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ACCAspace
Provided byACCA Research Institute ACCA课程研究学院
ACCA P7 习题详解Advanced Audit and Assurance (AAA)
高级审计与鉴证业务 第三讲
ACCA Lecturer: Iris Nie
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2014.June Q4 练习册Q8 36min
You are a manager in Ryder & Co, a firm of Chartered
Certified Accountants, and you have taken on the
responsibility for providing support and guidance to new
members of the firm. Ryder & Co has recently recruited
a new audit junior, Sam Tyler, who has come across
several issues in his first few months at the firm which
he would like your guidance on. Sam’s comments and
questions are shown below:
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2014.June Q4 练习册Q8 36min
Required:
For each of the issues raised, respond to the audit
junior, explaining the ethical and professional matters
arising from the audit junior’s comments.
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(a) I know that auditors are required to assess risks of
material misstatement by developing an understanding
of the business risks of an audit client, but I am not clear
on the relationship between business risk and risk of
material misstatement. Can you explain the two types of
risk, and how identifying business risk relates to risk of
material misstatement?
(4 marks)
2014.June Q4 练习册Q8 36min
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思考——
1. Explain the meaning of business risk and risk of
material misstatement
2. Business 分为 operational risk, financial risk,
compliance risk. / Risk of material misstatement 分为
inherent risk, control risk.
3. The relationship between the two risks—how
identifying business risk relates to risk of material
misstatement?
2014.June Q4 练习册Q8 36min
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2014.June Q4 练习册Q8 36min
Answer——
Business risk is defined in ISA 315 Identifying
and Assessing the Risks of Material Misstatement
Through Understanding the Entity and its
Environment. The definition states that【business
risk is a risk resulting from significant conditions,
events, circumstances, actions or inactions which
could adversely affect an entity’s ability to achieve
its objectives and execute its strategies, or from the
setting of inappropriate objectives and strategies.】
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2014.June Q4 练习册Q8 36min
Risk of material misstatement is defined in ISA
200 Overall Objectives of the Independent Auditor
and the Conduct of an Audit in Accordance with
ISAs as 【 the risk that the financial statements are
materially misstated prior to audit. 】Risk of
material misstatement comprises inherent risk and
control risk.
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2014.June Q4 练习册Q8 36min
ISA 315 states that the auditor shall perform risk
assessment procedures to provide a basis for the
identification and assessment of risks of material
misstatement at the financial statement and assertion
levels.
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2014.June Q4 练习册Q8 36min
Business risks can be broken down into operational
risk, financial risk and compliance risk. Each of these
components can have a direct impact on the financial
statements, and therefore understanding the
components of business risk can help the auditor to
identify risks of misstatement, and to design a
response to that risk.
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2014.June Q4 练习册Q8 36min
Some business risks impact the inherent risk
component of risk of material misstatement. For
example, the auditor may have identified that an
audited entity has significant levels of debt with
covenants attached. The business risk is that the
covenants are breached and the debt recalled. An
associated inherent risk at the financial statement
level is that the financial statements could be
manipulated to avoid breaching the debt covenant.
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2014.June Q4 练习册Q8 36min
Other business risks impact on the control risk
component of risk of material misstatement. For
example, the auditor may have identified that an
audited entity has a business risk due to having lost
key members of personnel in the accounting
department. This has a clear impact on control risk,
as it means the accounting department is short of
competent staff and errors are likely to go undetected
and uncorrected.
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2014.June Q4 练习册Q8 36min
Therefore the ISAs’ approach to planning an audit is
underpinned by the concept that it is essential for an
auditor to understand the business risks of an audited
entity in order to effectively identify and respond to risks
of material misstatement.
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2014.June Q4 练习册Q8 36min
评分标准——
(a) Risk assessment
– Definition of business risk (1 mark)
– Definition of risk of material misstatement (1 mark)
– Business risks impact on the financial statements
and therefore risk of material misstatement
– Business risk impacts inherent risk
– Business risk impacts control risk
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2014.June Q4 练习册Q8 36min
Compliance risk
Financial risk
Operational risk
Liquidity, interest rate,
change of exchange rate
Loss of assets,
loss of suppliers,
workforce strike, shortage
of material
Business
risk
Laws and regulations,
standards
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2014.June Q4 练习册Q8 36min
Examples of business risks——
• The risk that products may become technologically
obsolete.
