Wiley Practitioner's Guide to GAAS 2020. Joanne M. Flood

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СКАЧАТЬ of credit entries and other adjustments made to accounts receivable records.Unexplained or inadequately explained differences between the accounts receivable subledger and the control account, or between the customer statements and the accounts receivable subledger.Missing inventory or physical assets of significant magnitude.Unavailable or missing electronic evidence, inconsistent with the entity’s record retention practices or policies.Fewer responses to confirmations than anticipated or a greater number of responses than anticipated.Inability to produce evidence of key systems development and program change testing and implementation activities for current-year system changes and deployments.

       Problematic or unusual relationships between the auditor and management, including:Denial of access to records, facilities, certain employees, customers, vendors, or others from whom audit evidence might be sought.Undue time pressures imposed by management to resolve complex or contentious issues.Complaints by management about the conduct of the audit or management intimidation of audit team members, particularly in connection with the auditor’s critical assessment of audit evidence or in the resolution of potential disagreements with management.Unusual delays by the entity in providing requested information.Unwillingness to facilitate auditor access to key electronic files for testing through the use of computer-assisted audit techniques.Denial of access to key IT operations staff and facilities, including security, operations, and systems development personnel.An unwillingness to add or revise disclosures in the financial statements to make them more complete and transparent.An unwillingness to address identified deficiencies in internal control on a timely basis.

Illustration 5. Example Program for Management Override of Internal Control

Page of Audit Program for Management Override of Internal Control
Company:	Balance Sheet Date:

СКАЧАТЬ

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Audit Objective	Audit Procedure for Consideration	N/A Performed By	Workpaper Index
	AUDIT OBJECTIVESTo identify risk of material misstatement due to fraud caused by inappropriate or unauthorized journal entriesTo determine whether management is not unduly biased in the preparation of significant accounting estimatesTo determine whether significant unusual transactions have not been entered in order to engage in fraudulent financial reporting or to manipulate earnings.
A.	Review of Journal EntriesObtain an understanding of the company’s financial reporting process and the controls over nonstandard journal entries. Document the following:The sources of entries posted to the general ledger (for example, subledgers, cash receipts journal, etc.)How the journal entries are recorded and whether physical documentation existsThe individuals responsible for: (a) initiating, (b) reviewing, and (c) approving the journal entriesThe controls in place to prevent and detect unauthorized entries
A.	Obtain an understanding of the adjustments posted by the entity to prepare its financial statements (for example, reclassification or consolidating entries). Document the following:The nature of the adjustments posted to the financial statements that are not posted to the general ledgerHow the adjustments are posted to the financial statementsThe individuals responsible for: (a) initiating, (b) reviewing, and (c) approving the adjustmentsThe controls in place to prevent and detect unauthorized adjustments
A.	Identify and select significant nonstandard journal entries and other significant adjustments for testing. In making this selection, consider the following:The effectiveness of the company’s controls over journal entries and adjustmentsThe characteristics of fraudulent entries or adjustments, such as:Made to unrelated, unusual, or seldom-used accountsMade by individuals who typically do not make journal entriesRecorded at the end of the reporting period or as postclosing entriesHaving few or no explanations or account numbersContaining round numbers or a consistent ending numberThe nature and complexity of the accounts. Examples include accounts that:Contain transactions that are complex or unusual in natureContain significant estimates or period-end adjustmentsHave been prone to errors in the pastCannot be reconciled on a timely basis or that contain significant unreconciled differencesContain intercompany transactionsAre otherwise associated with an identified risk of material misstatement due to fraudContain journal entries or other adjustments processed outside the normal course of business
A.	Ask individuals involved in the financial reporting process, including IT personnel (if appropriate), about the presence or observations of inappropriate or unusual activity relating to the processing of journal entries or other adjustments.
A.	Document the following:The journal entries and adjustments selected for testingThe nature and purpose of the journal entry or adjustmentWhether the journal entries and adjustments were properly approvedA conclusion regarding the propriety of the journal entries and adjustments tested
	Retrospective Review of Estimates
B.	Identify and document:Accounting estimates that are significant to the financial statementsFor each significant estimate, the key underlying assumptions made by management
B.	For the prior reporting period, compare the key assumptions made by management at the time the financial statements were prepared to actual events, management actions, or results obtained subsequent to that time.
B.	Determine whether the results of your procedures indicate a bias on the part of management that may affect the financial statements. If no bias is detected, document this conclusion.
	Significant Unusual Transactions
C.	Identify and document significant unusual transactions entered into during the reporting period. Consider documenting:The counterparty(ies) to the transactionHow the transaction was accounted, presented, and disclosed in the financial statementsThe process followed by the entity to approve the transaction and its accounting treatmentManagement’s stated business rationale for the transaction