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QAD findings
CCAB Training Providers’ ForumOctober 2007
ICAEW
Introduction
• QAD visits - all sizes of firm
• Session outline– QAD findings– Underlying causes– Key messages
ICAEW
QAD findings
• ISAs (UK & Ireland) – current issues
• ISQC1
• Ethical Standards
• Accounts disclosure
ICAEW
ISAs (UK & Ireland)
Overall picture
• Audit quality
• Comparison with SAS compliance
• Main areas of difficulty……..ISA 315!
• Other common points
ICAEW
ISA 315 (& 330) - main problem areas
• Documenting background information covering all required elements
• Determining what controls are relevant to the audit
• Evidence of design and implementation work• Identification of significant risks and linkage to
work planned• Risk identification – differentiating between
inherent and control risk.
ICAEW
ISA 315 – extent of work on controls?
• Judgement
• Audits of smaller entities
ICAEW
ISAs – other common points
• ISA 240; enquiries of management; focus of engagement team meeting; revenue recognition; management override; written representations
• ISA 260 – communicating significant audit findings
• Old chestnuts– rigour of substantive analytical procedures– dealing with uncorrected misstatements
ICAEW
ISA issues – underlying causes (1)
• Reliance on audit systems without full understanding of the ISAs
• Difficulties in applying internal control concepts to smaller entities
• Ensuring the right people are involved at the right time
ICAEW
ISA issues – underlying causes (2)
• Coping with extensive checklists
• Some fraud requirements not very visible in audit systems eg fraud risk within revenue recognition, management override.
• Timing issues – update of systems.
ICAEW
ISQC1
• Still some lack of awareness in smaller firms
• Belief that only applies to large firms
• Lack of tailoring of standard manuals
• Mostly a documentation issue
ICAEW
Ethical Standards – common issues
• Non-audit services – accounting services– Definition of accounting services (“we just process the TB on
IRIS”)– Documentation of safeguards
• PASE – Confusion between exemptions and alternative provisions
• Long association– Process for monitoring period as RI– Documentation of safeguards/communication to the client
ICAEW
Accounts disclosure – desktop reviews
Common issues:
• SME accounts - handout
• Charity accounts - review of accounts of smaller charities (incoming resources between £10k and £250K) - handout
ICAEW
Key messages (1)
Training needs
• Understanding ISA 315• Applying ISA 315 to smaller clients• Substantive analytical procedures• Ethical Standards• Accounts presentation issues – SMEs and
charities
ICAEW
Key messages (2)
Audit systems
• “Wood for trees”. Too many checklists?
• Catering for increasing requirements in the future
• Prompt and responsive updates
ICAEW
Wrap up
• Good start with ISA implementation but still some way to go
• Training needs identified
• How much more can be added to audit programmes and checklists? Impact on audit quality?
• Questions?