- April 5, 2020 at 5:36 pm
Hello sir , please could you clarify to me these points :
1. auditor will audit the financial statement to make sure they are free from material misstatement ( but what I want to know in the planning stage the auditor will identify the risky areas and will only audit these areas ??for example if they identify that sales , receivables, are risky areas what about other figures in the financial statement! E.g Like payables , and expenses
2. Auditor will make Analytical procedures , test of control , substantive testing only for the Risky areas identified at the planning stage ?
3. If an effective internal control was found less substantive test could be done ?
4. Analytical procedure is done at all stages of audit ? If yes at the risk assessment how the will do the analytical procedures when the accounts of financial statement are not ready ?April 6, 2020 at 7:49 am
1. See page 54 of notes – auditor is assessing risk of MATERIAL misstatement – and there is no such thing as NO risk for material areas (audit provides only reasonable assurance – page 9). Hence all material audit areas will be audited – but how and how much will depend on risk.
2. In short – no. A “proof in total” (analytical procedure) – e.g. page 99 can provide sufficient audit evidence for a low risk audit area. You only test controls to reduce substantive procedures – see overview at beginning of chapters 7 & 8. If there is high control risk, tests of controls achieve nothing.
3. Yes – but ONLY if tests of controls confirm the operating effectiveness of the controls to justify this approach.
4. There will always be some “draft” financial information available – even if it’s only the trial balance extracted from the general ledger.
Please can you give posts more meaning titles than “general” (it helps other students to search posts) – you could have called this “planning, risk and analytical procedures”, for example.
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