Know You Client
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Transcript of Know You Client
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Know your client in Detail (understanding business and its activities)
I. Client Overview
(a) Client History and Background
Provide a description of relevant client background
Client Profile
Nature of client business
Number of Branches/offices (if any)
Directors
Major shareholders
Chief Executive Officer (Address and telephone number)
Chief Financial Officer (Address and telephone number)Head of internal audit (Address and telephone number)
Company Secretary (Address and telephone number)Legal Advisor(s)
List of related parties and their relationship
Tax Advisor
Major BanksOrganizational Charts, etc.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________________________________________________________________
________________________________________________________
________________________________________________________
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(b) Client Business Objectives and Related Business Strategies
Provide a summary of the objectives, strategies and method of implementing
the strategies.
Business Objectives Related Business Strategies
1.
2.
3.
(c) Client Business Components
(i) Major Markets
(ii) Major Products and Services
(iii) Major Customers
(iv) Major Competitors
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(v) Alliances (including suppliers) and other relationships
(d) List of Authorized Signatories
Name Designation Monetary Limit Allowed Signature
__________ _________ ____________ ________
__________ _________ ____________ ________
__________ _________ ____________ ________
__________ _________ ____________ ________
__________ _________ ____________ ________
Note: Information shall be used in performing audit procedures (e.g. Testof Controls & Substantive Testing). If there are no significantchanges since previous audit, this may be transferred to thepermanent file.
(e) Notes of Meeting with Client
(for recurring audits)
CLIENT NAME
DATE
VENUE
TIME
FIRM
REPRESENTATIVES
Name Designation
CLIENT
REPRESENTATIVES
Name Designation
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CONCLUDING
REMARKS
Sign off
Prepared by Reviewed by
Date Date
Agenda for Meeting
Latest audited accounts
Coordinating persons Name Designation
Information about Other Auditors/ Co-auditors(if any)
Availability of Accounting and/ or
Internal audit / Internal Control Systemmanuals and any changes
Areas Requiring special attention
Physical Existence Verification
A
p
pr
o
x
V
a
l
u
e
Date Location(s)
Coordi
nator(
s)
Stock
Cash
Investment
Others
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Clients expectation of completion of test
of controls
Expected date of Client to prepare
financial statements
Clients expectation of completion of
audit
Clients expectation of receipt of audited
accounts
Any significant accounting and audit
issues identified during the last audit
which are brought forward
Involvement of internal audit
a. No. of staff
b. Name of department head
c. Reporting authority
d. Type of reports issued
e. Frequency of reports
Confirmation circularization dates
Banks
Debtors
Creditors
Legal Advisors
Tax Advisors
Other
Changes in economic conditions
Changes in industry and operations
Significant changes in business since
last year
Changes in key finance and operations
managers
Changes in management / stake
holders / owners
Business objectives and whether they
are being met
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Changes in market strategies
Availability of latest cash flows /
budgets
Actual results to date (comment
generally)
Financial restriction placed by debt
covenants
Risk / Probability of breach of debt
covenants
Changes in credit terms for customers
since last year
Changes in information systems and
technology in use
Changes in significant accounting
processes
Effects of any recent or pending
government legislation / actions
Effects of outcomes of litigation since
last year
Effect of any new tax rules / legislation
New competitors in product lines of the
company
Changes in market share
Significant changes in major customers
/ suppliers
Acquisitions / disposals of associates/subsidiaries or any anticipation thereof
Changes in internal reporting formats
Changes in capital structure of the
entity
Names of key financiers and changes
thereto.
Significant changes in system of
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internal controls since last year
Whether any instances of fraud or
material error during the year. Howmanagement / those charged with the
governance responded?
Significant changes in accounting
policies
Effect of new accounting
pronouncements
Clients international reporting
requirements and changes thereto
Miscellaneous
II. Business Control Environment
When analyzing the business control environment understand the clients:
business structure;
culture and ethics;
remuneration management;personnel profiles;
communication of information;
Business structure
Culture and ethics
Remuneration management
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Personnel profiles
Communication of information
III. Computer Information Systems (CIS)
Business processes are often facilitated by computer information systems. Obtain anunderstanding of the:
level of dependence the client has on computer information systems (include
a list of the clients computer information systems);computer information systems personnel structure and skills;
security of computer information systems; Access Controls, Backups,
Disaster Recovery.
reliability of computer information systems; Data Integrity, Processing, and
Reporting Controls.
degree and rate of change in computer information systems;
dependence on external computer processing; Use of Service Organisation-
understanding and evaluation thereof.
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IV. Financial Reporting Environment
Obtain an understanding of the:
financial reporting framework applicable to the entity;
accounting policies applied by the entity and applied within the industry;
potential impact of accounting policies upon specific aspects of the financial
statements.
Financial Reporting Issues
Consider the following for identification of financial reporting issues to be addressed
while analyzing or consulting with colleagues, experts:
client's accounting practices and policies;
new accounting pronouncements;
the going concern assumption;
legal and regulatory changes
Financial reporting issue Reason for identification
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V. Critical Audit Areas / Significant Financial Statement Components
Critical audit areas are generally those where judgment is involved and significant
estimation is used. For example, making accounting estimates, fair value, selection and
application of accounting policies etc. The approach to those areas and resulting impact on
the financial statements relating to the audit is documented. It also includes
consideration of previous years brought forward issues.
Critical Audit Areas/
Objective
Management Response Proposed Audit
Approach
significant estimates
made
New borrowings with
extra-ordinary terms and
conditions
Acquisition of a
significant asset
Discontinuation of major
suppliers
Discontinuation of a
major customer
Loss of a significantmarket share
Related party
transactions
Impairment of assets
Examples of major critical areas may include:
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VI. Reasons for use of Experts and other parties
Description includes a summary of the issue, why it is considered significant to engage or
use and its potential financial statement effects.
Involvement of: Computer Information System (CIS) Specialist
Description of basis, nature, extent and conclusions related to the
involvement of CIS Specialist:
[Description]
Involvement of: Other specialist or other party involved in the audit
e.g.Actuary, Valuers, Internal audit, taxation
Description of significant issue and decision related to the involvement
of others:
[Description]
Findings