BUSINESS WITH CONFIDENCE icaew.com QAD WEBINAR 2012 Presented by: Stacey Hillyard, QAD reviewer Henrietta Thompson, QAD reviewer
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Contents Audit Monitoring Report 2011 Clarified ISAs – common problem areas Professional scepticism Q & A
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Ask a question Participate in today’s webinar – send us a question
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 QAD audit visit outcomes 2011 Visits closed without follow-up action69% Some further follow-up action21% Detailed report to Audit Registration Committee10%
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Reports to ARC
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 QAD initiatives in 2011 Roadshows Webinars Mid visit cycle
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Clarified ISAs – common problem areas Accounting estimates Related parties Risk of fraud – – revenue recognition – management override of controls Performance materiality Group audits
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 ISA Accounting estimates Planning stage: – Estimates either not identified or recording vague/incomplete – Lack of evidence of discussion with management – review of outcome of PY estimate – either not performed or poorly recorded – High level of estimation uncertainty – not assessed as a significant risk
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 ISA Related parties Inquiries with management Discussion of RP fraud risk at team meeting Weak documentation of RPs
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 ISA Fraud considerations Revenue recognition: – no justification of low risk assessment “N/A covered by audit work” !! “No risk as no cash income” – If significant risk assessed – unclear if sufficient work performed Management override controls: – Para 32 procedures – work missing or poorly documented
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 ISA Materiality F/S level materiality: – No consideration for using separate levels – Questionable benchmark used Performance materiality: – Not calculated – Some cases too low!
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 ISA Group audits Lack of communication with component auditors and weak documentation: – Understanding of CA, recording of the assessment and scope of work – Significant components – involvement in risk assessment/communication – Review and conclusion on adequacy of CA audit work
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Professional scepticism
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Characteristics A questioning mind Self confidence Not jumping to conclusions Understanding management behaviour and motivations
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Professional scepticism Fraud risk – Team meeting “fraud is low risk as no previous history of fraud” “fraud is low risk as the client is long standing”
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Professional scepticism Substantive analytical review – Management explanations Provisions – Review of prior year outcome – Lack of provision Going concern – Recording of discussions
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Professional scepticism
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Cold file reviews – the first line of defence! Identify where audit work can be improved Evidence of follow up CFR process – small firms – Annual CFR (either internal or external) – External CFR every 3 rd year External reviews
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 Resources and support Audit & Beyond CPD aide memoire Audit News ICAEW Practice Support Services Technical Advisory Services ICAEW website
BUSINESS WITH CONFIDENCE icaew.com © ICAEW 2012 QUESTIONS & ANSWERS
A world leader of the accountancy and finance profession BUSINESS WITH CONFIDENCE icaew.com