-
income statement items + accuracy assertion: risk
incorrectly calculated
-
if risk is re-assessed/risk increase, mention also:
change to audit strategy
-
inventory: analytical procedure for AVA
- gross profit ratio (NRV)
- compare total inventory by type (error in compilation)
-
inventory: analytical procedure for E
- inventory turnover days (overstatement)
- units costs against budget/prior period
-
planning stock take, must answer:
review inventory count instruction
-
PPE: AVA- reason for high RMM
- lots of accounting estimates in depreciation calculation
- impairment (VIU impairment)
-
when to use IC tactics
when IC is not ineffective
-
whistle-blowing - report to whom
audit committee
-
fraud risk factor- investment trust
pressure from unitholder
-
fraud risk factor - give figures
ARP
-
fraud risk factor - multi-location - what category
opportunity: inconsistent systems, controls
-
fraud risk factor - plan to list - what category
incentive
-
fraud risk factor - establish affiliated entity - what category
opportunity: related party
-
fraud risk factor - preventable accident - what category
attitude: ineffective monitoring of risk and control failure
-
what is a common procedure to "monitoring of control" in CERICAM
reconciliation
-
what is common control activities to address assertion level risk (eg. completeness, AVA)
- review
- *for EA, it is substantive procedures
-
Physical control - assertion addressed
Existence
-
Authorization- assertion addressed
Existence/occurrence
-
Authorization- assertion addressed
Existence/occurrence
-
Review- assertion addressed
other assertions, esp. completeness and AVA
-
ARP: inconsistent sales and AR
subprime crisis and increasing sales (AR)
-
difference between finite and indefinite IA
- finite: amortization
- indefinite: annual impairment
-
req. for change of auditors for listed co
s441: incoming auditor obtain a letter of resignation/termination of the predecessor auditor directly from the client
-
req. for long association of audit team and PIE
- a person shall not be key audit partner for more than 7 years
- after such time, a person shall not be (1) audit team member (2) key audit partner for the client for 2 years
-
-
what is key audit partner
- engagement partner
- EQCR partner
-
financial interest: when would threat be so significant that no safeguard can lower the risk
- direct financial interest
- indirect material financial interest
-
what is immediate family and close family
- immediate: spouse and dependent
- close: parents, children, sibling, friends
-
financial interest: when would threat be so significant that no safeguard can lower the risk
immediate family + FC/CFO (significant influence over accounting records and FS)
-
who are the "audit team"
anyone who has charged the job (篤鐘)
-
company secretary and threats
- self-review: perform comp. sec. function and make decisions re. corporate sec. matters at AGM>cannot properly evaluate the result of audit
- advocacy:act on behalf of the client in compliance matters which may promote the client's position
-
Fees: when are there additional procedures re. relative fees to firm
- PIE + fee for that client for 2 consecutive years is >15% of total fee of the firm
- *total fee = audit and non-audit fee
-
FASIS - all affect what principle
objectivity
-
ethics problem intro
code of ethics for prof. accountant, conceptual framework is adopted.
-
if auditor's request to communicate with outgoing auditor is denied- consequence
should not accept the nomination
-
provision of non-audit service - what service is so significant?
- design, implement and monitor of IC system
- prepare FS
- valuation and litigation support
- prepare tax comp.
-
involving the court/legal proceeding, what threat is high
advocacy
-
implication: from sole pro. to limited co
last years' FS not audited
-
employment with PIE audit client for key audit partner - so significant unless
- subsequent to the year the partner ceasing to be key audit partner, the PIE has issued audit report and the partner is not member of audit team
- for senior partners, they can only join the client after 12 mths of ceasing to hold such position
-
auditors and AGM
management's responsibilities to ensure auditors attend AGM
-
composition of audit committee
- all NED
- majority INED
- chairman INED
- at least 3 person
- at least 1 INED
-
composition of board
at least 1/3 INED
-
assumptions: has been auditor since incorp>
- 1. need not revise assessment of integrity, unless there are changes in KMP
- 2. competent to finish the audit, unless there are significant changes to operations
-
cut off of sales - refer to what
shipping terms
-
all revenue are measured at
present value
-
presentation - breach of convenant
if callable>current
-
presentation - usage from PPE to held for sale
reclass to current
-
what are significant risk
- fraud risk
- risk related to significant economic/accounting developments
- complex and subjective transactions
- RPT and unusual transactions outside normal course of business
-
when do we need to understand all CA
- significant risk
- substantive alone cannot provide enough evidence
-
presumed fraud risk
- management override of control (non-rebuttable)
- revenue recognition (rebuttable)
-
fraud type
- fraudulent financial reporting
- misappropriation
-
who is responsible for fraud detection
those charged with governance and management
-
what assertion does PARIS (control activities) address
-
listed status and materiality
users of FS is public shareholders who most concern profit and sales
-
NET - what does N mean
nature, ie. test of control v substantive procedures
-
Rotation of test of controls - conditions
- no SR
- no significant changes
- max. 3 years.
-
which substantive procedures allow auditor to extend the timing
analytical procedures
-
what indicate high RMM of revenue occurence
- significant increase
- GP margin rose a lot
- sale v PPE (scale)
-
High AVA RMM due to complicated disclosure
- FV measurement
- financial risk management
- impairment loss
- estimation of useful life
- business combinations
- NRV
- FI
- classification RMM of FI
- derivative or hedging
- provisions
- share based payment
- tax
- breach of bank loan convenant
-
ARP on AR aging: also consider
credit term
-
framework to assess RMM at FS level
- ROMAN
- control environment
- fraud risk factor
-
FS level risk - raising fund at high interest
in desperate need of fund
-
-
FS level risk: listed implication
- performance monitored by investors>earnings pressure
- subject to strict listing rule requirements
-
FS level risk: family business/controlled by few members
management override of controls
-
what are KAM
- higher RMM/SR
- fraud/suspected fraud
- non-compliance
- significant deficiency in control
- SUAM
- unreasonable management's refusal to send confirmation
- misstatement in opening balance
- significant matters re. related parties
- matter after the date of audit report
- concern over component auditor's work
- limitations on group audit
- refusal to correct misstatements in other info
- significant judgement/estimates
- complex accounting policy
- significant transaction with related parties/outside the normal course of business
- new IT/change of IT system/complex IT
-
@KAM reminders
- not related to misstatements or inabiliy
- no repetition
-
@EOM reminder
- not KAM
- not lead to modification
- already disclosed in FS
-
@Other information reminder
-
if other information is misstated, include what para
- Other info, which include a description of the misstatement
- Matters under which we are required to report by exception, under "report on director's report"
-
if any account is very significant (pervasive), RMM is
high
-
@when there is consignment sales,
RMM is higher
-
when management's estimate lie outside auditors range, indicates:
possible management bias
-
what is significant component
- individually financially significant (based on benchmark eg revenue, profit, asset)
- contains significant risk
-
when auditor issued a qualified or disclaimer of opinion due to inability, requirement:
report under s407(3)
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