Auditing Stages

The rank of this discussion is to explain how an examineor goes intimately the touch on of analyzeing fiscal statements and presents the five staple fiber interprets that the t stamp outer sufficeed during the fiscal statement analyze at Maryward uncomplicated School in Kwekwe for the year ending 31 celestial latitude 2012. In rear to be in a position to fulfil visiting office to enshroud on the nodes annual monetary statements, the attendee followed a series of procedures and activities as essential by the canvassing profession.The attendant applied the following visit coiffes pre- utilization activities, computer programmening, test of determines, substantive procedures, closure and reporting. Puttick et al (2012102) defines an take stock according to Section 1 of APA as the examination of, in ossification with prescribed or applicable canvassing standards a) fiscal statements with the objective of expressing an sound judgement as to their legitim ateity or compliance with the identified financial reporting framework and every statutory requirements.Pre-engagement activities thither ar five pre-engagement activities and considerations. The meeter at this stage performed a modernistic guest investigation in regulariseing to accept the new appointment as a way of managing conflicts and threats to the visitor. Assessments of any threats to the freedom of the canvasor was done as an visit engagement should non be genuine where the auditors independence is compromised.The separate discernment done was the employment essay faced in order to lift the peril of association with a node whose integrity is questionable and particularly where demand pull rounds to misstate disclosures in financial shootive information or indulge in irregular business and fraudulent reporting practices as it likely to render the auditors business put on the line un bankable. The factors considered during the investigation inc lude business reputation of Maryward Primary School. An assessment of the complication of the audit assignment and the estimated time, required to finish the work was done.An engagement letter was prep bed to provide the cleargonst shew of the footing of the engagement. ISA 210 provides the contents of an engagement letter to be sent to the client to help counter mis fellow feelings with valuate to the engagement. Also, SAS 140 requires that an auditor should ascertain with the client the terms of the engagement to be to a lower placetaken and the terms should be written accordingly the letter of engagement will be required whenever a new auditor appointment is real.The main constituent features of a typical letter of engagement ar responsibility of directors and auditors, the scope of the audit, different services, fees, pertinent police (Zimbabwe) and agreement of terms. The auditor accepted the engagement for the audit of the financial statements by and by the rema inder that the reporting framework was acceptable. There was an agreement between the auditor and Maryward Primary School, both parties agreed to meet when changes prepare and when the auditor considers the appropriateness of the matter to do so.In provision for the audit, the auditor had a play to Maryward Primary School after the hatchway meeting with the client. Russell (201269) states that a preventative of the body politic to be audited is permissible and often times highly desirable. An auditor may tour this area as part of a pre-audit visit to palingenesis documents before or after the opening meeting. Travel plans were do and a team of three good deal was identified and sent to the audit area. PlanningAccording to Puttick et al (2012) the auditor first considers sensibleity at the think stage of the audit. The auditor do a judgement of solidity in order to plan the audit in such a way that fitting induction is attained to draw up a conclusion. Planning s ubstantiveity was establish on the end of year financial statements and budgets. According to Millichamp (2002) materiality is material if its default/misstatement could influence the economic decisions taken on the basis of the financial statements.The auditor as well considered inherent pretend as it has a direct impact on the nature, time and extent of procedures the auditor plans to perform to roll up sufficient appropriate audit record in response to the assessed risk of material misstatement. Inherent risk as per ISA four hundred is the susceptibility of an account balance or class of legal proceeding to misstatements that could be material, separately or when come with misstatements in other balances or classes, assuming that there are no connect natural controls.The auditor assessed audit risk and inherent risk as it is an essential part of audit planning to help in find the quality and quantity of evidence gather and the staff that needed to be appoint to th e particular audit. The auditor also encountered an understanding of the business and its environment in order to assess the risk of material misstatement. ISA 310 requires a reasonable understanding of the clients business and industry. The nature of the clients business and industry affects the client business risk and the risk of material misstatements in the financial statements.The auditor apply the noesis of these risks to determine the appropriate amount of audit evidence gathered. The auditor through ingest is aware of the exposure to problems answering from the auditors failure to understand comprehensively the nature of transactions in the clients business. The understanding helped the auditor to approximate the aspiration and carrying into action of circumstantial controls that could stop or discover and rectify material misstatements at the avouchments level. Control risk is the probability that the clients internal control clay will fail to notice material mi sstatements. canvas risk is the risk that the auditor will unknowingly express inappropriate opinion on the financial statements. Inherent and control risk are the businesss risks that exist independently of the audit of financial statements, whereas detection risk is a conk tabu of the upshotiveness of an audit procedure and its exercise by the auditor. Puttick et al (2012) quotes the ISA 200 commentary of detection risk detection risk is the risk that the auditor will not detect a misstatement that exists in an assertion that could be material, individu all(prenominal)y or when aggregated with misstatements.The auditor inquired into the tiny working written document, inspected legal documents and minutes of meetings of the accounting system and its related controls from the counsel and personnel of the client. A comment of the system was recorded and confirmed that the record is an accurate definition of the system and a preliminary evaluation of the internal controls was do. Audit planning involves developing an overall system for execute the audit.ISA 300 audit strategy describes in simple terms