Scribd Logo
Upload

Welcome to Scribd!

  • 58 views

    Professional Review and Training Center (PRTC) : Responding To Assessed Risks

    Uploaded by

    Mark Lags
    The document discusses an audit firm's plans for responding to assessed risks on engagements. It outlines two types of responses: plans for responses and designing further audit procedures (FAP). FAP can involve tests of controls (TOC) and substantive procedures (SP). The document provides examples of how TOC and SP are designed according to the risk assessment, including for significant risks. It describes the purposes, timing, and extent of both TOC and SP.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Professional Review and Training Center (PRTC) : Responding To Assessed Risks

    Uploaded by

    Mark Lags
    58 views37 pages
    The document discusses an audit firm's plans for responding to assessed risks on engagements. It outlines two types of responses: plans for responses and designing further audit procedures (FAP). FAP can involve tests of controls (TOC) and substantive procedures (SP). The document provides examples of how TOC and SP are designed according to the risk assessment, including for significant risks. It describes the purposes, timing, and extent of both TOC and SP.

    Original Description:

    Original Title

    AT.2510_Responding-to-Assessed-Risks.pptx

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses an audit firm's plans for responding to assessed risks on engagements. It outlines two types of responses: plans for responses and designing further audit procedures (FAP). FAP can involve tests of controls (TOC) and substantive procedures (SP). The document provides examples of how TOC and SP are designed according to the risk assessment, including for significant risks. It describes the purposes, timing, and extent of both TOC and SP.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    58 views37 pages

    Professional Review and Training Center (PRTC) : Responding To Assessed Risks

    Uploaded by

    Mark Lags
    The document discusses an audit firm's plans for responding to assessed risks on engagements. It outlines two types of responses: plans for responses and designing further audit procedures (FAP). FAP can involve tests of controls (TOC) and substantive procedures (SP). The document provides examples of how TOC and SP are designed according to the risk assessment, including for significant risks. It describes the purposes, timing, and extent of both TOC and SP.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 37

    Professional Review and

    Training Center (PRTC)

    Responding to
    Assessed Risks
    (AT.2510)

    Leomar R. Cabarles
    Plans for Responses
    Overall Responses

    • Professional skepticism

    • More experienced staff,


    special skills, or experts

    • More supervision

    • Elements of unpredictability

    • General changes to
    procedures
    Designing FAP

    • Nature, timing, and extent

    • Depends on ROMM

    • For example, for an assertion:


    1. Only ToC
    2. Only SP
    3. Combined ToC and SP
    Designing FAP: Examples
    Designing FAP: Significant Risks

    • Specifically responsive SP

    • If SP only (no TOC), with TOD

    • Always with SP
    Nature of FAP: Summary
    Purpose
    Types FAP
    TOC SP
    Inspection ✓ ✓
    Observation ✓ ✓
    External Confirmation ✓
    Recalculation ✓
    Reperformance ✓
    Analytical Procedures ✓
    Inquiry ✓ ✓
    Tests of Controls: Purpose

    • To evaluate operating
    effectiveness of controls

    • in preventing, or detecting
    and correcting, material
    misstatements

    • at the assertion level.


    Tests of Controls: Perform and Rely

    • When to perform?
     Plan to rely on IC
     SP alone are not enough
    to provide SAAE at
    assertion level

    • When to rely on IC?


     Controls are effective
    Performing TOC
    Tests of Controls: NTE

    Nature
    • RIIO

    Timing
    • Interim (updated) or year-end

    Extent
    • More reliance, more extensive
    What to test in the control process?

    • How the controls were


    applied

    • The consistency of
    application

    • By whom or by what means


    of application
    Rotation of TOC

    • With changes in control


     Not allowed

    • No changes in control
     Rotation allowed
     Test for at least once every
    third audit
     Except for significant risks
    Deficiency in Operation of IC

    Do not operate as designed

    OR

    Control owner lacks authority or


    competence
    Assess
    Material AB, RAP, including
    ROMM (IR x CR)
    CoT & D walkthrough test
    at assertion level

    Assess inherent risk


    Understand D&I of
    (high, moderate & low)
    controls

    CR = Below
    AR = IR x CR x DR
    Maximum Level Plan to rely on internal
    control? DR = AR .
    YES NO
    IR x CR
    CR = Maximum Level
    Significant risk? Determine
    level of DR, and
    YES NO perform SP
    Perform ToC in the Perform ToC
    current period (or rotation)

    Effective CR = Below Maximum Level


    Evaluate results of ToC
    (Assess control risk) Ineffective CR = Maximum Level
    Substantive Procedures: NTE

    AR ROMM Detection risk

    Nature More effective

    Timing Year end

    Extent More extensive


    Substantive Procedures

    • To detect material
    misstatements at the
    assertion level

    • Composed of:
     Test of details of balances,
    transactions and presentation
    and disclosures
     Analytical procedures
    Performing SP
    TOD and SAP
    Directional Testing

    Understatement

    Record Completeness
    Vouching

    Tracing
    Support
    Existence

    Overstatement
    Analytical Procedures
    SP to FSCP

    • Agree F/S with underlying


    accounting records

    • Examining material journal


    entries and other
    adjustments.
    • Two types of responses

    • Plans for responses

    • Designing FAP

    • Designing FAP: Significant risk

    • FAP according to purpose and


    types
    • Tests of controls

     Purpose

     When to perform and rely

     What to test on control

     Rotation

     Deficiency in operation
    • Substantive procedures

     Test of details of transactions

     Test of details of balances

     Analytical procedures

     FSCP
    -now do the DIY drill-
    DIY Drill Answers

    1. D
    2. B
    3. B
    4. A
    5. D
    DIY Drill Answers

    6. D
    7. D
    8. B
    9. C
    10. A
    DIY Drill Answers

    11. D
    12. B
    13. C
    14. D
    15. D
    DIY Drill Answers

    16. C
    17. B
    18. A
    19. B
    20. D
    DIY Drill Answers

    21. B
    22. C
    23. C
     end of AT.2510 

    You might also like