Topic 7

7.1. Audit Evidence

In order to have a basis for conclusions on the main areas of the audit, the auditor must collect the appropriate evidence. Federal Auditing Standard No. 5 "Audit Evidence" establishes uniform requirements for the quantity and quality of evidence that must be obtained during the audit of financial (accounting) statements, as well as for procedures performed to obtain evidence.

Audit Evidence is the information obtained by the auditor during the audit, and the result of the analysis of this information, on which the auditor's opinion is based. Audit evidence includes, in particular, primary documents and accounting records, which are the basis of financial (accounting) statements, as well as written explanations of authorized employees of the audited entity and information obtained from various sources (from third parties).

The audit firm or individual auditor must obtain appropriate evidence in order to draw reasonable conclusions on which to base the auditor's opinion. Evidence is obtained as a result of conducting a set of texts of internal controls and the necessary substantive verification procedures. In some situations, evidence may be obtained solely through substantive procedures.

The concepts of sufficiency and appropriateness are interrelated and apply to audit evidence obtained as a result of tests of internal controls and audit procedures. Sufficiency is a quantitative measure of audit evidence. Appropriate nature is the qualitative side of audit evidence, which determines their coincidence with a specific premise of the preparation of financial (accounting) statements and its reliability.

The auditor's judgment about what is sufficient appropriate audit evidence is influenced by the following factors:

▪ audit assessment of the nature and magnitude of audit risk both at the level of financial (accounting) statements and at the level of balances in accounting accounts or similar business transactions;

▪ the nature of accounting and internal control systems, as well as assessment of the risk of using internal controls;

▪ materiality of the audited item in the financial (accounting) statements;

▪ experience gained during previous audits;

▪ the results of audit procedures, including possible detections of fraud or errors;

▪ source and reliability of information.

Audit evidence is usually collected, taking into account each premise of the preparation of financial (accounting) statements. Audit evidence relating to one assertion, such as the existence of inventory, cannot compensate for the lack of audit evidence relating to another assertion, such as a valuation. The nature, timing and extent of substantive testing procedures depend on the assertion being tested. During tests, the auditor may obtain evidence related to more than one assertion, for example, when checking the collection of receivables, he may identify audit evidence both about their existence and about their size (valuation).

The reliability of audit evidence depends on its source (internal or external), as well as on the form of its presentation (visual, documentary or oral). Audit evidence is more persuasive if it is obtained from different sources, has different content and does not contradict each other. In such cases, the auditor may provide a higher degree of assurance than would be obtained by considering the audit evidence individually. Conversely, if the audit evidence obtained from one source is inconsistent with the evidence obtained from another, the auditor should determine what additional procedures need to be performed to determine the reasons for such a discrepancy.

The auditor should balance the costs associated with obtaining audit evidence against the usefulness of the information obtained. However, the complexity of the work and the costs are not sufficient grounds for refusing to perform the necessary procedure.

If there are serious doubts about the reliability of the reflection of business transactions in the financial (accounting) statements, the auditor should try to obtain sufficient appropriate audit evidence to eliminate such doubt. If it is not possible to obtain sufficient appropriate audit evidence, the auditor should express an opinion subject to an appropriate qualification or disclaim an opinion.

The auditor obtains audit evidence by performing the following substantive procedures:

▪ an inspection is an examination of records, documents or tangible assets during which the auditor obtains audit evidence of varying degrees of reliability depending on its nature and source, as well as the effectiveness of internal controls over the processing of it;

▪ observation is the auditor's monitoring of a process or procedure performed by others (for example, the auditor's observation of inventory counts carried out by employees of the entity being audited, or monitoring the implementation of internal control procedures for which there is no documentary evidence for audit);

▪ request (search for information from knowledgeable persons within or outside the audited entity. In form, it can be either formal written, addressed to third parties, or an informal oral question addressed to employees of the audited entity. Answers to requests (questions) can provide the auditor with information that he did not previously have or that support audit evidence);

▪ confirmation (response to a request for information contained in accounting records (for example, the auditor usually requests confirmation of accounts receivable directly from debtors));

▪ recalculation (checking the accuracy of arithmetic calculations in primary documents and accounting records or the auditor performing independent calculations);

▪ analytical procedures represent an analysis and assessment of the information received by the auditor, a study of the most important financial and economic indicators of the audited entity in order to identify unusual and (or) incorrectly reflected business transactions in the accounting records, and identify the causes of such errors and distortions.

