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SA 265 -COMMUNICATING DEFICIENCIES IN INTERNAL CONTROL TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT SA 450 - EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT SA 720 -THE AUDITORS RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FS
SAs
TYPE OF STANDARD NUMERICAL SERIES STANDARDS ON QUALITY CONTROL STANDARDS ON AUDITING 999 STANDARDS ON REVIEW ENGAGEMENTS 2699 STANDARDS ON ASSURANCE ENGAGEMENTS 3699 RELATED SERVICES 4699 01-99 100-
2000-
3000-
4000-
Risk Assessment &Response to Assessed Risk 300 499 Audit Evidence Using Work of Others Audit Conclusions and Reporting Specialised Areas 500 - 599 600 699 700 799 800 899
OBJECTIVE
Communication of matters Not Scope
DEFINITION
Deficiency in Internal Control Significant Deficiency in Internal COntrol
1. 2. 3.
4.
Identified deficiency in Internal Controls Whether Significant? Communicate in writing on timely basis to Governing Body (GB) Communicate to Management, unless irrelevant To include:
Purpose of audit Internal control not part of audit, checked to identify quantum of audit procedures No comprehensive check made for such non-compliance
Deficiency
Ineffective control or non-existing control
Indicators of deficiency
Weak control environment, management frauds, non-remedial measures, absence of risk assessment process, misstatements, prior period items, ineffective control on FS
FACTORS
1. 2. 3. 4. Nature of Entity Size and Complexity of Entity Nature and Size of deficiencies Legal requirements
In writing or oral followed by in writing Timing In advance, such that the addressee, if required, can accordingly respond on it To communicate in writing even if reported in previous year Insignificant discrepancies not to be reported to GB
SIGNIFICANT DEFICIENCIES
In writing or oral followed by writing To be reported even if reported in previous year and still uncorrected
INSIGNIFICANT DEFICIENCIES
In writing or oral Not to be reported if reported in previous year and even if still uncorrected If required suggestions may also be included in report
Misstatement A difference between the amounts, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. Misstatements can arise from error or fraud. Uncorrected misstatements Misstatements that the auditor has accumulated during the audit and that have not been corrected.
Accumulation of Uncorrected Misstatements Consideration of misstatements as the Audit progresses Communication and Correction of Misstatements Evaluating effect of uncorrected misstatements Communication with Those Charged with Governance Written Representation and Documentation
Need for revision of Nature, Timing and Extent (NTE) of Audit Procedures (AP) to be applied Communicate to management to provide time for taking remedial action
COMMUNICATION
Timely communication Check any Legal restrictions to communicate
Quantification and Projection Impact on other areas Materiality Levels Circumstances effecting evaluation
Regulatory environment, Debt convenants, Ratio, Increases management on managerial remueration / dividend, etc
In writing Overall impact When management and governing body same report to management sufficient
THE AUDITORS RESPONSIBILITY IN RELATION TOOTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS
SCOPE Auditor not responsible to check other information but for credibility he may read other information OBJECTIVE Develop Auditors response with respect to the documents in the report
(a) Other information Financial and non-financial information (other than the financial statements and the auditors report thereon) which is included, either by law, regulation or custom, in a document containing audited financial statements and the auditors report thereon.
(b) Inconsistency Other information that contradicts information contained in the audited financial statements. A material inconsistency may raise doubt about the audit conclusions drawn from audit evidence previously obtained and, possibly, about the basis for the auditors opinion on the financial statements. (c) Misstatement of fact Other information that is unrelated to matters appearing in the audited financial statements that is incorrectly stated or presented. A material misstatement of fact may undermine the credibility of the document containing audited financial statements.
SEARCH
Auditor should arrange and read other information in advance like Managements report, Financial summaries, Ratios, etc