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Audit
Review
An
auditreview
istheprocess
of
examining an organization's
financial
records internal
controls
and
operations
toensure
they are
accurate transparent and compliantwith relevant
standards
and
regulations
inquiry of
Management
staff
an inquiry
involves asking
questions
to
people
both
inside
and
outside
theorganisation whohave knowledge
and information
relevant
to
theaudit It
isone
of
the
most commonauditprocedures
It can be
formal
written
or
informal
oral Itis
often
combined
withotherprocedures to
confirm
consistency
orinvestigate
contradictions
Observation
of
process it
means
watching
a
process or
activity
being
performed It
provides
evidenceabout
howprocedures
actuallyfunction at
a specific
point
in
time
It
Risk
Assessment
procedures
helpsthe
auditor
verify
that controls
areoperating as designed It
often
provides
evidence
only for
the
time
of
observation
does
not
guarantee
that thesame process operates
properly
when
not
observed
Inspection
of
documentation
records
inspection
is
examining
documents records or
physical
assets
to
verify
information The reliability of
evidence
dependson
its
source
and
type
Externally generated
documents are
generally
more
reliable
It isused
for
inspecting
contracts
invoices minutes
orpolicies
for
consistency authorization Physica
inspection of
assets
providesstrong
evidence
of
existence
butnotnecessarily
of
valuation
ownership
walkthrough of
transactions
A
walkthrough of
transactions
is
an audit procedure in
which
an
auditor
traces
a
specific
transaction
from
its
initiation through
each
step of
processingwithintheaccounting system unitil it is
recorded in
thefinancial
statements
Th
auditorchooses
a
transactions to
test
and
follows
the
transaction
frombeginning
enamin
supporting
documents interview
staffuntilitis
reflected
inthe
financial
records
Inquiry
aboutcontrol
performance
Involves asking
relevant personnel abouthow
controls
aredesignedand
operated
it
helps
get
content
explanations and
uncoverwhethercontrols
are
known
followed
Inquiry
alone
cannot
confirm
that
controls are
effective
it
needs
corroborating evidence from
other
tests
Reperformance
of
controlactivities
the
auditor
independently repeatsthe
control
procedure
confirm
itoperates
correctly
It
provides
direct hands
on
evidence
of
controleffectiveness
It
Tests
of
Control
highly
reliable because the
auditor tests
the
control
itself
rather
than just accepting
eviden
Inspection
of
evidence
of
control
it
involves reviewing physical
or
electronic documents
that
prove
controls
wereperformed
to
find
tangibleprooflikesignedapprovals
logs
reportsor
system
records The
quality
of
evidence depends on the
source client
prepared
documents
are
bisenhi
fintioid
activities
involves
watching
now
controls
are
carried
outin
realtime
to
see
if
employees
perform
themas
intended However behaviour
of
people can
change
when
they
knowthey're
being
observed
Recalculation recalculation involves independentlyrecomputingor verifying the
mathematical
accuracy of
documents
or
records prepared
by
the
client
to confirm that
figures
calculations
infinancial
statements
are
correct especially
for
areaslike
depreciation interest
or
other
estimates
Theauditor
uses
formulas data
fromfinancial
statements performs
calculations
manually
or
electronicallyratherthan relyingon
client
provided figures
Reperformance
it
involves independent examination
of
controlactivities
or
processesthatthe
client already
performed It
provides
direct hands
on
evidence
of
controleffectiveness
It
is
highly
reliablebecause the
auditor
tests the controlitselfrather than just accepting
eviden
External
confirmations they
are a
primary
audit
procedureused to obtainaudit
evidencedive
from
third parties
such
as
customers
banks
regarding
account balances
or
other information
As
responsescome
directly
to
auditor
it
is generally
more
reliable than
internally
Tests
of
Details
generated
evidence
positive
confirmations are when an auditor
sends
the
customer
a confirmation
letter
acceptable
differences
to
decide when
to
dig
deeper
Structural
Modelling a modelling
tool constructs
a
statistical model from
financial
andnon
financial
dataor
prior
accounting periods to
predict
current accountbalances
Ratio Analysis
itis
useful when analysing
asset liability
accounts
as
well
as
revenue expens
accounts
itis a
quantitative analytical toolwhere
the
auditor computes financial
ratios
from
record
amounts compares
them
to previousperiods budgets or industry
benchmarks Common
ratios
include
grossmargin
current
inventory
turnover return on
