What are the overall audit objectives for a compliance audit engagement
-To test
> Adequacy and effectiveness of controls, and
>Compliance to laws and regulations
What are the overall audit objectives for a financial audit engagement
-To evaluate
> reasonableness of
financial information
What are the overall audit objectives for an operational audit engagement
To evaluate
> Economy
> Efficiency
> Effectiveness
of operations
What is the format for writing a control effectiveness test
-How = action verb
> Inspect – docs / records
> Enquire – from ppl / personnel
> Observe – a process / action
> Examine – docs / records
> Reperform – a procedure
> Confirm – a process or action
-What (+detail)
-Why
> Always use to test/assess/evaluate/determine
When writing a about a control effectiveness test, what 3 elements should you refer to?
- Validity of process
- Completeness of process
- Accuracy of process
eg: “…to test whether the goods received are accurate and complete.”
Provide risks, controls and control objectives for the ordering function
Risks
- Incorrect/unnecessary good requested
- Wastage/liquidity issues
Ctrls
- Orders can only be placed based on an authorised requisition form
-Purchase orders should be prenumbered and authorized by purchasing manager
Provide risks, controls and control objectives for the requisitioning function
Risks
- Incorrect or unnecessary goods are requested
Ctrls
- Authorisation of purchase requisition by head of requisitioning dept
Provide risks, controls and control objectives for the receiving function
Risks
- Incorrect quantity or quality of goods are received
- Goods received are not in good order
Ctrls
- Receiving clerk inspect the condition of the goods delivered before it is accepted
- Receiving clerk should compare the description and quantities on the DN with the purchase order and actual goods and sign as proof
Provide risks, controls and control objectives for the recording of purchases function
Risks
- Transactions are not recorded or recorded incorrectly
Ctrls
- Invoices should be reviewed and re-calculated
-Invoices should be compared to DNs, PO,s and GRNs
Provide risks, controls and control objectives for the payment and recording of creditors function
Risks
- Incorrect payments are made
- Payments are recorded incorrectly
Ctrls
- Cheque signatories should agree on details
- Supporting docs should be cancelled or marked “paid”
Provide risks, controls and control objectives for the returning of goods function
Risks
- Incorrect goods are returned
- Inventory records are incorrect
Ctrls
- Pre-numbered debit notes should be issued
- Review goods to be returned before they are actually returned
Provide example of ctrl effectiveness procedures for the ordering of goods/serv function
- Select a few POs and confirm the use of sequentially pre-numbered PO forms
- Select a few POs and confirm cross referencing to requisition form
Provide example of ctrl effectiveness procedures for the receiving of goods function
- Observe receiving clerk when accepting goods to determine if they open the boxes and inspect the content for damages
- Observe receiving clerk when accepting goods to determine if they compare delivery note to purchase order to actual goods
Provide example of ctrl effectiveness procedures for the recording of purchases function
- Select a few invoices and purchase order;
> compare invoice quantities and descriptions to POs
>re-calculate amounts
> compare prices on invoices to price lists - Inspect the pending file for unmatched GRNs
Provide example of ctrl effectiveness procedures for the payment and recording of creditors function
- Inspect a sample of cheques and agree items such as payee and amounts to supporting docs
- Select a sample of paid invoices and inspect if they were stamped “paid” or cancelled
Provide example of general ctrl effectiveness procedures
- Enquire and discuss procedures followed w/ management
- Observe that adequate stationary control activities are in place
What are general engagement objectives that an IA aims to achieve in a financial audit that relate to the INCOME STATEMENT
- Occurrence
- Cut-off
- Completeness
- Accuracy
- Classification
- Presentation and disclosure
What are general engagement objectives that an IA aims to achieve in a financial audit that relate to the BALANCE SHEET
- Presentation and disclosure
- Completeness
- Obligation
- Existence
- Valuation and allocation
Documenting the results of the engagement
- Happens on WPs
Format
- Criteria: What should be in place
- Condition: What is in place/What was discovered
- Cause: Reason for deviation
- Effect: Impact of deviation
- Significance rating: How do you evaluate the findings
- Recommendation: How to address the cause
