auditing 4
DESCRIPTION
TRANSCRIPT
PA 503 FUNDAMENTAL OF AUDITING CHAPER 5
GROUP MEMBER :
UMMI SARAH BINTI ABD KGUPOR
QURATULAINI BINTI HASRI
NOR SHAWAL LEILA BINTI ZAHARUDIN
NURAZARIAH BINTI RAHIMAN
NUR HUZAIFAH BINTI ZULKIFLI
5.1 KNOW THE NATURE OF AUDIT DOCUMENTATION
5.1.1 Define the nature of audit documentation
5.1.2 Describe the purpose of audit documentation
AUDIT DOCUMENTATION
Audit documentation that meets the requirements of this ISA and the specific documentation requirements of other relevant ISAs provides :
a) Evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor
b) Evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements
TYPES OF AUDIT DOCUMENTATION
Internal Documentation
Relating to financial transaction that are prepared & used within the client’s organisation without ever going to an outside party such as a customer or vendor
Eg: Cheque request form, Payroll time card, adjusting journal entry & receiving report.
External documentation
Originate with an outside party or was originally an internal document that went to an outside party & is now either in the hands of the client or is readily accessible.
Eg: Suppliers invoice, vendors cancelled cheque or cancelled note & validated deposit slip.
It also can be independent verified, auditors usually place more reliance on them than on internal documents produced within the organisation.
PURPOSE OF AUDIT DOCUMENTATION
Assist the engagement team in planning and performing the audit
Assists reviewers in carrying out their responsibilities in accordance with ISA 220 and professional standards
Assist the engagement team to demonstrate that the audit work was performed properly
Record matters of continuing significance for future audits of company
5.2 UNDERSTAND THAT AUDIT PROGRAMME
5.2.1 Define the audit programme5.2.2 Provide the sample of audit
programme5.2.3 Construct the advantages and
disadvantages of using the audit programme
5.2.1 Define The Audit Programme
Detailed listing of the steps to be performed as part of the procedures to complete an audit
Provides guidance as to what the audit personnel involved need to do and set out the nature, timing, and extent of planned audit procedures required to implement the overall audit plan
5.2.2 Sample Of Audit Programme
1. Cash2. Inventory3. Account Payable4. Account Receivable
5.2.3 Advantages Of Using Audit Programme
Supervision of work
Systematic uniformity of work
Basic instrument for training
Several audit maybe control
Easy transfer
Final review
5.2.3 Disadvantages Of Using Audit Programme
Audit program increases the chance of
fraud
Possibility of being unsuitable
Audit program is unsuitable to small
concern
Exclusion of problem of new technology
5.3 LEARN ABOUT THE AUDIT WORKING PAPER
5.3.1 Discuss the nature of audit working paper :
a) Purposesb) functionsc) Contentsd) Format
MEANING OF AUDIT WORKING PAPER
The material that auditors prepare or obtain and retain in connection with the performance of the audit
May be in the form of data stored on paper, film, electronic media and also be used in court in case of negligent audit
PURPOSES OF AUDIT WORKING PAPER
Assist in the plannig and performance of the audit
Assist in the supervision and review of audit work
Record the audit evidence resulting from the audit
work performed to support the auditors opinion
Constitute a permanent record of the objective
and scope of the audit as well as the work
performed during the audit
FUNCTION OF AUDIT WORKING PAPER
State a clear audit objective
State the name of client, subject matter,
year/period end
Reference of linked document
How sample size were determined
The conclusion reached should be consistent
with result of the test
Signed and date by prepared and reviewer
CONTENT OF WORKING PAPER
Audit programmes. Grouped account schedules. Lead schadules. Analysis. Memorandum. Letters of confirmation. Copies or representatives abstract of
company documents. Flowcharts and questionnaires. Various other forms and practice aids.
FACTOR EFFECTING THE FORM AND CONTENT OF THE AUDIT
WORKING PAPERS
Nature of the engagement Forms of the auditors report Nature and complexity of the business Nature & condition of the entity
accounting & internal control system Needs in the particular circumstances
for direction, supervision, and review of work performed by assistants.
Specifis audit methodology & technology used in the course of audit.
FORMAT OF AUDIT WORKING PAPER
The name of the client
Period covered by the audit
Subject matter
File reference
The initials (signature) of the member of
staff who prepared the working paper and
the date which it was prepared
FORMAT OF AUDIT WORKING PAPER
Uniform working paper format may not be used but work paper for functional areas such as cash receipt should display conformity in various types of audit
Working papers may be in the form of paper, tapes, disks, diskets and film.
Should be backup copies of electronically generated working paper and should not be stored with original copies.
5.3.2 DISCOVER THE SYMBOLS USED IN AUDIT WORKING PAPER ‘N/A’ ( explain why the procedures or
test does not apply). ‘o’ (casted) ‘Ob’ (have checked and agreed with
Opening Balance) ‘Cb’ (have checked and agreed with Closing
balance) <C 12> ‘cross reference’ (usually document
can refer to supporting documents). ‘Pv’ (checking with payment Voucher) ‘Inv’ (Checking with invoice)
5.4 LEARN ABOUT THE AUDIT FILE
5.4.1 Define types of audit file :
a. Permanent audit fileb. Current audit filec. Correspondance files
PERMANENT AUDIT FILE The permanent file usually contains documents and
matters of continuing importance of clients’ businesses which will be required for more than one audit.
Below are some of the documents and records auditors would keep in:
Minute of board meeting Lease agreement Schedule of capital asset and capital stock The charted of corporation Description of the accounting method,
policy and internal control system of the company
Copy of articles of association Copy of memorandum of associaton Letter of engagement Types of Bankers Types of Legal adviser
CURRENT AUDIT FILEConsist of working papers containing information primarily related to the purposes of the current audit
Purpose : Evidence of the planning process Evidence of the auditor’s understanding
of the accounting and internal control system
Analysis of transaction and balance
Contain :> Audit and audit programme’s copies> Clearance the problem and confusion during the time of audit work> Bank reconcilatation statement> Paper of calculation of tax bonus> List of lost proofs> Paper regarding stock revaluation
CORRESPONDENCE FILES
Correspondence file should contain all correspondence and letters with the client company or with the authorities such as the Inland Revenue, the Registrar of Companies, and other matters concerning the client company’s affairs.