This presentation covers the types of audit, its practical implications, tools for conducting audits, how to plan an audit, and what the outcomes of audit planning and finally how to execute an audit.
2. Table of contents
Types of Audit
Overview
Accepting a client
Audit Planning
Outcomes of Audit Planning
Execution of Audits
Use of Technology and other Tools
Quality Assessment of Audit
Q & A session
6. Statutory Audits
Mandatory by law/Statute
Require reasonable assurance or even more
All Audits are assurances but not all assurances are audits
Examples are;
Financial Audits under Companies Act 2017 earlier Companies Ordinance 1984, Banking
Companies Ordinance 1962 and Modaraba Companies Ordinance, 1980
Tax Audits under various tax laws where some times CAs and CMAs are given special powers to
conduct audits on given parameters
Cost audits Under Companies Act 2017
7. Assurance/Agreed Upon Procedures
(AUPs)
Not Mandatory
Mandatory in some cases
Require specific or less than reasonable assurance
All Audits are assurances but not all assurances are audits
Examples are;
Various certificates to be issued under various statutes e.g. Share deposit money certificate
Payroll Audits
System’s Audits
Control Audits/Assessments
8. Internal Audits
Not Mandatory
Done in house
Detailed audits of processes, Controls, procedures and executions
Detection of loop holes in system, minimizing any risks of fraud and pilferages
Staff normally reports to an independent Committee namely the Audit
Committee/Internal Audit Committee
Targeted to specific goals
Watch dog functions for the shareholder’s wealth
9. Forensic Audits
Audits done for detection of white color Crimes e.g.
Corruption
Assets beyond means
Assets and Funds misappropriations
Kick Backs
Transfer Pricing
Layering
Financial Statement Frauds
Benami Transactions and Money Laundering
Cooked Books-May include all or any of above
10. Forensic Audits
Recent Cases
Habibullah Case-Amnesty for 1.4 either PKR or USD still not clear- Involves breach of trust of shareholders
Hussain Lawai Case-Money laundering and benami Transactions
Panama Case investigation-Assets beyond means and corrupt practices
Recent Movies
The Accountant- Ben Affleck
Catch me if you can- Leonardo De Caprio and Tom Hanks
The Wolf of Wall street- Leonardo De Caprio
Old Cases
The penny Fraud
Enron, Cendant, and WorldCom are examples of massive companies torn apart by financial fraud and scandal
Ponzi or Pyramid scheme
12. Pre-Audit Process
Accepting a client
Initial Communications
Terms of Engagements
By Law
By Client
Conflict of Interest Check Pass
Initial assessment of documents and Terms of References [TORs] vs Skill availability and
deployment
Engagement Letters- the Auditor’s [TORs]
Acceptance or Decline
21. Tools for Audit Planning and Audit
IFAC guidelines
Requirements of Local Laws and Statutes
ICAP check Lists
Regulatory Guidelines
Auditing Software
Internet, information gathering and Data mining
Print media
IFRS and IAS
Pathological Support
Chemicals, DNAs, Reports, Finger Prints
Interviews/Meetings and Questionnaires
Use of Technology- e.g. Surveillance tools
22. IFACs guidelines and Standards
https://www.ifac.org/global-knowledge-gateway/audit-assurance?overview
International Standard on Quality Control 1 (ISQC 1)
ISQC 1 sets out an accounting firm’s responsibilities for its system of quality control and applies
to all audits and reviews of financial statements, and other assurance and related services
engagements, performed by the firms‘ professional accountants.
100-999 International Standards on Auditing (ISAs)
ISAs are to be applied in the audit of historical financial information.
2000-2699 International Standards on Review Engagements (ISREs)
ISREs are to be applied in the review of historical financial information.
3000-3699 International Standards on Assurance Engagements (ISAEs)
ISAEs are to be applied in assurance engagements other than audits or reviews of historical
financial information.
4000-4699 International Standards on Related Services (ISRSs)