assets
ratioetc Sudden
unexplained changes
or
deviations
alerts
auditors
to
investigate further
Trend
Analysis
auditors developexpected
balances based
on
historical trends budgets
forcastsor relationships
between financial non financial
data compare
these
expectations
with
actual
recorded balances
Itimplies
analysing
account fluctuations
by
comparing
current
year
to
prior year
information
to
alsoinformation
derived
over
several
yea
subsequent
Events events occurring
between
the
date
of
thefinancial
statements the date
of
the
auditors
report facts
that become
known
to the auditorafterthedate
of
the
audi
reportare
called
as
subsequent events
Financial
statements
may
be
affected
by
certain
events thatoccur after the date
of
financial
statements
Manyfinancial
reportingframeworks
specially refer
to
such events Such
frameworks identify 2
types
of
events
thosethat provide
evidence
of
conditions
that
existed
atthe
date
of
financial
statement
those thatprovide
evidence
of
conditions
thatarose
afterdate
of
financial
statement
Some
examples
include
issue
of
new
share
capital
planned merger
of
the
company
etc SA 56
deals
withthe
auditor's responsibilities
relating
to subsequent events in an audit
of
financial
statements
Final
Review
Theobjective
of
the
auditor
are to
Procedures
obtain
sufficient evidence about
events
occurring that
require
adjustment or
disclo
infinancial
statements arereflectedappropriately infinancial
statements
respondaccurately to
facts
that becomeknown
to
auditor
later
may
havecaus
the
auditor
to
amend
the
auditors
report
The
auditorshoulddiscuss
the
matter
withmanagement
TCWG
Determine whether
financial
statements need amendment inquire now management
intends
to
address
Ging
coin
assumption going
concern
is a
fundamental
accounting assumption I
is
assumed that
theenterprisehas
neither
the
intention
nor necessity
of
liquidation
of
curtailing materially
scale
of
operations That
isthecompany will
continue
operations
for
the
foreseeable future
It issignificant
assumption in preparation of financial
iiiiiiiiiiiiiii.it
i
statements
It isthe
auditors responsibility
to
obtain
sufficient appropriate evidence
regarding
appropriateness
of
managements use
y.fi
iiiphh
g
re
ua
going concernbasis in preparation
of
financial
statements
concludebased on audit
evidencewhether
a
material uncertainty
exists
relating
toev
other events
iral
tistropnes
io
iita
iiiitiitiijti
abilityto
continue as going
concern
The
auditor
shallprovide
adequate
disclosures about events or
conditions that
may
affect
an entity going
concern Certain
auditproceduresthatcanbeperformed to
assess
going
concern are
analysing discussingcash flows profits
reading
minutes
of
meetings
reding
debentures loan agreements determining
breaches
I
analysing discussing
latestavailableinterim
financial
statements
determining adequacy of
support
forany
planned disposals of
assets
Review
of
Management Representation this involves evaluating written statements provided
by
th
managementconfirming certain matters or supporting audit
evidence obtained during theaudit
Review
of
Audit
Documentation Audit
Documentation involves the
maintenance
of
a
record
of
the entireaudit process Reviewing
involves ensuring all planned procedures are
completed
evidence is
verified
checking
documentation
is
clear complete
meeting
audit
Éiraliriview
of
financialstatements this
isthe
high
levelreview
by
senior
audit team
to
I
perform
tests
such as detecting duplicates missing
entries
or frauds
analyse
results form audit
opinion
Use of
CAAT
mostdata
is
digital
many
companiesuse
computers
no
paper
trail
large
volumes
of
data
computers
can
handle analyse
easily
ensures accuracy improvesefficiency
detects frauds errors
faster
work
pesof
CAAT's
is iii
ii
asim
i.is
iii iii ta.notimts.mn
TestData auditor processesdummy
detects
frauds irregularities
no
human
error
transactions through
clients
intosystem
to verify processing accuracy
I
iii.is iii
iiitiimit
limitations
of
cant
Y fi
og'y9;
pyrp
p
aiisthyqe
cost
of
software
technology
requiresspecial
software trained
staff
need
for
technical knowledge
misinterpret results ITknowledge
data compatibility
issues
different formatsdata
stored
ie
iii security confidentialityrisks
risk
of
leakage
misuse
Dataanalysis
tools
not
suitable
for
all
clients
small
business manual accounting systems
impiety for
specific complen
dataaccess
problems
clients
may
not
givefull
access auditorcan't
use
CAAT
Key
Capabilities of
CAAT
Fileaccess
reading
files
records in
different formats
memorganisation
in iiigijiiiimji.ca
sorting
invoices
by
date
Data
selection