• The risk of losing key staff.
• The risk of a catastrophic failure of IT systems.
• The risk of changes in government policy.
• The risk of fire or natural disaster.
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Ultimately these business risks can lead to
complications and deficiencies in the accounting
process, which could lead to fraud, error or omission.
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2014.June Q4 练习册Q8 36min
(b) I worked on the interim audit of Crow Co, a
manufacturing company which outsources its payroll
function. I know that for Crow Co payroll is material.
How does the outsourcing of payroll affect our audit
planning?
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思考——
1. Definition
2. Affect audit planning → Obtaining an understanding
of the business → Materiality / Audit risk
3. Relevant control (both user organisation and
service organisation )
4. Means of obtaining understanding
2014.June Q4 练习册Q8 36min
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Answer——
【 Outsourcing is when certain functions within a
business are contracted out to third parties known as
service organisations. 】 It is common for companies
to outsource one or more of it functions, with payroll,
IT and human resources being examples of functions
which are typically outsourced.
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2014.June Q4 练习册Q8 36min
Outsourcing does have an impact on audit planning.
ISA 402 Audit Considerations Relating to an Entity
Using a Service Organisation requires the auditor to
obtain an understanding of how the audited entity
(also known as the user entity) uses the services of a
service organisation in the user entity’s operations,
including the following matters:
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2014.June Q4 练习册Q8 36min
– The nature of the services provided by the
service organisation and the significance of those
services to the audited entity, including the effect on
internal control;
– The nature and materiality of the transactions
processed or accounts or financial reporting
processes affected by the service organisation;
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2014.June Q4 练习册Q8 36min
– The degree of interaction between the activities
of the service organisation and those of the audited
entity;
– The nature of the relationship between the
audited entity and the service organisation, including
the relevant contractual terms.
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2014.June Q4 练习册Q8 36min
The reasons for the auditor being required to
understand these matters is so that any risk of
material misstatement created by the use of the
service organisation can be identified and an
appropriate response planned.
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2014.June Q4 练习册Q8 36min
The auditor is also required under ISA 402 to
evaluate the design and implementation of relevant
controls at the audited entity which relate to the
services provided by the service organisation,
including those which are applied to the transactions
processed by the service organisation.
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This is to obtain understanding of the control risk
associated with the outsourced function, for example,
whether the transactions and information provided by
the service organisation is monitored and whether
checks are performed prior to inclusion in the financial
statements.
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Information should be available from the audited
entity to enable the understanding outlined above to
be obtained, for example, through reports received
from the service organisation, technical manuals and
the contract between the audited entity and the
service organisation.
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2014.June Q4 练习册Q8 36min
The auditor may decide that further work is
necessary in order to evaluate the risk of material
misstatement associated with the outsourcing
arrangement’s impact on the financial statements. It
is common for a report on the description and design
of controls at a service organisation to be obtained.
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2014.June Q4 练习册Q8 36min
A type 1 report focuses on the description and
design of controls, whereas a type 2 report also
covers the operating effectiveness of the controls.
This type of report can provide some assurance over
the controls which should have operated at the
service organisation.
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2014.June Q4 练习册Q8 36min
Alternatively, the auditor may decide to contact the
service organisation to request specific information, to
visit the service organisation and perform procedures,
probably tests on controls, or to use another auditor to
perform such procedures. All of these methods of
evaluating the service organisation’s controls require
permission from the client and can be time consuming
to perform.
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2014.June Q4 练习册Q8 36min
The purpose of obtaining the understanding above
is to help the auditor to determine the level of
competence of the service organisation, and whether
it is independent of the audited entity. This will then
impact on the risk of material misstatement assessed
for the outsourced function.