8/14/2019 Icap Training Seminar(As315,330)

1/17

ICAP Training Seminar

Training Seminar:

Students of Small and Medium Sized

Practices

February 17, 2007

BDO International

8/14/2019 Icap Training Seminar(As315,330)

2/17

ICAP Training Seminar

2The Future is

HereBDO International

Outline of the Day

Introduction to Risk

ISA 315 Understanding the Entity and Its Environment and Assessing the Risksof Material Misstatement

Responses to Risk ISA 330 Responses to Risk

Practical aspects of Planning the Audit Work

ISA 300/320

8/14/2019 Icap Training Seminar(As315,330)

3/17

ICAP Training Seminar

3The Future is

HereBDO International

In other words

ISA 240/315

What could go wrong?

ISA 330

What are we going to do

about it?

8/14/2019 Icap Training Seminar(As315,330)

4/17

ICAP Training Seminar

4The Future is

HereBDO International

Why?

Risk of Material

Misstatement

Fraud Error

8/14/2019 Icap Training Seminar(As315,330)

5/17

ICAP Training Seminar

5The Future is

HereBDO International

Our Responsibilities

8/14/2019 Icap Training Seminar(As315,330)

6/17

ICAP Training Seminar

6The Future is

HereBDO International

May want to hold

final discussion at

completion?

Fraud should be

considered in context

of errors/testing results

The Standard & The Audit

Mandatory team

discussion to be

held (ISA 300)

Professio

nal

Scep

ticis

m

8/14/2019 Icap Training Seminar(As315,330)

7/17

ICAP Training Seminar

7The Future is

HereBDO International

Definition of Risk

Audit Risk =

Inherent Risk x Control Risk x Detection Risk

Risk of Material Misstatement

8/14/2019 Icap Training Seminar(As315,330)

8/17

ICAP Training Seminar

8The Future is

HereBDO International

ISA 315 - Overview (Para 2, ISA 315)

The auditor should obtain an understanding of the entity

and its environment, including its internal control, sufficient

to identify and assess the risks of material misstatement of

the financial statements whether due to fraud or error, andsufficient to design and perform further audit procedures

8/14/2019 Icap Training Seminar(As315,330)

9/17

ICAP Training Seminar

9The Future is

HereBDO International

Requirements of ISA 315

OVERALL REQUIREMENTS

Risk assessment procedures and

sources of information about the entity

and its environment, including IC

Understanding the

entity and its

environment including IC

Assessing the risks

of material misstatement

Communicating with

those charged with

governance

and management

Documentation

8/14/2019 Icap Training Seminar(As315,330)

10/17

ICAP Training Seminar

10The Future is

HereBDO International

Risk Assessment

continuous, dynamic process of gathering, updating

and analysing information throughout the audit (Para

6, ISA 315)

Planning Meeting

Risk assessment procedures:

Enquiries of management and others within the entity

Analytical procedures

Observation and inspection

8/14/2019 Icap Training Seminar(As315,330)

11/17

ICAP Training Seminar

11The Future is

HereBDO International

ISA 330 - requirements

Overall responses to risks of material

misstatement at the financial statement level

Audit procedures responsive to risks ofmaterial misstatement at the assertion level

Evaluating the sufficiency and appropriateness

of audit evidence obtained

Documentation

8/14/2019 Icap Training Seminar(As315,330)

12/17

ICAP Training Seminar

12The Future is

HereBDO International

Assertions how much do you know?

P&L Occurrence Completeness Accuracy

Cutoff Classification

BS Existence Completeness Rights & Obligations

Valuation Presentation & Disclosure

8/14/2019 Icap Training Seminar(As315,330)

13/17

ICAP Training Seminar

13The Future is

HereBDO International

Assessing the risk of material misstatement

Risk of material

misstatement

at FS and

assertion level

Identify risk Relate risk to what

can go wrong at

the assertion level

Consider

magnitude of risks

Likelihood

of risks

Specific RiskGeneral Risk

8/14/2019 Icap Training Seminar(As315,330)

14/17

ICAP Training Seminar

14The Future is

HereBDO International

General Risks and GeneralControls

General Risks are

those risks that affect

multiple financial

statement areas ortend to be pervasive

to the financial

statements.

General Controls

are those controls

that are pervasive

to the organisation

Information Gathering

8/14/2019 Icap Training Seminar(As315,330)

15/17

ICAP Training Seminar

15The Future is

HereBDO International

Nature of Procedures

ASSURANCE

Risk

To

Cs

SA

Ps

OS

Ps

8/14/2019 Icap Training Seminar(As315,330)

16/17

ICAP Training Seminar

16The Future is

HereBDO International

ISA 300

Preliminary engagement activities

Planning activities

Initial audit engagements

The auditor should plan the audit so that theengagement will be performed in an effective

manner.

8/14/2019 Icap Training Seminar(As315,330)

17/17

ICAP Training Seminar

17The Future is

HereBDO International

ISA 320 Audit Materiality

Planning Materiality Materiality refers to the size or nature of a misstatement that, in

the light of the surrounding circumstances, makes it probable thatthe judgement of a reasonable user of the financial statements

would have been changed or influenced as a result of themisstatement.

Only material misstatements and uncertainties will affect our auditopinion. Our audit procedures should not therefore beconcerned with detecting misstatements that could not be

material; they need to be focused on obtaining assurance thatmaterial misstatements do not exist