Substantive procedures of NCA
- Physical inspection
- Trace NCA register to NCA for existence
- Trace NCA to NCA register to ensure completeness
- If newly purchased NCA, scrutinise purchase invoice. If material, check board minutes
- If disposed, check cash receipts. If material check board minutes
- Scrutinise repairs and maintenance
- Reconciliation of balance of NCA register and general ledger balance and fs figures
- Reperform calculations of depreciation
- Inspect documents for title of ownership
- Check disposals: NCA register adjusted, depreciation taken out, profit and loss koss recorded
Revaluation substantive procedures
- Where an asset has been revalued, IAS 16 followed
- Agree revaluation amount
- Confirm gain has been recorded in OCI and revaluation surplus
- Recalculate depreciation expense, transfer excess depreciation from revaluation surplus to retained earnings
- Obtain copy of valuers report and ensure reliability using
Basis of valuation, experience, qualifications, reputation, independence objectivity - Appropriate disclosure according to ifrs
- Reperform calculations
- Compare valuation of other similar properties
Function of Internal audit
- Examine, evaluate, report to mngmt and directors about adequacy and effectiveness of IC
- Helps achieve corporate objectives
- Test IT controls
- Value for money audit
- Liases with external audit
- Aids risk assessment
Using work of internal audit
- Objective
- Competent
- Applies sytematic and disciplined approach
Management experts
Helps in preparation of financial statements
Use of mngmt expert
1. Check objectivity
2. Check competence
3. Appropriateness
4. Consistent with other data
5. Whether it is sufficiently reliable
Auditors expert
To assist auditors in obtaining sufficient appropriate evidence
1. Assumptions made
2. Use of source data
3. Nature, timing of communication
4. Confidentiality
5. Nature, scope and objective of work
6. Responsibility
Purpose of audit documentation
- To ensure audit was done properly
- For senior staff to review work of junior staff
- To help auditor in future
- To encourage high quality work
Typical contents of working paper
- Title
- Date
- Preparers name and sign
- Reference to other schedules
- Purpose of audit test
- Detail of test done
- Conclusion from work
- Reviewers name and signature
Quality management objective
To achieve reasonable assurance that
1. Audit has been conducted according to professional standards
2. Auditor opinion has been issued in appropriate circumstances
Engagement partener is responsible for following components of quality management
- Leadership
- Relevant ethical requirement
- Montioring and remediation
- Acceptance and continuance
- Enggemnt resources and engagement performance
Areas requiring significant judgement are
- Determination of materiality
- Decisions in auditor report
3, proposed audit opinion - Conclusions in significant areas like going concern
- Response to significant risk
Engagement quality review
Compulsory for listed company
1.review fs and proposed auditor opinion
2. Review selected documentation for significant judgements and conclusions
3. Use of appropriate consultation during difference of opinion
4. Firms independance
5. Discussion of significant matters with EP
Fraud risk factors
- Deficiencies in IC
- Signifucant estimates
- Easy to steal assets
- Known history of breached
- Pressures on management to meet financial targets
Contingent liability and contingent assets
- Contingent liabilities:
If no outflow of resources but probable, then disclosure
If outflow of resources - Probable: provision
- Not probable: nothing
Contingent assets
If inflow of resources certain: asset
If not probable, then disclosure
4 kinds of opinion
2 diffiiculties
1. Mm
2. Not obtaining sufficient appropriate evidence
4 opinions
1. Unmodified opinion
None of the issues arose. Fs present fairly
2. Qualified opinion ( except for)
One or both issues but not pervasive. Fs present fairly except for
3. Adverse opinion: MM which is pervasive. Fs do not present fairly
4. Disclaimer of opinion: no sufficient appropriate evidence. Cannot form opinion
Addition to auditors report
- Material uncertainty related to going concern
- Matter paragraph ( disclosure disclosed)
- Other matter paragraph( disclosure not disclosed)
- Other information paragraph (director report contradicting fs)
