SYLLABS 2016 Part-D Weightage Part-E Part-C Part-A PROFESSIONAL LEVEL P2 - Audit & Assurance Part-B Part-A Overview of Auditing and Assurance 15% Part-B Audit Planning 20% Part-C Internal Controls 20% Part-D Audit Evidence 25% Part-E Review And Reporting 20% Syllabus Overview: This course is divided into five main areas of audit. The syllabus starts with the nature, purpose and scope of assurance engagements both internal and external, including the statutory audit, its regulatory environment, and introduces professional ethics relating to audit and assurance engagements. It then leads into planning an audit. The syllabus then covers a range of areas relating to an audit of financial statements including the scope of internal control. These include evaluating internal controls, audit evidence, and a review of the financial statements. In addition to final review procedures, the last section concentrates on reporting, including the form and content of the statutory audit report. Learning Outcomes: On completion of this course, students will be able to: Explain the concept of audit and assurance. Determine legal and ethical considerations relating to the appointment and removal of auditor. Describe and evaluate internal controls, techniques and audit tests, including IT systems to identify and communicate control risks and their potential consequences, making appropriate recommendations. Identify and describe the work and evidence obtained by the auditor and others required to meet the objectives of audit engagements and the application of the International Standards on Auditing. Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are reflected in different types of audit report, written representations and the final review and report. Prepare an audit report, keeping in view types of qualifications. Detailed Contents Weightage Level of in % Study Required PART-A: OVERVIEW OF ADITING AND ASSRANCE 1. The concept of audit Identify and describe the objective and general and assurance engagements principles of audit engagement. Define and provide the objectives of an assurance engagement. Explain the five elements of an assurance engagement. Describe the types of assurance engagement Relevant ISA: ISA 200 2. External audit Explain the statutory regulations governing the appointment, rights, removal and resignation of auditors (i.e., Companies Ordinance 1984: Section # 252-260) Explain the regulations governing the rights and 15 duties of auditors (i.e., Companies Ordinance 1984: Section 255) Describe the limitations of external audits. 3. Internal audit Discuss the factors to be taken into account when assessing the need for internal audit Compare and contrast the role of external and internal audit. Discuss the scope of internal audit and the limitations of the internal audit function Discuss the nature and purpose of operational internal audit assignments Describe the format and content of audit review reports and make appropriate recommendations to management and those charged with governance Relevant ISA: ISA 610 (Revised) 94
SYLLABS 2016 4. Obtaining and accepting audit engagements 5. Audit planning and documentation 6. nderstanding the entity and its environment 7. Fraud, laws and regulations 8. Assessing audit risks 9. Internal control systems PART-B: ADIT PLANNING Discuss the requirements of professional ethics in relation to the acceptance of new audit engagements Explain the preconditions for an audit Explain the process by which an auditor obtains an audit engagement Justify the importance of engagement letters and their contents Specific responsibilities of the auditor regarding quality control procedures Relevant ISA: ISA 210, ISA 220 Identify and explain the need for and importance of planning an audit. Identify and describe the contents of the overall audit strategy and audit plan. Explain and describe the relationship between the overall audit strategy and the audit plan. Explain the need for, and the importance of, audit documentation. 20 Describe the form and contents of working papers Explain the procedures to ensure safe custody and retention of working papers Relevant ISAs: ISA 300, ISA 230 Explain how auditors obtain an initial understanding of the entity and its environment. Describe and explain the nature, and purpose of, analytical procedures in planning. Compute and interpret key ratios used in analytical procedures. Auditor's responsibilities relating to related party relationships and transactions in an audit of financial statements Relevant ISAs: ISA 315, ISA 520, ISA 550 Discuss the effect of fraud and misstatements on the audit strategy and extent of audit work. Evaluation of misstatements identified during the audit Discuss the responsibilities of external auditors in context of fraud and error Explain the auditor's responsibility to consider laws and regulations in an audit of Financial Statements Relevant ISA: ISA 240, ISA 250, ISA 450 PART-C: INTERNAL CONTROLS Explain the components of audit risk Explain the audit risks in the financial statements Define and explain the concepts of materiality and performance materiality Explain and calculate materiality levels from financial information Audit considerations relating to an entity using a service organization Relevant ISAs: ISA 315, ISA 320, ISA 402, Explain why an auditor needs to obtain an understanding of internal control relevant to the audit. Define internal management control Importance of internal control, internal audit and risk management Objectives of internal control systems and how they can help prevent fraud and error Describe and explain the five components of internal control 20 95
