AP - General

What is the risk of new client

• increases detection risk due to lack of cumulative knowledge
• Opening balances may be misstated as we are not the previous auditor
• insufficient time to undertake subsequent events review
• Threat to objectivity

What is the audit procedure for new client risk

• Obtain previous year's audited FS and ensure that the balance was accurately brought forward
• Perform substantive audit test on opening balances such as: Circularization of confirmation
• Perform substantive audit test on opening balances such as: Review post year end payments
• If possible, review the working papers of the predecessor.
• Allocate more time to gain understanding of the client's business

What is the audit procedure for new client risk

• Allocate more senior into the engagement
• Perform substantive audit test on opening balances such as: Review post year end receipts
• Perform substantive audit test on opening balances such as: Ascertain from management the controls which are in place for entries to be recorded into the accounting system
• Accounting systems and internal controls need to be ascertained
• Special attention to be directed at judgmental areas of the FS such as provision and estimates

What is the risk for quick audit

• insufficient time to undertake subsequent events review
• Opening balances may be misstated as we are not the previous auditor
• increases detection risk due to lack of cumulative knowledge
• Work performed by them may not be reliable
• Accessibility to their working papers may be restricted

What is the audit procedure for the risk of quick audit

• Allocate more time to gain understanding of the client's business
• Inform the management that the timeframe is too tight and an extension is required
• Special attention to be directed at judgmental areas of the FS such as provision and estimates
• If possible, review the working papers of the predecessor.
• Accounting systems and internal controls need to be ascertained

What is the audit procedure for the risk of management override internal control

• Substantiate journal entries
• Use of data analytics to identify exceptions
• Investigate transactions outside the normal course of business
• Interview management to assess its attitude towards the control environment
• Recalculate on a sample basis by vouching to employment files and compare to payroll information provided by them

What is the audit procedure for the risk of management override internal control

• Investigate reconciling items
• Review significant accounting estimates and judgments for bias
• Review 'whistle-blowing' arrangements
• Review internal audit reports
• Request type 1/2 report from outsourced entity’s external auditor

What is the risk if payroll was outsourced (done by 3rd party)

• Accessibility to their working papers may be restricted
• Work performed by them may not be reliable
• If these were taken place, amount remitted to HMRC may be incorrect Thus attract hefty fines and penalties
• Failure to pay these could result in an understatement of liabilities
• increases possibility of incomplete recording

What is the audit procedure for the risk of Payroll outsourced (done by 3rd party)

• Recalculate on a sample basis by vouching to employment files and compare to payroll information provided by them
• Read correspondence with HMRC to identify any potential disputes
• In respect of the outsourced provider, Consider : o Read engagement letter to confirm scope of work
• In respect of the outsourced provider, Consider : o Reputation within the industry
• Special attention to be directed at judgmental areas of the FS such as provision and estimates

What is the audit procedure for the risk of Payroll outsourced (done by 3rd party)

• Request type 1/2 report from outsourced entity’s external auditor
• In respect of the outsourced provider, Consider : o The independence from client
• In respect of the outsourced provider, Consider : o Reputation within the industry
• If possible, review the working papers of the predecessor.
• Accounting systems and internal controls need to be ascertained