Audit Basics
To enhance the degree of confidence of the intended users of the financial statements
Audit purpose
Testing method not used for monetary values
Accept/Rejecting Testing
Territory Assurance Leader
Sean W. Ramirez
Our risk assessment starts with this process
Acceptance and Continuance
Five internal control components
Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring Activities.
Risk that an inappropriate opinion is issued when the financial statements are not free from material misstatement.
Audit risk
Factor that influences the determination of the appropriate method of test of details
Population
Any two digital tools
1. Halo for Journals
2. Alteryx
3. Datasnipper
4. PowerBI
Risk affects particular financial statement line items/ accounts/classes of transactions
Assertion level risk
What does ITGCs stand for?
Information Technology General Controls
Inherent risk + Control risk = ??
Risk of Material Misstatement
The third step that you need to fill out in the Non-Statistical Audit Sampling Form
Define misstatement
Any three service industry
1. CIPS ( Consumer & Industrial Products and Services )
2. Insurance
3. Banking and capital markets
4. Energy
5. Hospitality and leisure
Misstatement affecting the financial statements as a whole
Financial Statement Level Risk
What is the purpose of internal controls?
The purpose of internal controls is to achieve:
● Reliability of financial reporting;
● Effectiveness and efficiency of operations; and
● Compliance with applicable laws and regulations.
The seven (7) PwC Assertions are?
Accuracy, Completeness, Cut-Off, Existence/Occurrence, Presentation & Disclosure, Rights & Obligation and Valuation
Preferred type of ToD but its results cannot be projected to the untested items within the population
Targeted Testing
Global PwC Chairman
Mohamed Kande
Methods of gaining understanding during the risk assessment process
1. Inquiries of Management
2. Analytical Procedures
3. Observation and Inspection
What are the four IPOs (Information Processing Objectives)
Completeness, Accuracy, Validity and Restricted Access
The maximum tolerable amount of quantitative error or misstatement before the financial statements is considered as materially misstated or misleading to the intended users
Give PwC Audit Guide reference
Overall Materiality
PwC Audit Guide: 3302.2.1
Four types of Substantive Analytical Procedures
1. Trend analysis
2. Ration analysis
3. Reasonableness testing
4. Regression Analysis
5. Scanning Analytics
PwC Values are:
Care, Act with Integrity, Making a difference, Working together, Reimagine the possible.
Inherent risk factors
1. Complexity
2. Subjectivity
3. Change
4. Uncertainty
5. Susceptibility
1. What might be an example of a manual control using system generated reports or data (also known as an IT dependent manual control)?
2. What might be an example of an automated control?
1. Sub-ledgers are reconciled to the general ledger on a periodic basis. Reconciling items are investigated and resolved on a timely basis. (Reconciliations)
2. The system performs a three-way match by comparing pertinent data (e.g., price, quantity.) between the purchase order, invoice and goods receiving note and further processing is blocked when differences exceeding a predetermined threshold are noted. Invoices with differences are flagged for further investigation.