cribe how 1. What steps will you take to review the company\'s business transact
ID: 2436292 • Letter: C
Question
cribe how 1. What steps will you take to review the company's business transactions? 2. What would your plan be to utilize these procedures? you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions B. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue 1. 2. What would you need to do in the field to investigate these? Could you convey this information through charts or other supporting documentation? C. Create a test to assess appropriate assertions for designated high-risk business transactionsExplanation / Answer
overall objective of the independent auditor is to obtain reasonable assurance that financial statements are free from material mistatements and there by enabling auditor to express an opinion whether financial statements prepared by management in accordance with applicable financial reporting framework and report findings as per Standards on Auditing.
risk of material mistatement can be found through assertion level. i.e. with the verification of account balances; classification of transactions and presentation&disclosures.
two procedures are conducted in an audit.
1. compliance procedure
2. substantive procedure
A.
analytical procedure is conducted in substantive procedure stage.
Evaluation of financial information through analysis of plausible relationship among financial and non financial data and if any inconsistancy shown investigate in detail.
it involves
comparision with
-> prior periods
-> anticipated results/ budgets i.e. any deviation from production
-> similar industry information
-> trend analysis
-> ratio analysis
steps
to perform above following steps to be taken
suitability :- analyse whether performing analytical procedures here is suitable or not i.e. if controls are more in the organisation then risk of material mistatements will be less hence detailed checking is not required. so perform analytical procedures
reliability:- Data based on which we are performing analytical procedures is reliable or not is to be evaluated. performing these procedures on wrong data give wrong results.
Expectations:- evaluate whether you could build up an expectation and compare with actuals.
Materiality:- fix a materiality level up to which difference between expected and actual value is acceptable without further investigation.
B.
understand the inherent risks and controlrisks here for determining risk in high business transactions.
evaluate whetherseggregation of duties was done properly and the control over the work of employees were effective.
generally senior management people frame the controls so ultimately they will be having more chances to break the controls for their personal benefit.
observe the litigation amount paid for not compplying any laws and for entering related party transaction not as per laws.
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