Financial Auditing Session 7 PDF

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 152  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 153  Last Update 01/09/24 I. ACCOUNTS CONTROL GOAL The identific...

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 152  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 153  Last Update 01/09/24 I. ACCOUNTS CONTROL GOAL The identification of misstatement risks and the existence of significant transactions and accounting balances justify the implementation of susbtantive controls. If weakness of internal control → risk increase → increase of number of tests Substantive controls = tests performed by the auditor to confirm the assertions contained in the financial statements FINANCIAL AUDITING - Audrey CHEREF - page 154  Last Update 01/09/24 II. SUBSTANTIVE TESTING TYPES Inspection of key book entries and analysis of Verify the variations, trends and Consistency consistency correlation with other or of accounting information, or previous, corroboration and non- subsequent or forecast tests accounting data for the entity or information similar entities. Verify consist in ensuring that an accounting element carried out by the data by company has been Validation or reconciling correctly reflected in the detail tests them with the accounts based on reality they documents that have represent On balances sufficient probative value. On transactions FINANCIAL AUDITING - Audrey CHEREF - page 155  Last Update 01/09/24 III. CONSISTENCY TESTING TOOLS & TECHNIQUES Analytical procedures or reviews = comparisons between annual financial statements and data from previous, subsequent and forecast periods, and from similar companies. Balance checking = Inspection of key book entries Study of the credit or debit of an account FINANCIAL AUDITING - Audrey CHEREF - page 156  Last Update 01/09/24 IV. DETAIL TESTING TOOLS Control of switchboard or continuity schedule = detailing the changes that occurred during the period between the opening balance and the closing balance Reconciliation: Examination of accounting records and internal or external supporting documents Comparison of totals, balances and transactions on documents from different sources, internal cross-checks Circularization or request for third-party confirmation Arithmetic checks: verification of calculations and evaluations Informative techniques: file extraction, software Cut-off controls Physical observation & inspection: validation of physical quantities & existence Sampling & CAATS = define the objective the population concerned, study a representative part, called a sample & draw conclusions. FINANCIAL AUDITING - Audrey CHEREF - page 157  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 158  Last Update 01/09/24 I. DEFINITION & PRINCIPLE Request information from a third party outside the organization to verify the reliability of the same information collected within the organization. Weighting information reliability Place of Reliable Place of data information information collection production ++++ External External +++ Internal External ++ External Internal + Internal Internal FINANCIAL AUDITING - Audrey CHEREF - page 159  Last Update 01/09/24 II. EXAMPLE Ladies and Gentlemen, Our Statutory Auditor, the company [name of the firm of Statutory Auditors] , is currently auditing our accounts and would ask you to send it directly to the following address: [address of the auditing firm]. a detailed statement of our account in your books as at 31/12/2007, the amount and due date of the bills we have accepted to your order, as well as any advances on outstanding orders as at the same date and the number of invoices corresponding to deliveries with a reservation of title clause. We wish to make it clear that the sole purpose of this request is to audit our accounts as part of the normal performance of our Statutory Auditor's duties. Thank you for your cooperation. Yours sincerely Signature FINANCIAL AUDITING - Audrey CHEREF - page 160