how audit is to be carried out and the audit plan details the exact procedures to be carried out to implement the strategy and complete the audit. During planning the auditor established an understanding with the client as to the nature of services to be provided and the responsibilities of each party through the engagement letter. The auditor developed an overall audit strategy, an audit plan and audit program and documented in the working papers each significant business wheel that is, revenue, expenditure, fixed assets, payroll and accounting.Planning continued throughout the entire audit as the auditor accumulated sufficient appropriate audit evidence to pay the audit opinion. playacting tests of control and Substantive procedures One of the roughly important of all the audit stages is the butt of testing the internal controls. The aim of test s controls is to obtain evidence that controls on which audit credit is intended, worked out throughout the issue of the financial year under audit. The tests of controls indicated that internal controls are operating effectively the planned audit approach was not to be changed.These processes and procedures were used to ensure that proper approvals are in place before payment is made or transactions entered in the system. The auditor used the primary method of internal control testing to ergodicly select transactions and checked the source documentation. The random selection from a representative sample revealed that controls are strong, so there was no point for increasing the sample size. A substantive procedure is the actual process of collecting physical evidence of transactions and verifying the value posted to a specific account is supported by actual documents.This aspect of the audit is the nigh time consuming and is very detailed work. Gray (2008) propounds that at th is stage conclusion made by the auditor must be supported by in each case by carefully evaluated evidence that the transactions are totally and accurately recorded. As auditors cannot rely completely on focussing assertion of completeness, the inquisition for unrecorded expenses and liabilities was designed to yield audit evidence of liabilities that were not recorded in the reporting period. A material faulting or fraud in the stock certificate has a pervasive effect on the financial statement.Auditing standards requires that the auditor should observe the inscription taking and make test control. somatogenic inventory at year end was counted when the auditor was present to observe and perform the dual direction testing to gather evidence for the existence and completeness assertions. This involved the executing of substantive procedures the nature, timing and extent of which responded fittingly to the assessed risk of misstatement at the assertions level to extend to a level of detection risk that will result in an acceptable level of audit risk relating to assertions within financial statements.Evaluating and concluding The final stage of auditing process involves evaluating and drawing conclusions on the join origination of the financial information and the draught of the audit report. During this stage the auditor considers the adequateness of the evidence gathered in support of financial statement assertions. Assertions are the representations of circumspection that are represented in financial statements, for, example, that fixed assets radiateed in financial statements exist and are owned by the entity and are fairly valued.ISA 500R identifies assertions under three categories viz. assertions about classes of transactions and events for the period under audit, assertions about account balances at the period end and assertions about presentation and disclosure. The auditor decided on the fair presentation of assertions and evaluated the differences between amounts included in the financial information and amounts supported by audit evidence.The audit differences represent uncorrected material misstatements in the financial statements. The auditor evaluated the effect of uncorrected material misstatements on the audit and the effect of uncorrected misstatements on the financial statements and tested whether the financial statements as a whole are free of material misstatement. The auditor evaluated the effect of such misstatements on audit opinion. For this purpose, the auditor established a final estimate of materiality.After consideration of all evidence, the auditor concluded that financial statements were not significantly materially misstated and management was not requested to make appropriate adjustments. The period stage of the audit is the final stage during which the engagement team and partner prudent for the audit perform finishing procedures, evaluate the sufficiency and appropriateness of audit evidence gathered during the audit and findings in respect of significant risks identified, including fraud risk, in order to form the audit opinion on financial statements.During completion procedures, the auditor reviewed the financial statements on an overall basis performing a final analytical review on period end financial information. The reading of supplementary and other relevant information and resolution of the impact of any significant matters arising were considered. Update inquiries on specific aspects for example, fraud, laws, regulations and evaluation of the results of audit procedures for all significant findings. Written representations from management acknowledging its esponsibility for the design and implementation of internal controls to prevent and detect fallacy were obtained. Reporting The last stage of the audit is finalization. This is the creation of a report to management that summarizes all the procedures used to conduct the audit, the result of the var ious processes, and supporting documentation. Gray (2008) states that at this stage the auditor summarizes evidence on systems and other aspects seen to be of interest to management and sends a formal report of comments and recommendations.After completion of fieldwork and analysis the auditor presented the first pen of findings and recommendations to the client during the exit meeting. Paragraphs 27, 32, and 35b of ISA 700 indicate that the description in the auditors report can refer either to the preparation and fair presentation of the financial statements or the preparation of financial statements that give a true and fair view.True in the experience that the auditors information assumption was factual and conforms to reality and not false, in addition the information conforms to the required standards and law and that the accounts of Maryward Primary School had been correctly extracted from the books and records. somewhat in the sense that information disposed is free fro m discrimination and bias and in compliance with the expected standards and rules and that the accounts of the client reflect the substance of the businesss cardinal transactions.