7.2. Audit Documentation

Audit documentation is regulated by Federal Auditing Standard No. 2. The audit organization and the individual auditor must document all information that is important in terms of providing evidence supporting the audit opinion, as well as evidence that the audit was conducted in accordance with the Federal Auditing Standards.

The purpose of this standard is to optimize the composition and content of the working documentation of accounting and reporting sections to increase the "readability" of audit files, as well as to ensure the ability to control the validity of audit evidence at all levels, including the performer's self-control.

The term "documentation" refers to working papers and materials prepared by and for the auditor, or received and retained by the auditor in connection with the audit. Working documents can be presented in the form of data recorded on paper, photographic film, in electronic form or in another form, and are used:

▪ when planning and conducting an audit;

▪ when carrying out ongoing monitoring and verification of the work performed by the auditor;

▪ to record audit evidence obtained to confirm the auditor's opinion.

The standard does not contain a specific list of mandatory audit working papers and specific requirements for their execution, however, it formulates factors that affect the form and content of working papers, as well as a list of approximate information that should be given in working papers. Working papers should be drawn up in the complete form necessary to provide a general understanding of the audit so that an experienced auditor, having read them, can get a general idea of ​​\uXNUMXb\uXNUMXbthe audit performed by the organization.

The auditor should reflect in the working papers information about the planning of the audit work, the nature, timing and extent of the audit procedures performed, their results, as well as the conclusions drawn from the obtained audit evidence. The working papers should contain the rationale by the auditor of all important points on which it is necessary to express his professional judgment. In cases where the auditor has reviewed complex matters of principle or expressed professional judgment on any matters important to the audit, the working papers should include facts that were known to the auditor at the time of formulating the conclusions with the necessary reasoning.

The length of the working papers depends on the professional judgment of the auditor. It is not necessary to document every matter considered by the auditor. In particular, it is unacceptable to include in the working documentation copies of primary documents that are duly executed, do not contain errors and correspond to business transactions described by these primary documents. Instead of copies of such documents, it is permissible to compile a summary table indicating the list of verified operations and putting a mark on the availability and correctness of the relevant primary documents.

Working documentation should contain information about all checked documents, operations, facts, and not just about those on which comments are made.

The sufficiency of the volume of working documentation is determined by the head of the audit, while the main criteria are the availability of documents confirming the performance of audit tests on the merits in accordance with the approved audit programs, compliance with the principle of targeted verification, ensuring the possibility of end-to-end tracking (using the cross-reference method) of the correctness (incorrectness) of reporting data.

The form and content of working documents are determined by factors such as:

▪ the nature of the audit engagement;

▪ requirements for the auditor's report;

▪ the nature and complexity of the audited entity's activities;

▪ the nature and condition of the audited entity's accounting and internal control systems;

▪ the need to give instructions to the auditor’s employees, exercise ongoing control over them and check the work they perform;

▪ specific methods and techniques used in the audit process.

Working papers should be drawn up and systematized in such a way as to meet the circumstances of each specific audit and the needs of the auditor during its implementation. In order to increase the efficiency of preparation and verification of working documents in an audit organization, it is advisable to develop standard forms of documentation (for example, a standard structure of an audit file (folder) of working documents, forms, questionnaires, standard letters and appeals, etc.). This standardization of documentation can facilitate the assigned work of subordinates and at the same time allow you to control the results of their work.

For each client, the audit firm fills in a permanent and annual (current) folder. The permanent folder contains permanent and little-changing information about the client, for example:

▪ copies of the package of constituent documents;

▪ information about the main shareholders (co-owners);

▪ data on the organizational structure of the enterprise;

▪ copies of long-term agreements (with banks on loans, with own clients, with suppliers), which are important for the audit over many years;

▪ copies of regulatory documents related to the functioning of this enterprise or enterprises of a specific group to which the client’s organization is related.

The annual (current) folder contains the current working documents of the audit based on the results of each specific financial year. For each year, a separate current folder or (in the case of a significant amount of documentation) a set of folders is created for each audited organization.

For small enterprise clients, as well as for performing one-time tasks, it is allowed to place permanent and variable information about the client in the same folder. In the event that the client reapplies in the next year, the auditors working with such a client are required to separate his documents into appropriate separate folders.

