External Auditing

We perform independent audit services designed to improve the reliability of information prepared by our clients.
Our audit approach is tailored to suit your organization and takes out from our wide-ranging industry knowledge. Our deep understanding of regulation and legislation means we can also help you with complex reporting issues.
Our method is both effective and cost efficient.
Audit Procedures
Audits are conducted in various phases. In each phase, certain procedures are often used.
Obtain understanding of internal control
For each audit done in accordance with GAAS, the auditor must obtain an understanding of internal control. The appropriate procedures are:
o    Make inquiries
o    Inspect manuals and other documentation
o    Observe the client
Tests of controls
The auditor may decide to test controls. If the tests show that the client's controls are effective at preventing and detecting errors, the auditor has obtained some evidence that there is a reasonable basis for issuing a report that there are no misstatements in the financial statements. How to test controls:
o    Inquiries, inspections, and observations
o    Re-performance of client's activities
Substantive tests
Substantive tests are designed to determine if there are any errors in the numbers or disclosures in the financial statements. These are always done because tests of controls are not a sufficient basis for giving an opinion on the financial statements.
1- Tests of transactions
2- Tests of balances
3- Analytical review procedures.
The 5 assertions are
·         Existence or occurrence
·         Completeness
·         Rights and obligations
·         Valuation or Allocation
·         Presentation and disclosure
o    Existence is a concern when auditing assets
o    Completeness is a concern when auditing liabilities
o    Occurrence is a concern when auditing sales
o    Completeness is a concern when auditing expenses
Audit Evidence
To be sure that there are no material misstatements, the auditor gathers evidence. According to auditing standards, there are two types of evidence.
•Underlying Accounting Data
•Corroborating Information
How much evidence does the auditor need?
Auditing standards are very clear on this. You must have sufficient, competent, evidential matter for a reasonable basis for an opinion.
o    Material
o    risky, i.e., more prone to misstatement
What is competent?
Several characteristics are used to evaluate competency:
o    Relevant - Competent evidence must relate to the auditor's objective
- Counting cash is very relevant for testing the existence of cash
- Counting cash is not relevant for determining if cash's presentation is OK
o    Source - Consider the source of the evidence. Competent evidence comes from:
 - Independent sources outside the client
 - A system with good internal control
 - Through the auditor's direct personal knowledge
o    Timeliness - evidence relates to the balance sheet date. For example:          -Timely evidence: The auditor observes the client counting inventory on the balance sheet date.          - Not so timely: The client counts the inventory 1 month before the balance sheet date. This requires additional procedures because the auditor must test the changes in the inventory balance between the count date and the balance sheet date.
o    Objectivity - competent evidence is objective rather than subjective. For example:
 - Objective: Observation of physical assets verifies existence
 - Subjective: Opinion of credit manager about the collectibility of accounts receivable. This relates to valuation. 
•physical evidence
o    bank statements and checks
•testing of calculations to ensure accuracy
o    checking of payroll withholding tax calculations
•internal documentary evidence
o    minutes of meetings
•accounting records and reports
o    general ledger and trial balance
•statements and representations by management and employees
o    the letter of representation
•external documentary evidence
o    confirmation of accounts receivable with debtors
•statements and representations by third parties
o    documents from lawyers
•consistency with other evidence
o    ratios and comparisons with industry norms

•physical examination of assets
o    an auditor might ask to see a center's new playground
•testing of accounting routines/calculations
o    checking pricing on fee invoices
•observation of activities performed by client personnel
o    observing an inventory count
•vouching of source documents
o    examining paid invoices and cancelled checks
•analysis of financial statement information
o    analyzing the ratio of salaries to fees
o    asking questions of management and employees
o    sending out confirmations to debtors

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