GROUP AUDIT AND USING THE WORK OF OTHERS

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GROUP AUDIT AND USING THE WORK OF OTHERS by Mind Map: GROUP AUDIT AND USING THE WORK OF OTHERS

1. 1.Objectives of an auditor performing a group audit:

1.1. determine whether to act as auditor of the group FS

1.2. If is acting as auditor of group FS,

1.2.1. communicate clearly with component auditors about the scope and timing of their work

1.3. obtain sufficient and appropriate audit evidence

1.3.1. express opinion on whether the group FS are prepared(in all material aspects) in accordance w/ applicable FR framework

2. 2.Overall audit strategy clearly set out: i)the resources required for specific audit areas ii)use of experienced team members(technical training provided and proficiency given the circumstances of clients) for high risk areas iii)involvement of experts on complex matters

2.1. Factors considered: i)engagement size&complexity ii)level of risk iii)special technical expertise iv)personnel availability v)timing of work to be performed

2.2. When auditor uses the work of other auditor: a)determine how the work of other auditor will affect the audit b)consider the professional competence of other auditor(specific assignment) c)perform procedures to obtain the audit evidence that the work is adequate for principal auditor's purpose d)consider the significant findings of other auditor

2.2.1. Professional competence of other auditors: a)membership of professional organization b)membership or affiliation with another firm c)inquiries with other auditors etc d)discussion with other auditors

2.3. Principal auditor would advise the other auditor of: a)independence (and acc,auditing, rptg) requirements and obtaining written representations of their compliance b)the use of auditor's work and making sufficient arrangement of coordination of efforts at initial audit stage, i.e. procedures for identification of interco. transactions that may require disclosures& timetable for completion of audit

3. 3.Definition of principal auditor:

3.1. the auditor with the responsibility for reporting on FS of an entity when those FS include one or more components auditor by another auditor

4. 4.Def of component auditor

4.1. An auditor with responsibility for reporting on FS of a component which is included in FS audited by principal auditor

4.1.1. Component: division, branch, subsidiary, JV, associate co

5. 5.If principal auditor concludes that the work of other auditors cant used,

5.1. The principal auditor required to issue qualified opinion/disclaimer(limitation in scope)

6. 6.If other auditor wants to issue modified auditor's report, principal auditor should consider whether the subject of modification is significance

7. 7.Related party transaction

7.1. higher risk of material misstatement of FS than transaction w/ unrelated parties

7.2. a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. i.e. JV

7.3. Objectives of auditor: a) obtain understanding of related party relationships and transaction to be able: -recognize fraud risk factors -conclude whether the FS achieve fair representation or not misleading b) obtain sufficient audit evidence about whether have been appropriate identified, accounted for and disclosed in FS in accordance w/ framework

7.4. Auditor must obtain written assurances(letter of representations) from directors because they primarily responsible for disclosures of RP and ownership matters

8. 8.Work of an expert

8.1. if an auditor concludes that the work of that expert is adequate for auditor's purpose, the expert's findings may be accepted as appropriate audit evidence

8.2. Although the auditor's work program provide them with sufficient, reliable and relevant evidence to substantiate证实 their opinion, but there can be circumstances where auditors' knowledge is insufficient (need experts/specialists to help)

8.3. Def of experts: an individual or org. possessing expertise in a field, is used by auditor to assist in obtaining sufficient and appropriate audit evidence (internal expert or ext expert) -i.e. valuation on NCA, lawyers, QS(on value of work done on LT contracts)

8.3.1. competence of specialist, experience and independence

8.4. -obtain an understanding of the entity and its environment and IC -identify and assess risk of material misstatement -determine and implement overall responses to assessed risk -design and perform further audit procedures evaluating the sufficiency and appropriateness of audit evidence obtained

8.5. Factors considered whether need specialist opinions: a)knowledge and abilities of audit team b)risk of material misstatements c)quality and quantity of audit ecidence

8.6. At the end of work, auditor have to review the expert findings: i)making inquiries of the expert ii)review their working papers and reports} iii)corroborative procedures such as observing their work, confirming relevant matters w/ 3rd parties, reperforming calculations etc

9. 9.Use the work of internal auditors

9.1. effective internal audit-->allows modification in the nature and timing and reduces the extent of audit procedures performed by ext auditor

9.2. Objectives of ext auditor (if an entity has IA function): a)to determine whether the work of IA function can be used b)is adequate for auditor's purpose

9.2.1. Def of IA function: Function of an entity that performs assurance and consulting activities which are designed to evaluate and improve the effectiveness of entity's governance, risk management and IC processes

9.3. ext auditor assess the competence and objectivity of internal auditor

9.3.1. organization status (independence, free from operating responsibility), scope of function (nature and extent of function performed by IA, mgmt response on IA recommendations), technical competence (adequate training and skill), due professional care(properly planned, reviewed and documented)

9.4. Eg of IA functions can be used by ext auditor: i) testing of operation effectiveness of controls ii) observations of inventory counts iii) tracing transactions through the info. systems relevant to FR

9.5. ext auditors may evaluate the quality(adequacy) of work and the conclusion reached by int auditor -inquiries of appropriate individuals within IA function -Observing procedures performed by IA function -reviewing the IA's work program and working papers

9.5.1. objectivity, competency and quality control