SYLLABS 2016 10.The use and evaluation of internal control systems by auditors 11. Tests of control 12.Communication on internal control 13.Financial statement assertions and audit evidence 14.Audit procedures the control environment the entity's risk assessment process, the information system, including the related business processes, relevant to financial reporting and communication control activities relevant to the audit monitoring of controls Relevant ISA: ISA 315 (Appendix) Explain how auditors record internal control systems including the use of narrative notes, flowcharts, internal control questionnaires and internal control evaluation questionnaires Evaluate internal control components including deficiencies and significant deficiencies in internal control Internal control system and Effectiveness of internal control systems Discuss the limitations of internal control components Describe computer systems controls including general IT controls and application controls Describe control objectives, control procedures, activities and tests of control in relation to: The sales system The purchases system The payroll system The inventory system The cash system Non-current assets Communication with those charged with governance Discuss the requirements and methods of reporting significant deficiencies in internal control which are provided to management and those charged with governance. Explain, in a format suitable for inclusion in a management letter, significant deficiencies within an internal control system and provide recommendations for overcoming these deficiencies to management Relevant ISA: ISA 260, 265 PART-D: ADIT EVIDENCE Explain the assertions contained in the financial statements about: Classes of transactions and events Account balances at the period end Presentation and disclosure Describe the nature and timing of the audit procedures to obtain audit evidence Discuss the quantity and quality of audit evidence including the concept of relevance and reliability of the audit evidence Audit Evidence-Specified consideration for 25 selected items Relevant ISA: ISA 500, ISA 501 Discuss substantive procedures for obtaining audit evidence Discuss and provide examples of how analytical procedures are used as substantive procedures Discuss the difference between tests of control and substantive procedures Describe the principles of external confirmation procedures to obtain audit evidence Describe the auditor's responsibilities relating to opening balances in an initial audit engagement Relevant ISAs: ISA 520, ISA 330, ISA 505, ISA 510 96
SYLLABS 2016 ICMAP 15.Audit sampling and other means of testing 16.The audit of specific items 17.The work of others 18.Subsequent events 19.Going concern 20.Written representations 21.Audit finalization and audit reports Define audit sampling and explain the need for sampling Identify and discuss the differences between statistical and non-statistical sampling Discuss the results of statistical sampling, including consideration of whether additional testing is required Relevant ISAs: ISA 530 Receivables Inventory Payables and accruals Bank and cash Tangible and intangible non-current assets Non-current liabilities, provisions and contingencies Share capital, reserves and directors' emoluments Relevant ISAs: ISA 540 (Part Related to Accounting Estimates Only) Discuss why auditors rely on the work of others Discuss the extent to which external auditors are able to rely on the work of experts, including the work of internal audit. Explain the extent to which reference to the work of others can be made in audit report. Special consideration-audit of group financial statements (including the work of component auditors) Relevant ISAs: ISA 600, ISA 610, ISA 620 PART-E: REVIEW AND REPORTING Explain the purpose of a subsequent events review Explain the responsibilities of auditors regarding subsequent events. Discuss the procedures to be undertaken in performing a subsequent events review Relevant ISA: ISA 560 Define and discuss the significance of the concept of going concern. Explain the respective responsibilities of auditors and management regarding going concern Identify and explain potential indicators that an entity is not a going concern. 20 Discuss the procedures to be applied in performing going concern reviews. Discuss the reporting implications of the findings of going concern reviews Relevant ISA: ISA 570 Explain the purpose of and procedure for obtaining written representations. Discuss the quality and reliability of written representations as audit evidence Discuss the circumstances where written representations are necessary and the matters on which representations are commonly obtained. Relevant ISA: ISA 580 Describe procedures an auditor should perform in conducting overall review of financial statements Identify and describe the basic elements of an unmodified auditor's report Explain modified audit opinions in the audit report Describe the format and content of emphasis of matter and other matter paragraphs, A & D 97
SYLLABS 2016 22.Review Engagements 23.Related Services Describe auditor's responsibilities relating to comparative information in an audit of financial statements Explain the auditor's responsibilities relating to other information in documents containing audited financial statements. Relevant ISAs: ISA 700, ISA 705, ISA 706, ISA 710, ISA 720 Objectives of Review Engagements Terms of Engagements Procedure and Evidence Conclusion and Reporting Objectives of Engagements to review interim Financial Information Agreeing the Terms of Engagements Procedure of a Review of Interim Financial Information Reporting the Nature, Extent and Result of the Review of Interim Financial Information Assurance Engagement Other than Audits or Reviews of Historical Financial Information o Engagements Acceptance and Continuance o Agreeing on the Terms of the Engagements o Planning and performing the Engagements o Preparing the Assurance Report Engagements to Perform Agreed upon Procedures Regarding Financial Information o Objective of an Agreed-pon Procedure Engagements o Defining the Terms of the Engagement o Procedure and Evidence o Reporting Examination of prospective financial statements Relevant ISAs: ISRE 2400 (Revised), ISRE 2410, ISAE 3000, ISRS 4400 and ISRS 4410 Agreed upon procedures Compilation Engagements Assurance engagements to report on the compilation of proforma financial information included in prospectus Services under the provision of corporate laws Services under the provision of tax laws TOTAL WEIGHTAGE 100 &A NOTE:- = nderstanding A = Application D = Decision 98