By the time the audit report is prepared, all working documentation must be created (received) and formalized accordingly. The auditor needs to establish appropriate procedures to ensure confidentiality, security of working papers, and also for their storage for a sufficient period of time, based on the nature of the auditor's activities, as well as legal and professional requirements, but not less than five years.

Working papers are the property of the auditor, although parts of the documents or excerpts from them may be provided to the audited entity at the discretion of the auditor, they cannot serve as a substitute for the accounting records of the audited entity.

7.3. Verification of compliance with regulatory requirements

When considering this issue, it is necessary to be guided by the Federal Auditing Standard No. 14 "Taking into account the requirements of regulatory legal acts of the Russian Federation during the audit".

As part of the audit of financial statements, the auditor does not aim to identify all the facts of non-compliance with laws and regulations. Identification of such facts may be the subject of a special audit engagement in the performance of audit-related services, however, conducting an annual audit may help prevent non-compliance by the auditee with laws and regulations.

The degree of influence of laws and regulations on the financial statements of the organization may be different. Some legislative and regulatory acts determine the form of financial statements, the procedure for the formation of its indicators, disclosure of information in the organization's financial statements. Other laws and regulations define the conditions for the activities of the organization, without which the activities or individual operations of the organization cannot be carried out or can be terminated or limited. For example, the legislation on joint-stock companies regulates the processes of formation, reorganization of joint-stock companies, procedures for changing their capital, etc.; organizations in a number of industries must have licenses in order to carry out their activities (for example, audit organizations, organizations engaged in the extraction and processing of oil and gas, transport organizations, etc.); antitrust laws regulate certain transactions by organizations and may prohibit their implementation, etc. A number of laws and regulations create special obligations for organizations.

Tax legislation, currency control legislation, customs legislation, etc., affect the activities of almost all organizations. At the same time, non-compliance with the law in these areas can have significant financial consequences for the organization.

Finally, there are laws and regulations that define the general issues of the functioning of the organization. These include labor laws, safety regulations, worker health, etc. Such regulations generally have no impact on an entity's financial statements because they have little or no bearing on events or transactions that would normally be reflected in the financial statements. reporting.

The management of the audited organization is responsible for compliance with the requirements of legislative and regulatory acts. The auditor is not responsible for the non-compliance of the audited organization with laws and regulations, and therefore verification of compliance with the audited organization with laws and regulations is not the purpose of the audit. The less the impact of laws and regulations on the transactions and facts of business activities that are usually reflected in accounting and reporting, the less likely it is that the audit will reveal facts of non-compliance by the organization with laws and regulations.

When planning and performing an audit, as well as when evaluating its results and forming an auditor's report, the auditor should take into account that non-compliance by the audited entity with laws and regulations can, in some cases, have a material impact on the financial statements. For example, non-compliance with tax laws can lead to misreporting of an entity's tax liabilities and material liabilities to pay penalties. Failure to comply with the conditions stipulated by licenses for the use of natural resources, the development of mineral deposits, etc., may lead to a violation of the going concern principle, etc.

The auditor also needs to obtain sufficient evidence that the audited entity complies with laws and regulations that, in the auditor's opinion, affect the determination of material amounts in the financial statements and the information disclosed therein. To do this, he needs to study the requirements of the relevant laws and regulations and make sure that the necessary indicators are reflected in the financial statements and the information is disclosed in the notes to them.

In accordance with the requirements of the Law on Auditing, when checking the compliance of the accounting procedure with the law, the auditor must:

▪ study the requirements of current legislative and regulatory acts on the procedure for maintaining accounting records;

▪ make sure that the audited organization complies with the specified requirements.

As a rule, verification of compliance with the requirements of legislative and regulatory acts is carried out in the course of audit procedures for checking the relevant items of financial statements. The auditor should be prepared for the fact that this may reveal facts of non-compliance with laws and regulations. For example, such facts may be identified when reviewing the minutes of meetings of the board of directors or other governing body, when responding to inquiries regarding litigation, claims and sanctions from management and/or the lawyer of the organization, when performing substantive audit procedures with respect to transactions or balance reports.

In assessing the impact of non-compliance with laws and regulations on the financial statements of the auditee, the auditor should:

▪ consider possible financial consequences for the organization: fines, penalties, other sanctions, threat of confiscation of assets, forced termination of activities, litigation, etc.;

▪ consider the need to disclose possible financial consequences in the organization’s reporting;

▪ assess whether the potential financial consequences are so serious that they may affect the reliability of the financial statements.

