ISA 330 - Auditor's Response

Question 1

ISA 330

THE AUDITOR’S RESPONSES TO ASSESSED RISKS

Answer 1

1. ROMM @ FS level - FURTHER OVERALL RESPONSES
   x-CUSES

C - Combined ➔ Substantive
U - Unpredictable tests added
S - Greater supervision (greater involvement of audit engagement partner)
E - Experienced (Senior) team
S - Skepticism

1. ROMM @ assertion level - FURTHER AUDIT PROCEDURES
   These will be included in the Audit Plan (Audit Program)
   Combined Approach
   * Substantive Approach
2. SIGNIFICANT RISK

Test ICs over data generated
DSP - Detailed substantive Procedures
Greater involvement of audit engagement partner
Skepticism
Experienced (Senior) team
+ Consultation (experts in accounting / auditing)
+ Auditor expert

Question 2

ISA 330

Answer 2

Irrespective of the assessed risk of material misstatement, the auditor should design and perform substantive procedures for each material class of transactions, account balance, and disclosure - the least being, Minimum Substantive Procedures. This is due to the inherent limitations of internal control.

ASSERTIONS:
1/ TRANSACTIONS & EVENTS
C - Completeness
O - Occurrence
C - Cut-off
A - Accuracy
C - Classification (recognition)
P - Presentation

2/ ACCOUNT BALANCES
C - Completeness
A - Accuracy: Valuation
R - Rights & obligation
E - Existence
C - Classification (recognition)
P - Presentation

Question 3

ISA 330

TESTS OF CONTROL / SUBSTANTIVE PROCEDURES

Answer 3

TESTS OF CONTROL

Tests of control are tests performed to find out whether
the ICs are effective in preventing or detecting and
correcting material misstatements at the assertion level.

Observation of procedures
Reperformance
Inspection of a document
Computer Assisted Audit Techniques
Enquiry (Corroborative Enquiry)

SUBSTANTIVE PROCEDURES
Substantive procedures are audit procedures performed to detect material misstatements at the assertion level;
a) Substantive Analytical Procedures.
b) Tests of details of classes of Transactions, Account balances & Disclosures

Analytical procedures (Substantive)
Inspection of a document / physical inspection of an asset
Reperformance
Confirmation
RecalcUlation

Question 4

ISA 330

Relying on TESTS OF CONTROL PERFORMED DURING PREVIOUS AUDITS

Answer 4

Relying on TESTS OF CONTROL PERFORMED DURING PREVIOUS AUDITS

ISA 330 states that IF the auditor plans to use audit evidence from a previous audit about the operating effectiveness of SPECIFIC KEY CONTROLS (AUTOMATED CONTROLS),

then the auditor should carry out WALK THROUGHS to confirm whether there have been CHANGES in the system since the previous audit. (Using enquiry combined with observation or inspection)

IF there have been changes in the system since the previous audit, the auditor shall test the controls in the current audit.

IF there have been no changes, the auditor:

− Is permitted to test the controls on a three-year cycle rather than every year. (PROVIDED prior year results of tests of the specific controls were good)

− And shall test SOME controls EACH AUDIT,

to avoid the possibility of testing all the controls on which the auditor intends to rely on a single audit period with no testing of controls in the subsequent two audit periods.