Wiley Practitioner's Guide to GAAS 2020. Joanne M. Flood
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Название: Wiley Practitioner's Guide to GAAS 2020
Автор: Joanne M. Flood
Издательство: John Wiley & Sons Limited
Жанр: Бухучет, налогообложение, аудит
isbn: 9781119596035
isbn:
The assessment of the risk of material misstatement enables the auditor to design appropriate further audit procedures, which are clearly linked and responsive to the assessed risk.
How to Consider Internal Control When Assessing Risks
When making risk assessments, the auditor should identify the controls that are likely to either prevent or detect and correct material misstatements in specific assertions.
Individual controls often do not address a risk completely in themselves. Often, only multiple control activities, together with other components of internal control (for example, the control environment, risk assessment, information and communication, or monitoring), will be sufficient to address a risk. For this reason, when determining whether identified controls are likely to prevent or detect and correct material misstatements, the auditor generally considers controls in relation to significant transactions and accounting processes (for example, sales, cash receipts, or payroll), rather than ledger accounts.
Revision of Risk Assessment
During the course of the audit, new information may surface that causes the auditor to change his or her assessment of the risk of material misstatements. If so, the auditor should revise the assessment and the planned audit procedures. (AU-C 315.32)
Documentation
The auditor should document the following:
The discussion among members of the audit team regarding the susceptibility of the entity’s financial statements to material misstatement due to error or fraud, including how and when the discussion occurred, the subject matter discussed, the audit team members who participated, and significant decisions reached concerning planned responses at the financial statement and relevant assertion levels.
Key elements of the understanding obtained regarding each of the aspects of the entity and its environment, including each of the five components of internal control, to assess the risks of material misstatement of the financial statements, the sources of information from which the understanding was obtained, and the risk assessment procedures.
The risks identified as significant risks.
The assessment of the risks of material misstatement both at the financial statement level and at the relevant assertion level and the basis for the assessment.
(AU-C 315.33)
Examples of Matters to Consider When Obtaining an Understanding of the Entity and Its Environment
The extent of the auditor’s planning depends on the nature of the client and the experience of the auditor with that client. For example, planning for the audit of a new client is more extensive than planning for the audit of an existing client. When planning an audit, the auditor should consider the following:
The economy
The client’s industry
The client’s business
Firm requirements
These factors are in Appendix A of AU-C 315.A156 and are discussed next. All factors are not appropriate for every audit. The size and complexity of the client determine which factors are relevant.
The Economy
There are certain economic conditions that significantly influence the industry and the business of the client. The auditor should be aware of these conditions and should consider them when planning the audit. Some economic factors that might affect client operations and, therefore, should be considered in planning an audit include:
1 Interest rates and availability of financing
2 Unemployment rates
3 Money supply
4 Foreign currency exchange rates and contracts
5 Tariff trade restrictions
6 Government regulations and legislation
7 Overall business conditions—depression, recession, inflation
The Client’s Industry
When planning the audit, the auditor should be aware of conditions in the client’s industry. Factors to consider include the following:
1 Growth and financial results of the industry; possible sources of this information are:Industry trade association literaturePublications issued by agencies such as Moody’s, Standard & Poor’s, and Robert Morris AssociatesGovernment publications issued by the Government Printing Office, Washington, D.C.
2 Cyclical and seasonal nature of the industry
3 Product technology
4 Supply availability and cost
5 Is the industry labor intensive or capital intensive?
6 Industry labor conditions:Is the industry unionized?Has the industry recently experienced a strike?
7 Accounting principles and industry accounting practices; this information may be obtained from firm members with clients in the same industry and the American Institute of Certified Public Accountants (AICPA) Industry Audit and Accounting Guides.
8 Industry price patterns and consumer reactions to price changes
9 Regulatory environment
10 Taxation:Number of bankruptcies during the past yearNumber of new companies organized during the current year
In addition to the information the auditor obtains about the client’s industry from industry- related publications, he or she may obtain industry information from bankers, client management, auditors with clients in the same industry, and general business publications, such as the Wall Street Journal, Bloomberg Businessweek, Forbes, and Fortune.
The Client’s Business: New Client
When planning the audit, the auditor should have a knowledge of the client’s operations. For a new client, the primary sources of information are discussions with the predecessor auditor and inquiries of client management.
For a new client, the auditor should learn about the client and plan the audit by doing the following:
1 Communicate with predecessor auditor.
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