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Auditing and Assurance Manual ICAB
Auditing and Assurance Manual ICAB
Assurance
CA in Bangladesh 1
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
CONTENTS OF ASSURANCE
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
08. Documentation
8.01 Documentation
8.02 Purpose of documentation
8.03 The form and content of working Papers are affected by matters such as:
8.04 The form and contents of Audit working Paper
8.05 Contents of Permanent Audit files
8.06 Contents of current file
8.07 Safe custody, retention, ownership and right of access to documentation
8.08 Importance of confidentiality:
8.09 Security procedures to prevent accidental disclosure of information:
8.10 Where an auditor can disclose information acquired in the course of professional
work:
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Fair: information is free from unfairness & bias with compliance expected standards and
rules. The accounts should return the business matter of the company's underlying
transactions.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Objectivity: This is a state of mind that excludes partiality, unfairness and compromise and
that gives fair and neutral consideration to all matters that are relevant to the task in hand.
Professional competence and due care. A professional accountant has a continuing duty to
maintain professional knowledge and skill at the level required to ensure that a client or
employer receives competent professional service based on current developments in
practice, legislation and techniques.
Professional behavior: A professional accountant should comply with relevant laws and
regulations and should avoid any action that discredits the profession.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
4.04 The form and remaining content of audit engagement letters are given
below:
a) The objective of the audit of financial statements
b) Management's responsibility for the financial statements'
c) The scope of the audit including reference to applicable legislation, regulations, or
Pronouncements of professional bodies to which the auditor adheres'
d) The form of any reports or other communication of results of the engagement.
e) Unrestricted access to whatever records, documentation and other information is
requested in connection with the audit.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
5.04 Define steps to develop an audit plan including risk assessment procedures,
01. Understanding the entity’s environment:
a. General economic factors and industry conditions.
b. Important characteristics of the business including business strategies, financial
performance and reporting requirements.
c. Level of competence of management.
02. Understanding the accounting and internal control systems:
a. The accounting policies adopted and changes.
b. The effect of new accounting or auditing pronouncements.
03. Risk and materiality:
a. The expected assessment of risks of fraud or error and
b. Identification of significant audit areas.
c. The setting of materiality level.
d. The possibility of material misstatements,
04. Nature, time and extend of procedure
a. Possible change on specific audit areas.
b. The effect of information technology on the audit.
05. Co-ordination, direction, supervision and review:
a. The number of locations.
b. Staffing requirements.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
5.08 Possible source of information about the client to perform analytical procedure:
Interim financial information
Budgets
Management accounts
Non-financialinformation
Bank and cash records
VAT returns
Board minutes
Discussions with the client at the year-end
5.09 Materially:
Information is material if its omission or misstatement would reasonably influence the
economic decisions of users taken on the basis of the financial statements.
Materiality depends on the size of error in the context of its omission or misstatement.
Audit Materiality should be considered by the auditor when:
Determining the nature, timing and extent of audit procedures; and
Evaluating the effect of misstatements.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
7.08 Statistical sampling is any approach to sampling that involves random selection of a sample
and use of probability theory to evaluate sample results, including measurement of sampling
risk.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
08. Documentation
8.03 The form and content of working Papers are affected by matters such as:
The nature of the audit procedures to be performed
The identified risks of material misstatements
The level of judgment required in performing the work.
The significance of the audit evidence obtained
The nature and level of problems identified
The audit methodology and tools used
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
8.10 Where an auditor can disclose information acquired in the course of professional
work:
Consent obtained from the client, employer or other proper source, or
There is a public duty to disclose, or
There is a legal or professional right or duty to disclose.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Key areas when testing the balance sheet bank figure are:
Confirming bank balances directly with the bank (existence, valuation, right and
obligation)
Confirming reconciling differences calculated by the client are reasonable
(completeness, valuation)
Confirming any material cash balances held at the client are correctly stated (valuation)
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Ordering
Key Risk
Orders taken from customers who not able to Pay
Orders taken from customers who pay for a long time
Orders not recorded properly so customers lost.
Control:
Segregation of duties; credit control, invoicing and inventory dispatch.
Authorization of credit terms to customers
Choose solvent customer
Sequential customer order numbering
Correct prices quotation given to customers
Matching of customer orders with production orders and despatch notes
Prompt Customer service.
Tests of control:
All new receivable accounts have authorized by senior staff on not.
Orders accept with credit terms and credit limits
Customer order is matched with production orders and despatch notes or not.
Recording:
Key Risk:
Sales invoiced, credit notes not properly recorded
Sales recorded wrong customer accounts
Debts included on receivables ledger that not collectable.
Control:
Segregation of duties: recording sales, maintaining customer accounts and preparing
statements
Matching of cash receipts with invoices
Regular preparation & checking of trade receivables statements
Review and follow-up of overdue accounts
Authorization of writing off for bad debts
Reconciliation of receivables ledger control account
Test of control:
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Cash collection:
Key Risk:
All monies received are recorded
All monies received are banked
Control:
Segregation of duties.
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Payment:
Risk
False invoices are paid in error
Invoices are paid too soon
Payment is not correctly recorded
Credits are not correctly recorded
Payments are not recorded in the right period
Control:
Cheque and bank transfer payments
Cheque and bank transfer requisitions
Authority to sign cheques
Prompt dispatch of signed cheques
Payments recorded promptly In cash book and nominal and payables ledgers
Cash payments) Authorization of expenditure
Cancellation of vouchers to ensure they cannot be paid twice
Limits on payments
Rules on cash advances to employees, lOUs and cheque cashing
Test of control:
Payments cash book (authorization)
Compare with paid cheques to ensure Payee agrees
Check that cheques are signed by persons authorized and within their authority limits
Check that bank transfer was authorized and initiated by appropriate person
Check to suppliers' invoices for goods and services' Verify that supporting documents
are signed as having been checked and passed for payment
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Assurance Hand Note
Professional Stage-Knowledge Level
By: Shafique Ahmed-Sr. Officer (Internal Audit-BSRM)
Check that the engagement of new employees and release has been confirmed in
writing.
Check calculations of wages and salaries are being checked.
For wages, check calculation of gross pay with:
- Authorized rates of pay
- Production records. See that production bonuses have been authorized and
properly calculated
- Clock cards, time sheets or other evidence of hours worked. Verify that overtime
has been authorized
For salaries, verify that gross salaries and bonuses are in accordance with personnel
records, and that increases in pay have been properly authorized.
Controls:
Bases for compilation of payroll (for example, clock cards, overtime records, agreed
hours)
Maintenance of separate employees' previous records
Reconciliation of total pay and deductions.
Comparison of actual pay totals with budget or standard costs and investigation of
differences between them
Agreement of gross earnings and total tax deducted with taxation returns.
Test of control:
Reconciliation of wages and salaries'
For wages, there should have been reconciliations with:
- The previous week's Payroll
- Clock cards/time sheets/job cards
- Costing analyses, production budgets
The total salaries should reconciled with previous month salary
Postings of summary to nominal ledger (including control accounts)
Total of net pay column posting into the cash book
Auditors should check the calculations of taxation and other deduction to appropriate
records
CA in Bangladesh 20
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