Slide 7 : reviseur d’entreprise ---> what is the area that RE should intervenes

1- Testing for evidence

- Evidence is anything that can make a person believe that a fact, proposition or
assertion is true or false.
- Audit evidence is information used by the auditor in arriving at the conclusions on
which the auditor’s opinion is based.
- It includes both information contained in the accounting records underlying the
financial statements and other information.
 we should test what in the accounts but also things that are not recorded.

------------------ Techniques that auditors use to test evidence: you can get informations from
inside the company (invoices, inventory….) or outside the company (suppliers, banks…
!!!! Confirmation is an exemple of external informations …

This is an internal
audit role
And remember
this slides
And step 1 is :
design
2 implementation
3 operating
effect.
Substantive procedures :

What you get from outside a company is very very reliable against what you get against
inside the company !!!!! remember it

Sources documents: is where you find invoices …. And useful doc

-If you want to test occurrence or evidence, you go from ledger to source documents
-If you want to get completeness you go from the source documents to the ledger and ask
is it there?

-The best way to get information is when you ask open questions?

Important Examples

For internship
 An expert you will trust him because he is expert in that domain that an auditor :
completeness of a project for Ex

External confirmation is the top 1 to test evidence !

 No one is obliged to answer the external auditor, and if as an auditor u don’t get a.
respond u should opt for an alternative audit procedure to provide required evidence.

Search for unrecorded Liabilities: HOW ?

The worst thing could happen is when a company show profit but it is not making
profit….

If they are unrecorded

liabilities the accounts are not
complete!!

Value adjustment that is not

recorded is automatically an
unrecorded liability
(impairment should have
been recognized ..)
And confirming balances of 0
is also important.

A doubtful receivable can be more than a customer is uncapable of paying it may be

that a customer will call you at court for a potential litigation.
 Phase 4 :

Indicative timeline for Major Activities during an Audit

1- Evaluation governance evidence :

Written representations: According to ISA 580 ‘Written representations’, the auditor should
obtain written representations from management, which consists in a written statement by
management provided to the auditor (who defines the template) to confirm certain matters or
to support prior audit evidence. Such a letter should be signed ideally same date than the
audit report, not after.

This is a reminder for the

management that they are
responsible for such matter.

But if the client says “im not

signing this” it means that
they don’t know their
resposbility
 2- Perform procedures to identify subsequent events

For moment many companies publishing their accounts 31 dec 21 there was no war in
Ukraine we published our financial statements in March without editing them, but we
disclose on the notes the impairment loss in the notes of financial statements.
Permanent files is where auditors will use it for all years for every audit.
Current files : is really specific to the year of audits
An auditor will test on a sample he can’t audit every transaction
 Loans convenents is a real potential threat to going concern it is some ratio to meet and if
not you will have to repay your loan
An audit opinion is usually called a short form.

Joint audits is where a company is has two audit firms that is auditing that company it is
obligatory in France

EXAM !!!!!!!!!!!!!!!!!
!

From left to right you are going from good to less good to ba.

1- Unmodified opinion:
2- Modified positive: is where an auditor finds a material misstatements
3- Modified and negative : here the material statements affects the financial
statements overall. - the accounts does not give a true and fair view

Disclaimer of opinion : I refuse to give my opinion

Always the explanation of the opinion before giving the opinion ( basis of qualification and
then giving opinions slide : 60 )

Slides : completeness + unrecorded liabilities is included in completeness u should also talk

about it

Slide : 38 , 42 (going concern is something can lead companies being badly creative on
accountings), 49, 10,

3 lines of defense !!!! internal audits to boost his independent he can report not only to
management but only to the board.

2 or areas of accounting minefields and explain it.

Safeguards!!! - what is the safeguards put that to eliminate risks

Lecture 4 5 6 : 5 components , audit risks , analytical reviews, creative accounting

Best answers are with Ex