filtering
dataas
per
given
conditions
selecting
all
payments
above 5,0000,
statistical function
sampling
or frequencyanalysis
checkinghow often errorsoccur
Arithmetical functions recalculating or verifying
computations
rechecking totals
or
tax
amounts
Auditopinions
UnmodifiedOpinion
An
auditor
gives
an
unmodified
opinion
when theauditor concludes from
the
audit evidence
thatthe
financial
statements
inall
material aspects
are free from
material misstatements
Standard Unmodified Opinion is
given
when the auditor concludes
from the audit evidence tha
the
financial
statements
are
free from
material misstatements
in
accordance or compliance
auditor is
independent
disclosures
are
adequate complete
its
therapytyres
from
anap
with
GAAP
or
other
reporting
framework and
there
are noinuesthe
auditorneeds
to
noscope
limitations
anaporotherreporting frameworks
Limified
opini
with
impnais
fiaiter
plight
given
whenthe auditorconcludes from consistentlyapplied
the audit evidence
that
the
financial
statements
are
freefrom
material misstatements
but
the
existsspecific information that the auditorneeds
to
bring
tothe
attention
of
theuser
of
thefinancial
statements
through the
emphasis
of
matter
paragraph For
example an
issue
withthecompanys
ability
to
continue as agoing
concern
in thenear
future
Modified
Opinion
A
Modified opinion is when
an
auditor
is required to
modifyhisopinion
on
the auditreport
auditor
gives
a modifiedopinion when
the
auditor concludes
from
the auditevidence
that
thefinancial
statements
of
an
organisation
as a
whole
are
not
freefrom
material
misstatements
Or
whenthe
auditor
is
unable to
obtain
sufficient appropriateauditevidence
t
conclude that
the
financial
statements are freefrom
material
misstatements
Qualified Except
for
opinion
auditors issue
a qualified
opinion
when auditors can
give an
unmodified opinion on
one area
of
thefinancial
statements
but
believe finan
statements as a
whole
arematerially
accurate
misstatements evaluation
of
appropriateness
of
accounting policies managements
use
of
going
con
andthe
overall
presentation
structure content
of
financial
statements
In
ouropinion
the
accompanying
Auditors Opinion ultimatelythe
auditor
is to give
an
opinion
on the financial statements
based
on
the
audit
evidence
IE
iu
giiI.Ei
I
i
fi
I
njinincial
gama
opinion one accompanyingfinancial
statements
present
fairly
in
all
material
aspects in
accordance
withthe
reporting
framework
except
for
the
following
effect
of
the
matter described
Adverse
opinion theaccompanying
financial
statements
donotpresent
fairly
in
material
aspects in
accordance
withthereportingframework
because
of
thesignifi
of
the
matters described
in the
Basis
for
Adverse opinion
section
Disclaimer
opinion
the
auditor
does
notexpress an
opinion
on the
consolidated
financial
statements
due to the significance
of
mattersdescribed
in the
Disclaim
of
opinion
section
Emphasis
of
Matter other
Matters
it is an
additional
paragraphthat
may
be
added
after
theaudit
opinion The
emphasis
of
matter
paragraph
contains
in
the
auditors judgement
matter
that
is
important for
theusers
understanding
of
the
financial
statements
The
other
matter
paragraph
contains
in
the
auditors judgement
matter
that
is
important for
theusers
understanding
of
the
audit
the
auditor
responsibilities
or the
auditreport
CriticalAudit Matters are
those
matters that in
the
auditors
judgement are
I
reported
to orrequiredtobe
reported
toaudit
committee
material
tofinancial
statements
assessing challenging subjective complexauditjudgement
Other
reporting responsibilities responsibilities in addition to responsibilities under
GAAS Report on
other
legal
regulatory
requirements
Signature signature
of
firm
auditor along
withaudit
firm
Address
place
where
auditreport
is signed
Date date
on
which report is
complete
Companies Auditors Report Order 2020
CARO 2020
is thenewformat
for
issue
of
audit
reports incase
of
statutory
audits
of
companiesunder companies Act
The
aim
of
CARO 2020
is
to
enhance overall qualit
of
audit
by
company
auditors
Applicability of
CARO
1
Rygpplies
toall
companies
currently including
foreigncompanies except
small companies
paid
up
capital Yer
turnover
40 or
Insurance companies
Banking companies
companiesregistered for
charitable purposes
Private
companies revenue locr
I
paid
up
share
capital ler
borrowings
ler
nota
holdingorsubsidiary
of
Public Co
Reporting
requirements underCARO
Tangible
Intangible
assets
inventory
working
capital
investments loans
loans
to
directors
Deposits
cost records
statutory
liabilities
unrecorded incomes
loan
defaults
funds
raised
