100%(2)2 out of 2 people found this document helpful
This preview shows page 8 - 13 out of 37 pages.
• Volatility in proposed benchmark (may need to reconsider if fluctuates widely)• Also: Consider the need to ‘normalise’ the benchmark based for unusual or non-recurring itemsMaterialityISA 320Setting the percentage%%risk of material misstatementrisk of material misstatementaudit proceduresaudit procedures
Quick Reference Guide 8.1Audit Risk Model and Audit PlanAudit & Assurance Chartered Accountants ProgramPage 1 of 1Quick reference guide 8.1 – Audit Risk Model and Audit PlanPerform Tests of controlsif:• Expect controls to be operating effectively• Can’t get sufficient appropriate audit evidence from substantive procedures alonePerform substantive procedures:To reduce DR to acceptable level• Mustperform for each material class of transaction, account balance & disclosure (Either Substantive Analytical Procedures or Tests of Details)Consider performing Substantive Analytical Procedures if:• Controls are strong• When auditing accounts with high volumes of transactionsX X=Type of procedure:RMMAudit Risk Model:Must perform tests of detail if:• significant riskSusceptibility to material misstatements before considering related controls Risk that a material misstatement is not prevented, or detected and corrected by internal control Risk that audit procedures will not detect material misstatements Risk that the auditor expresses an inappropriate opinion Inherent Risk (IR)Control Risk (CR)Detection Risk (DR)Audit Risk (AR)
Quick Reference Guide 8.2Preliminary Assessment of Control Risk (CR)Audit & Assurance Chartered Accountants ProgramPage 1 of 1Quick reference guide 8.2 – Preliminary Assessment of Control Risk (CR)Adopt substantive audit approach1) Do there appear to be controls on which an auditor can rely?2) Does it appear cost-beneficial to rely on controls?3) Are controls effectively designed and implemented?4) Are controls operating effectively?
Quick Reference Guide 8.3Control risk & impact on audit planAudit & Assurance Chartered Accountants ProgramPage 1 of 1Quick reference guide 8.3 – Control risk & impact on audit planTests of DetailSubstantive Analytical Procedures1) Perform assessment of inherent risk2) Preliminary assessment of control risk (CR) – see Study Aid 8-2Consider Dual Purposetests (i.e. act as both test of controls and substantive procedures)Perform Substantive Procedures (Look for monetary errors)CR less than HighCR HighTest controlsFinal assessment of CRSet Detection Risk (DR)Set Detection Risk (DR)
Quick Reference Guide 9.1Testing controlsAudit & Assurance Chartered Accountants ProgramPage 1 of 1Quick reference guide 9.1 – Testing controlsTests of Controls for Control Risk (CR) AssessmentPreliminary assessment of CR indicatesCR less than high• controls appear good enough to be able to assess CR at less than high (medium) strongPreliminary assessment of CRIndicates CR High• No controls• Not efficient to test controls