PERFOMING THE AUDIT & EVALUATION OF MISSTATEMENTS

Discussion outline Introduction, Evidence gathering techniques, Step by Step Approach: Key Focus Areas, Working papers, Exercise.

Introduction: Where Are We?

Introduction: Applicable Standards On level 3 of the ISSAI framework ISSAI 200 par. 102; ISSAI 200 par. 126 ISSAI 200 par. 134-138; ISSAI 200 Par. 139-142 On level 4 of the ISSAI framework ISSAI 1240; ISSAI 1250; ISSAI 1315; ISSAI 1330 ISSAI 1450; ISSAI 1500; ISSAI 1520; ISSAI 1530

Introduction: Objectives Performing relevant procedures for each material class of transactions, account balance and disclosure, irrespective of the assessed risks of material misstatement; Determining the extent of testing (sample sizes) Documenting audit procedures in such a way as to obtain sufficient appropriate audit evidence and thus draw conclusions on which to base the auditor’s opinion; Keeping a full record of misstatements identified during the audit; Identify key audit matters and concluding on whether sufficient audit work has been done for all components.

Evidence gathering techniques, Inspection Observation Inquiry Confirmation Recalculation Reperformance Analytical reviews

Exercise Evidence gathering For each identified technique: 1. Identify a situation where it is applicable, 2. Identify the type of evidence to be obtained.

Step by Step Approach: Key Focus Areas, Perform and document audit procedures, 2. Compile a full record of misstatements identified during the audit, 3. Conclude whether all audit work has been completed sufficiently for all components, 4. Perform audit work for the overall financial statements.

Step1: Perform and document audit procedures Test of Controls Step Key Focus Area 1. Determine the sample size, Recommended Sample size 2. Select the sample items, Random Number Sampling Vs Interval Sampling 3. Perform the planned procedures on the selected items, Workpaper PA 1 4. Evaluate the sample results and conclude. The 4 options/possibilities  

Exercise TEST OF CONTROLS

Step1: Perform and document audit procedures Substantive Analytical Procedures Step Key Focus Area 1. Establish the expected value of the population being audited Dependent variables/indicators 2. Define the tolerable error margin 5% of expectation threshold 3. Compare results and conclude Investigate differences - W/p PA 2; 4  

Exercise ANALYTICAL PROCEDURES

Step1: Perform and document audit procedures Substantive Test of Details Step Key Focus Area 1. Determine the sample size 100%; Stratification and Sampling 2. Select the sample items Random Number Sampling Vs Interval Sampling 3. Perform the planned procedures on the selected items Work paper PA 2; 3 4. Evaluate the sample results and conclude Projected misstatement formula  

Exercise TEST OF DETAIL

STEP 2: Accumulate and evaluate misstatements   Step Key Focus Area is Work paper PA 6 a. Obtain an understanding of the results of audit procedures performed on individual financial statement items, b. Accumulate the misstatements taking into consideration the correction of misstatements, c. Consider the effect of uncorrected misstatements from the prior period, d. Determine whether uncorrected misstatements are material individually or in aggregate.

Exercise evaluate misstatements

STEP 3: Perform audit work for the overall financial statements   Step Key Focus Area 1. Confirm the teams independence, none 2. Consider subsequent events, 3. Update lead schedule and perform final analytical review, Work paper UE 1 Step 8

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