The auditor, as soon as possible, reports the facts of non-compliance with the regulatory legal acts of the Russian Federation by the audited entity to the board of directors and senior management of the audited entity or obtains evidence that they are properly informed about the facts of non-compliance that attracted the attention of the auditor. However, the auditor may choose not to do so in the absence of consequences or in minor cases, and may communicate with management in advance the nature of the matters to be reported by the auditor.

If the auditor came to the conclusion that the fact of non-compliance with the regulatory legal acts of the Russian Federation has a significant impact on the financial (accounting) statements and was not properly reflected in it, he must express a qualified opinion or a negative opinion in writing.

The auditor should document identified (or suspected) non-compliance by the audited organization with laws and regulations. If the audited entity prevents the auditor from obtaining sufficient appropriate audit evidence confirming that the facts of non-compliance with the regulatory legal acts of the Russian Federation, which may be significant for the financial (accounting) statements, have taken place or could take place, the auditor should express an opinion with a reservation or refuse to express opinions due to the limitation of the scope of the audit.

7.4. Actions of the auditor in case of detection of errors and dishonesty

Distortion of financial statements, i.e., incorrect reflection and presentation of accounting data can be of two types: intentional and unintentional.

Deliberate distortion of financial statements is the result of deliberate actions (or inaction) of the personnel of the audited economic entity. They are committed for selfish purposes to mislead users of financial statements. At the same time, the auditor should take into account that the conclusion about the deliberate actions (or inaction) of the personnel of the economic entity, leading to the appearance of distortions in the financial statements, can only be made by the authorized body.

Unintentional distortion of financial statements is the result of unintentional actions (or inaction) of the personnel of the audited economic entity. It may be the result of arithmetic or logical errors in accounting records, errors in calculations, oversight in the completeness of accounting, incorrect reflection in accounting of the facts of economic activity, the presence and condition of property.

Both intentional and unintentional misrepresentation of financial statements can be significant for the audited economic entity (i.e. affecting the reliability of its financial statements to such a strong extent that a qualified user of financial statements can draw erroneous conclusions or make erroneous decisions) or insignificant.

An error is an unintentional misrepresentation in the financial (accounting) statements, including the failure to reflect any numerical indicator or the failure to disclose any information. Examples of errors are:

▪ erroneous actions taken during the collection and processing of data on the basis of which financial (accounting) statements were compiled;

▪ incorrect estimates resulting from incorrect accounting or incorrect interpretation of facts;

▪ errors in the application of accounting principles relevant to accurate measurement, classification, presentation or disclosure.

Fraud is understood as deliberate actions committed by one or more persons from among the representatives of the owner, management and employees of the audited entity or third parties with the help of illegal actions (inaction) to obtain illegal benefits. The Federal Auditing Standards considers only fraudulent actions that cause material misstatements of financial (accounting) statements.

There are two types of fraudulent misstatements that are considered in an audit:

▪ distortions arising in the process of unfair preparation of financial (accounting) statements;

▪ distortions arising from the appropriation of assets.

Fraud implies the presence of motivating factors and perceived opportunities for their commission. Unfair preparation of financial (accounting) statements is possible in cases where the management of the audited entity, under the influence of external or internal factors, wants to achieve biased performance results. A perceived possibility of fraudulent financial (accounting) reporting or misappropriation of assets exists when an individual believes that they can bypass the internal control system (for example, if this person is in a responsible position or knows specific weaknesses in the internal control system).

An error differs from an act of bad faith by the lack of intent underlying the action that led to the distortion of the financial (accounting) statements. Unlike error, fraud is intentional and usually involves the deliberate concealment of facts. While the auditor can determine the potential for fraud, it is difficult if not impossible for the auditor to determine intent, especially in terms of the subjective judgment of the entity's management.

The management of the audited entity and representatives of the owner, in accordance with the legislation of the Russian Federation, are responsible for preventing and detecting fraud and errors. The responsibility of these persons may depend on the organizational structure and internal regulatory documents of the entity being audited. Corporate governance practices require that the representatives of the owner and the management of the audited entity create and maintain a general culture of integrity and high moral standards, as well as establish appropriate controls to prevent and detect errors and fraud.

