There is a question on the audit risk response which I hope you can help me to sort out.
I read from an example given for the audit risk response summary as follows :
Trade & other payables:
: Risk identified: Completeness is medium risk as unexpected fall
: Other assertions: Low risk
: Audit approach: Standard programme
results of work on supplier statements historically good.
My question is (i) what is the use of identifying the audit risk as above and the risk response, since in any way, we shall still follow through the procedures in the Standard Audit programme, which basically should include circularizing the suppliers statements, reconciling the suppliers’ statements, whetehr the risks are medium or low.
And (ii) what does the combined approach above mean?
I thank you in advance for your guidance.
I don’t know what ‘combined approach’ means. It might be some sort of in-house expression used by the writer when he/she was an auditor. it’s not standard.
If there are suppliers statements available, then circularisation is not really necessary.
Because of the unexpected fall in payables I wouls also look at payments after year end, seek explanation for the fall, trace postings from the Purchases day book to payables and purchases
Thank you very much for your kind guidance.
As the procedures, like reconciling suppliers’ statements, looking at payments after yaer end, etc are generally set out in the Standard Audit Programme to work through, actually what are the rsik assessment and risk response for ? Is it that where the completeness assertion of the trade payables as in the above example is assessed to be of medium risk, then we shall perform more tests (larger sampling size), while for checking the other assertion, like existence and accuracy, we can do tests of lesser extent and even no tests at all?
I would be obliged if you could give me some more guidance on this. Thanks a lot.
Risk assessment and response guide how much work to do. If high risk then reconcile many statements etc
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