Immersing in audit

  Planning an audit includes establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of financial statements in such ways: helping the auditor to pay appropriate attention to important areas of the audit, helping the auditor to   identify and resolve potential problems, helping the auditor properly organize and manage the audit engagement, assisting in the selection of engagement team members. ISA 300 deals with the auditor’s responsibility to plan an audit of financial statements and apply in the context of recurring audits.

  Planning is one of the stages of independent audit of financial statements. The nature and extent of planning activity depends on the size and complexity of the company, engagement team members’ previous experience with the company and changes in circumstances that take place during the audit engagement.

 Deficiency in internal control exists when: ·         Control is in place, but it is unable to prevent or detect and correct misstatements in the financial statements. ·         A control is missing . Significant deficiency in internal control is a deficiency or several deficiencies that in auditor professional judgment, is of sufficient importance to attract attention of those charged with governance or management. If the auditor has identified deficiencies in internal control, the auditor determines whether they constitute significant deficiencies . Significant deficiencies in internal control should be communicated in writing to those charged with governance on a timely basis.   Besides of significant deficiencies in internal control the auditor also is required to communicates other deficiencies in internal contro l identified during the audit that, in the auditor’s professional judgment, are o...

  An auditor obtains an understanding of internal control relevant to the audit when identifying and assessing the risks of material misstatement. In making those risk assessments the auditor may identify deficiencies in internal control. Also, deficiencies in internal control may be detected by an auditor at any other stage of the audit. ISA 265 deals with the auditor’s responsibility to communicate appropriately to those charged with governance and management deficiencies in internal control1 that the auditor has identified in an audit of financial statements. https://www.iaasb.org/

  Fraudulent financial reporting means intentional misstatements, including omissions of amounts or disclosures in financial statements with the aim to deceive financial statement users Fraud risk factor are events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Auditors may face with fraud risk factors in different rage of situations. Fraud risk factors usually are classified based on the three conditions generally present when material misstatements due to fraud take place:   incentives/pressures , opportunities , and attitudes/rationalizations .   The following are examples of fraud risk factors when material misstatements due to fraud take place Incentives/pressures It relates to situations when financial stability or profitability is threatened by economic, industry, or company operating conditions:    New accounting, statutory, or regulatory requirements.   High degree of co...

Those charged with governance are the persons or organizations with responsibility for controlling the strategic direction of the company and obligations related to the accountability of the company. They also oversee the financial reporting process . The board of directors of a private or public sector company or owner-managers of private company relate to   those charged with governance of company. Managemen t are the persons with executive responsibility for the conduct of the company’s operations.

  The communication of auditors with those charged with governance is very important in audit process and    helps in communicating the responsibilities of the auditor in relation to the financial statement audit, obtaining from those charged with governance information and communicating significant findings. ISA 260   deals with the auditor’s responsibility to communicate with those charged with governance in an audit of financial statements.   It defines objectives and requirements of auditor communications with those charged with governance . https://www.iaasb.org/

  Laws and regulations may influence company`s financial statements in various ways: (a)     Prescribe applicable financial reporting and tax framework (b)    Establish the legal rights and obligations of company (c)     May require specific disclosure in financial statements of company (d)    Impose fines and penalties on company in case of non-compliance (e)     Revoke the operating license of a company It is the management of company under the oversight of those charged with governance is responsible to ensure that the company’s operations are conducted in accordance with laws and regulations. Management may apply the following policies and procedures to detect and prevent non- compliance with laws and regulations : ·         Monitoring legal requirements and ensuring that operating procedures are designed to meet these requirements ·     ...