1 Engagement letter (Auditor/client contract)
1.1 Content
- Objective and Scope
- Responsibilities (Auditors/management)
- FS framework
- Reports
1.2 Requirements (Function)
- Minimize the possibility of misunderstanding between clients and auditors, eliminate expectation gap
- Provide written confirmation
- Reviewed every year but no need to reissued unless there're changes
2 Audit Planning
進行審計計劃的原因
To ensure
- Appropriate attention is devoted to important areas of the audit
- Potential problems are identified and resolved on a timely basis
- The engagement is properly organized and managed to be performed in an effective and efficient manner
- Proper assignment of work to engagement team members
- Direction, supervision and review of team members
- Co-ordination of work done by auditors and experts
2.1 ISA 300 (Audit strategy and Audit plan)
ISA300
2.1.1 Audit strategy
- Interim/Final
- Substantive/Control
- Analytical review/Test of control
2.1.2 Audit plan
- Assess risk
- Assess materiality
- What evidence do we need?
- Design procedures to get it
2.2 ISA 315 (Risk and Understanding)
ISA315
2.2.1 Audit risk
2.2.1.1 Identification
- Objective
Plan and perform the audit to reduce audit risk to an acceptable low level - Category of audit risk
Audit risk / Risk of material misstatement / Inherent risk / Control risk / Detection risk
2.2.1.2 Assessment
- Materiality
An expression of the relative significance or importance of a particular matter in the context of FS as a whole.- Nature (related party transactions)
- Impact （扭虧為盈）
- Value
- 1/2~1% of revenue
- 5~10% of profit before tax
- 1~2% of gross assets
Performance materiality (實際執(zhí)行的重要性水平), as 75% of materiality level
-
Importance of risk assessment
風(fēng)險評估的重要性
2.2.1.2 Response (ISA 330)
ISA330
審計流程
2.2.2 Business risk
A risk resulting from significant conditions, events, circumstance, actions or inactions with could adversely affect an entity's ability to achieve its objectives and execute its strategies, or from the setting for inappropriate objectives and strategies.
-
Category of audit risk (CFO)
- Compliance risk
- Financial risk
- Operational risk
-
Tools to identify
- SWOT analysis
- The five force model
- The PESTEL analysis
- Porter's value chain
經(jīng)營風(fēng)險和審計風(fēng)險的聯(lián)系
企業(yè)的所有活動都有financial effect胳螟，就有交易被錯報的風(fēng)險撕氧，體現(xiàn)在固有風(fēng)險和控制風(fēng)險
3 Audit methodologies
- Risk-based audit
- 'Top-down' approach (a.k.a. business risk approach, more controls testing at high level controls and less substantive testing)
- Macro-environment (PESTEL)
- Industry (Porter's five force)
- Micro-environment ?? Company
