material misstatement, given inherent and environmental characteristics, without regard to internal control structure An assessment of IR and Control Risk (CR) can be combined or separate Irrespective of this, an auditor is required to: – – assess IR at financial report level for audit plan, assess related to assertions at account balance or class of transactions level when developing audit program Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-3 Business Risk (BR) and IR • Entity’s business strategy and associated risks will affect an auditor’s assessment of IR at the financial report level • Where an auditor can trace BRs to areas of a financial report which are likely to be misstated, this gives rise to a higher IR assessment for that area Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-4 Factors affecting IR at financial report level • • • • • Integrity of management; Management experience, knowledge and changes during the period; Unusual pressure on management; Nature of entity’s business; and Factors affecting the industry Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-5 Inherent risk and computer Information Technology (IT) • As IT risks can be pervasive to the entity, factors affecting overall IR associated with IT are: – – – – – – Significant changes in IT; Insufficient IT skills and resources; Lack of entity support and focus; High dependence on IT; Reliance on external IT; and Reliability and complexity of IT Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-6 Inherent risk assessment at assertion level • IR is greater for some assertions and related classes of transactions than for others • Auditors will normally focus on: – – – – – – Accounts likely to require adjustment; Complexity of underlying transactions; Judgment involved in determining account balance; Susceptibility of assets to loss or misappropriation; Occurrence of unusual and complex transactions, particularly at or near year-end; and Transactions not subject to ordinary processing Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-7 Effect of inherent risk on account balance assertion Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-8 Learning Objective 2: Special Areas of Audit Risk: FRAUD • At the planning stage, an auditor should consider the risk that misstatements from fraud or error will not be detected • It is easier to miss material misstatements resulting from fraud because fraud involves acts designed to conceal it Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-9 Audit procedures for fraud at planning stage • An auditor will use their experience, knowledge and training to determine whether fraud could occur • An auditor needs a thorough understanding of a client’s business in order to identify opportunities for the perpetration of fraud Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-10 Procedures for identifying related parties • • • • • • Review the previous period’s working papers for known related parties; make inquiries of management concerning the names of all related parties; review the entity’s procedures for identifying related parties; inquire about management’s and directors’ affiliations with other entities; review minutes of meetings; and inquire of other auditors involved in the audit Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-17 Learning Objective 4: Preliminary Assessment of Going Concern Basis • Going Concern: – – – Entity expected to pay debts as and when they fall due, and continue to operate without any intention necessarily to liquidate or otherwise wind up operations Refer AUS 708.03/ASA 570.06 (ISA 570.03) Auditors are required by Standards to assess going concern at planning stage Imminent business failure might have an effect on appropriateness of presentation of financial report or might motivate management misrepresentations Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-18 Preliminary Assessment of Going Concern Basis (cont.) • Early identification helps focus audit effort on appropriate assertions in the financial report, and permits early communication with management • An auditor focuses primarily on anticipated events during the relevant period, approximately 12 months from the date of the current audit report to the expected date of the next audit report Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-19 Examples of indications of going concern problems • Operating indicators include: – – – – – – – – – – Lack of strategic direction; Deficiencies in the governing body; Lack of management expertise; Concentration of risk in few products; Loss of major market; Prolonged industrial action; Shortages of important supplies; Deficiencies in management information systems; Rapid or unplanned development of business; and Uninsured or underinsured disasters See Table 7.2 (p 311) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-20 Examples of indications of going concern problems (cont.) • Financial indicators: – – – – – – – – – – High gearing; Fixed-term borrowings; Reliance on short-term borrowings; Adverse key financial ratios; Lack of sustainable operating profits; Dividend arrears; Inability to pay; Difficulty in complying with terms of loan agreements; Denial of trade credit; and Inability to obtain necessary financing See Table 7.2 (p 311) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-21 Examples of indications of going concern problems (cont.) • Other indications: – – – – – – Non-compliance with capital requirements; Undue influence of market-dominant competitor; Legal proceedings against the entity; Technical developments making key product obsolete; Adverse changes in legislation; and Failure of other entities in industry See Table 7.2 (p 311) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-22 Mitigating factors • Auditor should consider mitigating factors These include: – Asset factors – sale of assets, with delayed replacement – Debt factors – unused lines of credit, ability to renew or extend existing loans – Cost factors – ability to reduce costs – Equity factors – additional contributions from owners, subsidiaries or associates See Table 7.3 (p.312) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-23 Learning Objective 5: Materiality • Materiality: – • Information, which if misstated, omitted, or not disclosed separately in a financial report may adversely affect either user decisions or the discharge of accountability by management Refer AUS 306.03/ASA 320.06 (ISA 320.03) Auditor uses materiality to: – – Evaluate the presentation of financial data Determine the nature, timing and extent of audit procedures (sometimes called planning materiality) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-24 Quantitative guidelines: MATERIALITY • • • • • Material   10% of appropriate base amount Immaterial   5% of appropriate base amount Judgment  5-10% of appropriate base amount Base amount for balance sheet items  equity, or the appropriate asset or liability class total Base amount for income statement items  net profit or loss and appropriate revenue and expense amount, for year or averaged over a number of years Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-25 Setting the preliminary materiality judgment • When planning the audit, an auditor makes a preliminary estimate of the amount to be considered material for audit purposes • Conceptually encompasses: – – – • Known misstatements; Likely misstatements; and Potential undetected misstatements A single amount is normally estimated for materiality because misstatements usually affect both balance sheet and income statement Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-26 Rules of thumb for planning materiality Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-27 Financial information used as base • Can be taken from: – – – Financial report to be audited (if available); Annualised interim financial information; or Previous period’s financial reports Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-28 Consideration of qualitative factors in materiality • An auditor should consider qualitative factors as well as quantitative assessment Qualitative factors include: – – – The significance of the item of the particular entity; The pervasiveness of the misstatement (for example the misstatement might affect the presentation of numerous items in the financial report); and The effect of misstatement on the financial report as a whole Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-29 Allocation of materiality to account balances and classes of transactions • An auditor needs to allocate planning material to account balances and classes of transactions for audit testing (Auditing standards are silent on this issue.) • No required or optimal method, but an auditor should consider: • Dollar value of account • Expectation of error Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-30 Relationship between materiality and audit risk • There is an inverse relationship between audit risk and materiality • An auditor sets a lower materiality threshold for accounts that have a higher audit risk This means the auditor will need to collect more evidence for these accounts Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-31 ... controls (control risk) Copyright  2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger... Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett 7-14 Considering illegal acts • AUS 218/ASA 250 (ISA 250) provides guidance on an auditor’s consideration... by Roger Simnett 7-20 Examples of indications of going concern problems (cont.) • Financial indicators: – – – – – – – – – – High gearing; Fixed-term borrowings; Reliance on short-term borrowings;