Icap Training Seminar(as315,330)

ICAP Training Seminar

Training Seminar: Students of Small and Medium Sized Practices February 17, 2007

BDO International

ICAP Training Seminar

Outline of the Day • Introduction to Risk – ISA 315 “Understanding the Entity and Its Environment and Assessing the Risks

of Material Misstatement”

• Responses to Risk – ISA 330 “Responses to Risk”

• Practical aspects of Planning the Audit Work – ISA 300/320

The Future is Here…

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ICAP Training Seminar

In other words… ISA 240/315 • What could go wrong?

The Future is Here…

ISA 330 • What are we going to do about it?

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ICAP Training Seminar

Why?

Risk of Material Misstatement

Fraud The Future is Here…

Error

4

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ICAP Training Seminar

Our Responsibilities

The Future is Here…

5

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ICAP Training Seminar

Mandatory team discussion to be held (ISA 300) Fraud should be considered in context of errors/testing results

Professional Scepticism

The Standard & The Audit

May want to hold final discussion at completion? The Future is Here…

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ICAP Training Seminar

Definition of Risk Audit Risk = Inherent Risk x Control Risk x Detection Risk

Risk of Material Misstatement

The Future is Here…

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ICAP Training Seminar

ISA 315 - Overview (Para 2, ISA 315)

“The auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures”

The Future is Here…

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ICAP Training Seminar

Requirements of ISA 315 Risk assessment procedures and

Understanding the

sources of information about the entity

entity and its

and its environment, including IC

environment including IC

OVERALL REQUIREMENTS Assessing the risks of material misstatement Communicating with those charged with governance

Documentation

and management

The Future is Here…

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ICAP Training Seminar

Risk Assessment • “…continuous, dynamic process of gathering, updating and analysing information throughout the audit” (Para 6, ISA 315) • Planning Meeting • Risk assessment procedures: – Enquiries of management and others within the entity – Analytical procedures – Observation and inspection

The Future is Here…

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BDO International

ICAP Training Seminar

ISA 330 - requirements • Overall responses to risks of material misstatement at the financial statement level • Audit procedures responsive to risks of material misstatement at the assertion level • Evaluating the sufficiency and appropriateness of audit evidence obtained • Documentation

The Future is Here…

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ICAP Training Seminar

Assertions – how much do you know? •

P&L – – – – –

•

Occurrence Completeness Accuracy Cutoff Classification

BS – – – – –

Existence Completeness Rights & Obligations Valuation Presentation & Disclosure

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ICAP Training Seminar

Assessing the risk of material misstatement Identify risk

Risk of material misstatement

Relate risk to what can go wrong at the assertion level

at FS and Consider

assertion level

magnitude of risks

of risks

General Risk The Future is Here…

Likelihood

Specific Risk 13

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ICAP Training Seminar

General Risks and General Controls General Risks are those risks that affect multiple financial statement areas or tend to be pervasive to the financial statements.

General Controls are those controls that are pervasive to the organisation

Information Gathering The Future is Here…

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ICAP Training Seminar

Nature of Procedures To Cs

SA Ps

OS Ps

ASSURANCE

Risk The Future is Here…

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ICAP Training Seminar

ISA 300 • Preliminary engagement activities • Planning activities • Initial audit engagements “The auditor should plan the audit so that the engagement will be performed in an effective manner.”

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ICAP Training Seminar

ISA 320 – Audit Materiality Planning Materiality • Materiality refers to the size or nature of a misstatement that, in the light of the surrounding circumstances, makes it probable that the judgement of a reasonable user of the financial statements would have been changed or influenced as a result of the misstatement. • Only material misstatements and uncertainties will affect our audit opinion. Our audit procedures should not therefore be concerned with detecting misstatements that could not be material; they need to be focused on obtaining assurance that material misstatements do not exist

The Future is Here…

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