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Can someone help me with this? Is it about IAS 315?
Identify FIVE sources of information relevant to gaining an understanding of the client and how this information will be used by the auditor.
Yes – the understanding will be used to identify and assess the risk of misstatement (in the financial statements). IAS 315 has useful ideas, for example, information is obtained:
– during client acceptance/continuation process
– in performing other engagements for the client
– from previous audit
– the client’s information system including relevant business processes …
IAS 315 is also about documentation which reminds us that sources can be written or oral and internal or external.
5 different sources might therefore be:
– Prior period working papers – in particular the “points for partner” that might highlight issues of ongoing relevance
– Internal audit (if the Q scenario indicates that there is such a function) – reports to management might show significant deficiencies in internal control
– External pronouncements (e.g. a new IFRS relevant to the client)
– Legal counsel/advisor – matters of litigation, compliance, suspected fraud, etc
– Analytical procedures on draft financial statements
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