Presentation 2 - Planning and Internal Control Evaluation
- 1. Prepared by Marzanur Rahman Audit Planning and Control Evaluation
- 2. Audit Planning and Control Evaluation We have discussed regarding audit planning process in our previous session. Here, we will be focusing on planning procedure. We will what planning activity we need to perform as per Audit Practice Manual (APM)
- 3. Audit Planning and Control Evaluation Sl No. Document Title Reference No. 1 Audit Planning Summary C1 2 Acceptance Procedures C1.1 3 Audit Planning Checklist C2 4 Audit Planning Memorandum C3 5 Audit Planning Notes C4 6 Systems and Internal Control Summary C5 7 Review of Design And Implementation of internal Controls C5.1 8 Audit Risk Summary C6 9 Audit Risk Checklist C6.1 10 Risk Response Summary C6.2 11 Specific Risk Action Plan C6.3 12 Detailed Risk Assessment C6.4 13 Preliminary Analytical Review C7 14 Materiality Summary C8 15 Comparison of Financial Statements C8.1 16 Accounting Work Planning 17 Sample Size Planning C9.2 18 Assignment Planning C9.3 19 Budget and Performance Summary C9.4 20 Job Progress Report C9.5 21 Opening balance and Comparative Checklist C 10
- 4. Audit planning summary – C1 An overall strategy for audit has been established An audit plan has been developed to reduce risk Fraud risks have been considered Overall strategy and audit plan have been properly documented Acceptance procedures are followed properly Audit planning checklist is followed Professional skepticism
- 5. Acceptance procedures –C1.1 We have discussed on acceptance procedure in our previous session
- 6. Audit planning checklist – C 2 Strategic consideration – Financial reporting framework, industry specific requirements, group reporting etc. Client back ground- ‘know your client checklist’, significant accounting policies etc. Laws and regulations Audit risk General – materiality, external confirmations, opening balance checklist, audit program etc. Quality control- Ethical requirements, partner’s review, cold review etc.
- 7. Planning memorandum C-3 Background information Scope of engagement Key personnel Timetable Key risk and responses at financial statements level Key risk and responses at assertion level Outline the audit approach to the above areas
- 8. Notes of planning meeting – C4 • Attendees and date of meeting • Susceptibility of entity’s financial statements to • material misstatement • Susceptibility of the entity to fraud • Other matters
- 9. Systems and internal controls summary – C 5 Complete the basic questionaries' Document relevant systems and control Significant weaknesses and specific risk action plan Internal control evaluation
- 10. Review of design & implementation of internal controls – C 5.1 • Business area – FA, Payable etc. • Outline of information systems and controls • Comment on implementation of controls • Client’s comments • Further testing required ?
- 11. Audit Risk Summary – C 6 The audit risk checklist (C.61) Risk response (C6.2) and risk action plan (C.03) for risks that may result in a material misstatement Overall risk assessment at FS level
- 12. Audit risk checklist – C 6.1 It is a guide to monitor whether appropriate risk response, risk action plan and overall risk at FS level have been considered to reduce the risk at an acceptable level.
- 13. Risk response summary – C 6.2 Major risk factors of individual items e.g. tangible assets Risk level ( High, Medium, Low) Justification of risk Audit approach and reference to program
- 14. Specific risk action plan C- 6.3 Specific risk affecting the client Risk level ( High, Medium, Low) Management response Financial reporting areas and assertions affected Audit approach Outcome
- 15. Detailed risk assessment C-6.4 Industry conditions Regulatory environment Business operations Investments Financial reporting Fraud and error etc.
- 16. Preliminary analytical review – C 7 Analytical procedures mean evaluation of financial information made by a study of plausible relationships among both financial and non financial data. It has been used as part of risk assessment and as part of the final review process. It may be used as substantive procedures also. Technique of analytical review: o Ratio analysis o Simple comparisons o Examining related accounts o Reasonableness tests o Trend analysis etc
- 17. Materiality summary C- 8 Range of turnover or gross assets percentage of turnover or gross assets Materiality ranges TK.0-Tk. 500,000 3.00% Tk1-Tk.15,000 TK.500,001-Tk.1,000,000 2.50% Tk15,001-Tk.25,000 TK.1,000,001-Tk.2,000,000 2.00% Tk25,001-Tk.40,000 TK.2,000,001-Tk. 5,600,000 1.50% Tk40,001-Tk.84,000 Over Tk. 5,600,000 1.00% over Tk.84,000
- 18. Accountancy work planning – C 9.1 Key accounting head Material Journal entries Observe the ethical operation Re-calculation and re- perform Any Contingent issue
- 19. Sample size planning C-9.2 Basis of sleeting sample Deeming sampling threshold Quantity of sample
- 20. Assignment planning – timetable C-9.3 Availability of accounting records Staff bookings Stocktaking attendance Bank confirmation, lawyer’s confirmation and debtors and creditors circularization's Manager and partner review Draft FS and discussions with client Signed FS
- 21. Budget and performance summary C-9.4 Item-wise detail budgeted hours as per staff grade VS. Actual hours as per staff grade. Result: Proper planning, cost control and performance evaluation and identify the areas for improvement may be
- 22. Job progress report – C 9.5 • Monitor the execution as per plan • Find out the progress of the pan • Prepare action plan to solve the issue
- 23. Opening balance and comparatives checklist – C-10 • Closing balances have been correctly b/frw • Accounting policies consistently applied?
- 24. Audit Planning and Control Evaluation
- 25. Audit Planning and Control Evaluation