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Hello
I was a bit confused on the process of the audit proceedings, what exactly does the auditor look at? Is it the Internal Controls firstly and then The Managment assertions? Shouldnt the management assertionsbe part of internal controls?
i wanted to know step by step what auditor looks at broadly and in sequence pleaseRegards
Ultimately it’s the assertions that evidence is needed for.
If there are good controls, then those will give evidence that the assertions are OK. For example, if a company physically verifies the existence of non-current assets every year, then the auditor won’t have to do much substantive work there. Instead the auditor will look at the non-current asset register (perhaps 30 items) to ensure that these have been signed and dated with the date of last inspection. Therefore the auditor is relying on the operation of a control to support an assertion. The auditor will inspect only a very few items himself.
If the client does not have this control in operation, then the only way the auditor can gather evidence about the existence of NCA is to inspect many more himself.
Look at this article:
https://opentuition.com/articles/f8/audit-tests-difference-tests-control-substantive-tests/
and this lecture:
https://opentuition.com/acca/f8/f8-financial-statement-assertions-and-audit-evidence/
Hope that helps.
Thanks alot
Can u clarify for me the meaning of management assertions and so internal controls are not to be verified by auditor and evidence is only needes for assertions? And what measures can be used to assess the internal controls
A ‘management assertion’ is somthing said by management. Eg “ALL liabilities have been included”. That is not very strong evidence.
The assertions I’m talking about are assertions made by each figure in the FS such as
‘I …
am complete..
exist..
am properly valued”.Internal control have to be verified by the auditot as I said above. The auditor has to garher evidence by inspecting the NCA records that teh client has carried out the conytol of physical inspection.
You need to look at the article and lecture I suggested.
Thanks Alot and also For your Speedy Replies, Really Appreciate It
So what i can gather from what u said that Auditor Basically Looks at Assertions in the way you were suggesting in your first post , he also needs to look at internal controls that will further clarify their authenticity,accuracy, but what I dont get is how The Management Assertions fit in In All of This
A management assertion is a weak form of evidence. Eg management saying that
“The internal controls are operating fine”
or
“All the liabilities are included”.
Nearly worthless. Why not just have management asserting that the FS give a true and fair view!?
Thanks alot groomit, really appreciate it, i get it Now Alhamdulillah
THANKS A MILLION
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