Free Auditing revision

i. The audit risk assessment helps auditors to give a correct opinion of the financial statements of the company
ii. Assessment of client-specific risks at the start of the audit process drives the audit in the right direction and helps in reducing the probability of over-auditing.
iii. If audit risks are not assessed in the initial phase, a complete audit procedure is termed as non-compliant to IFRS.
iv. Potential errors may be reduced by reducing the need to combine large quantities of data in one’s mind.
v. Auditors cannot check each and every transaction of the entity, and audit risk assessment helps in increasing the focus where risk is high i.e. a risk-based approach towards auditing.

To be successful, test data should include all data that is available. The data should be realistic, accurate and representative of the environment.

i. Management uses internal audit reports, while stakeholders, such as investors, creditors, and lenders, use external audit reports.
ii. CPAs must direct the activities of external auditors, whereas internal auditors do not have to be CPAs.
iii. External auditors are responsible for the shareholders, whereas internal auditors are responsible for a company’s management.
iv. External auditors conduct audits annually, whereas internal audits are conducted throughout the year.
v. Internal auditors can issue their findings in any type of report format, while external auditors must use specific formats for their audit opinions and management letters.
vi. External auditor’s reports are used by stakeholders such as creditors and shareholders, whereas internal auditor’s reports are used by both management and investors and creditors.
vii. Internal auditors can be used to provide advice and other consulting assistance to employees, while external auditors are constrained from supporting an audit client too closely.
viii. Internal auditors examine issues related to company practices and risks, whereas External auditors examine the financial records and issue opinions regarding the financial statements of the company.

Auditors can prove the existence of the related asset or liabilities at the balance sheet date through verification.

i. Prohibition by law or regulation of the jurisdiction in which the auditor is operating.
ii. Threat to the objectivity of the internal auditors to perform the tasks without bias, conflict of interest, or undue influence.
iii. Incompetence to perform the assigned tasks diligently and under applicable professional standards.

An asset register is a detailed list compiled of all your business assets. An asset register can provide several benefits to an auditor, including:
i. Depreciation records: Asset registers provide records that help auditors calculate depreciation, amortization, or depletion deductions. They can also help auditors assess gains or losses from the sale or disposal of assets.
ii. Comprehensive data: Asset registers consolidate information about asset location, usage, life cycle, and maintenance costs. This data can help with informed decision-making and efficient asset utilization.
iii. Compliance: Asset registers can help organizations stay compliant with industry regulatory standards and legal rules and regulations.
iv. Asset security: Asset registers can help prevent theft or loss of assets by providing a clear record of all assets and their locations.
v. Insurance premiums: Accurate asset registers can result in accurate insurance premiums.
vi. Asset lifespan: Asset registers can help track routine updates and maintenance, which can help increase asset lifespan.
vii. Productivity: Automating asset register management can help improve productivity.

i. Analytical procedures to identify inconsistencies or significant fluctuations.
ii. Test of details of transactions and balances such as recalculating interest.
iii. Sampling programs to extract data for audit tests.
iv. Tests of application controls and general controls.
v. Reperforming calculations performed by the entity’s accounting systems.

i. Unqualified opinion: This indicates that the auditor found the financial statements to be fairly presented in all material respects, as required by the applicable financial reporting framework, and no material misstatements were during the audit. It also implies that the company has adhered to the International Financial Reporting Standards (IFRS).

ii. Adverse opinion: This type of opinion is issued when the auditor has identified material and pervasive misstatements in the financial statements. This means that the financial statements do not present a fair view of the company's financial position and performance. It is the most severe type of opinion and can have serious implications for the company, including loss of investor confidence, potential legal consequences, or also regulatory scrutiny.

iii. Qualified opinion: This type of opinion is issued when the auditor has identified material misstatements in the financial statements, but these misstatements are not pervasive (i.e. The financial statements are still largely reliable despite the identified issues). This type of opinion is also issued when the auditor cannot obtain sufficient audit evidence for a specific aspect of the financial statements but the potential impact of the missing information is not pervasive.

iv. Disclaimer of opinion: This type of opinion type of modified opinion that the audit team would issue if there are audit issues that are both material and pervasive. It is only used when the auditor has exhausted all avenues to get the evidence needed to form an opinion that provides some level of comfort over the financial statements. A disclaimer of opinion has serious implications and can raise red flags about the company's financial health and governance.

