Audit Area Technique

Ethics 1. Identify the issue from the scenario – WHAT?

2. Classify the issue? Which threat is present and which ethical principle is being
breached/threatened? WHY?
3. Justify…this is significant due to…..SO WHAT?
4. Explain how it can be managed, what are the safeguards? (Firm/ engagement level)
Audit risks Describe audit risks or Identify and explain audit risks
1. What is the risk? Justify – risk of overstatement/ understatement
2. Why have you identified it as a risk? – fact from the question or a calculated ratio
3. So what? What could happen as a result of that risk
Explain the auditors response to each risk
1. How audit team will obtain S & A evidence at an acceptable level
2. Approach to address possible error in FS – how will they get confirmation
Audit procedures 1. Verb – action (inspect, enquire, review, obtain, perform, recalculate)
2. What/ Who? – source to look at or person to enquire of
3. Why? Which risk are you testing, which assertion are you testing
Auditors report 1. Discuss the issue – lack of sufficient evidence? Misstatement? Other? (e.g. MURGC)
2. Is it material? (value/ nature)
3. Is it pervasive? Or isolated?
4. What is the impact on the audit opinion? Qualified, Except for…/ Disclaimer/ Adverse
5. What is the impact on the auditor report? Unqualified opinion – Emphasis of Matter/
Material uncertainty regarding going concern) Qualified opinion – basis of opinion
modified, report by exception (RAPID)
Internal controls/ Management letter 1. Identify the weakness/ deficiency.
2. What could go wrong? – from Managements view – EXPLAIN
3. What control procedures to you recommend to prevent or detect the thing going wrong