A declaimer of opinion is a type of modified opinion that the audit team would issue if there are audit issues that are both material and pervasive. It is only used when the auditor has exhausted all avenues to get the evidence needed to form an opinion that provides some level of comfort over the financial statements. A disclaimer of opinion has serious implications and can raise red flags about the company's financial health and governance.

An effective audit committee should:
i. Oversees and provides valuable insights that improve financial practices and reporting.
ii. Review an organization’s anti-fraud control measures periodically so as to offer effective anti-fraud strategies.
iii. Oversees the organization’s external audit by meeting, monitoring with the auditors to ensure appropriate financial reporting, strong internal controls, and sound business practices.
iv. Enhances and contributes to the overall integrity of the internal audit function. Since the internal audit department reports to the audit committee, it is able to access the organization’s ability to meet its financial and compliance responsibilities, thereby ensuring strong internal controls are maintained.
v. Communicates a message of reliability, independence, and trust, thereby strengthening the organization’s credibility with stakeholders

The primary objective of an auditor is to report to owners that the financial accounts give an accurate view of the situation of the company’s activities. The secondary objective, also known as the incidental objective, is related to the fulfillment of the primary purpose.

Auditing documentation refers to audit procedures applied, evidence obtained, and conclusions reached by the auditor in the engagement.

Benefits of Audit Documentation include:
i. Provides the principal support for the representation in the auditor's report that the auditor performed the audit in accordance with the international Financial Reporting Standards (IFRS).
ii. Provides the principal support for the opinion expressed regarding the financial information or the assertion to the effect that an opinion cannot be expressed.
iii. Assists members of the audit team responsible for supervision to direct and supervise the audit work, and to review the quality of work performed.
iv. Assists quality control reviewers (for example, internal inspectors) who review documentation to understand how the engagement team reached significant conclusions and whether there is adequate evidential support for those conclusions.
v. Provides company’s assessment of the potential risks and helps them in planning effectively to address specific risks and challenges.
vi. Provides auditors assessments and compliance checks, thereby providing a transparency and integrity of the firm, hence compliance with accounting standards, regulations and internal policies.
vii. Facilitates effective communication and collaboration within the audit team, thereby ensuring all audit team members are aligned in their understanding of the audit procedures and objectives. This promotes consistency and collaboration among team members.
viii. Serves as a tool for communicating with clients, thereby enhancing the overall client-auditor relationship.
ix. Audit documentation undergoes rigorous quality control and review processes which ensures that the documentation accurately reflects the audit procedures performed, supporting the reliability of the audit opinion. Comprehensive documentation facilitates external and internal reviews, contributing to the overall quality assurance of the audit process.
x. Audit documentation serves as a historical record of the audit engagement which is invaluable for continuity in subsequent audits. Auditors can reference past documentation to understand prior audit approaches, findings, and client-specific nuances, fostering consistency and efficiency over time.

The internal check can be defined as a procedure whereby the work of one person is securitized /analyzed by another person to ensure its authenticity. This prevents collusion between two or more persons to commit fraud and irregularities.

Objectives of internal check
i. To prevent misappropriation of cash or goods by employees.
ii. To prevent errors or fraud by employees.
iii. To detect fraud or irregularities immediately and easily.
iv. To find those responsible for fraud or mistakes detected.
v. To have an accurate record of all business transactions.

i. Absence of input documents or lack of a visible paper trail may require the use of CAATs in the application of compliance and substantive procedures.
ii. Need for obtaining sufficient, relevant, and useful evidence from the IT applications or database as per audit objectives.
iii. Ensuring audit findings and conclusions are supported by appropriate analysis and interpretation of the evidence.
iv. Need to access information from systems having different hardware and software environments, different data structures, record formats, and processing functions in a commonly usable format.
v. Need to increase audit quality and comply with auditing standards. Need to identify materiality, risk, and significance in an IT environment.
vi. Improving the efficiency and effectiveness of the audit process.
vii. Ensuring better audit planning and management of audit resources.