The entity's management is required to establish a control environment and maintain policies and procedures that maximize the achievement of the objectives of the entity's orderly and efficient operations by implementing and maintaining the continuity of an accounting and internal control system designed to prevent and detect fraud and error. Such a system reduces, but does not completely eliminate, the risk of misstatement due to errors and fraud. Accordingly, the entity's management is responsible for any remaining risk.

The auditor is not and cannot be held responsible for preventing errors and fraud, and he cannot obtain absolute assurance that all material misstatements in the financial (accounting) statements will be detected. Due to the inherent limitations of an audit, there is an inevitable risk that some material misstatement of the financial (accounting) statements will not be detected, despite the fact that the audit was properly planned and conducted in strict accordance with the Federal Auditing Standards.

The risk of not detecting fraudulent actions of the audited entity's management is much higher than the risk of not detecting fraudulent actions of its employees, since the management and representatives of the owner are in a position that implies their high authority, honesty and integrity, which gives them the opportunity to circumvent formally established control procedures. A certain level of management can take advantage of their position and circumvent control procedures designed to prevent similar dishonest actions of employees (for example, give an order to record a particular business transaction or hide it). Management may order employees to commit any dishonest act or use their help to do so, and ordinary employees may not be aware of this.

Until evidence to the contrary is obtained, the auditor has the right to accept the records and documents of the audited entity as genuine. An audit conducted in accordance with the Federal Auditing Standards, as a rule, does not involve verification of the authenticity of documentation and does not require the auditor, as a person who does not have special training, to be a specialist in such verification.

The ability to hide fraudulent activities makes it much more difficult to detect them. However, using knowledge of the activities of the entity being audited, the auditor may determine the events or conditions that provide an opportunity, motivation or means of committing fraud, or determine the fact that fraud has already occurred. Such events or conditions are referred to as fraud risk factors. This, for example, is the absence of a primary document or a contradictory result of an analytical procedure. These events may occur as a result of other circumstances, and not as a result of dishonest actions. Fraud risk factors do not always indicate the presence of such acts, but they are often present in the circumstances in which the acts occur. The presence of fraud risk factors may change the auditor's assessment of inherent or control risk.

Matters to be communicated to the owner's representatives are determined by the professional judgment of the auditor. Such questions may include:

▪ issues of management competence and integrity;

▪ unfair practices involving management;

▪ other dishonest actions that led to significant distortions in the financial (accounting) statements;

▪ significant distortions in financial (accounting) statements resulting from errors;

▪ misstatements that may cause significant distortions in financial (accounting) statements in the future.

If the auditor has found material misstatements in the financial (accounting) statements resulting from an error, he must promptly inform the managers of the appropriate level and, if necessary, representatives of the owner of the audited entity.

If the auditor concludes that it is impossible to complete the audit due to the distortion of the financial (accounting) statements as a result of dishonest actions, then he must take into account his professional and legal responsibility in relation to these circumstances, consider the possibility of abandoning the assignment.

The increase in the risk of distortions in financial statements can be influenced by both factors of the economic activity of an economic entity, and reflecting the characteristics of a particular industry or country as a whole.

1. The factors of intraeconomic activities of an economic entity that contribute to the appearance of distortions include:

▪ the presence of significant financial investments in crisis sectors of the economy;

▪ discrepancy between the amount of working capital and the rapid growth in sales (production) of an economic entity or a significant decrease in profits;

▪ the presence of dependence of an economic entity in a certain period on one or a small number of customers or suppliers;

▪ changes in contractual practices or accounting policies that lead to a significant change in profit;

▪ atypical transactions of an economic entity, especially at the end of the year, which significantly affect the value of financial indicators;

▪ the presence of payments for services that clearly do not correspond to the services provided;

▪ features of the organizational and managerial structure of an economic entity, the presence of shortcomings in this structure;

▪ features of the capital structure and profit distribution;

▪ presence of deviations from established rules in accounting and organization of preparation of financial statements, etc.

2. Factors reflecting the specifics of the state of a particular branch of financial and economic activity of an economic entity and the economy of the country as a whole, contributing to the appearance of distortions, include:

▪ the state of the economic sector and the country’s economy as a whole - crisis, depression or recovery;

▪ increasing the possibility of insolvency (bankruptcy) of an economic entity due to the crisis state of the industry;

▪ features of the production activity of an economic entity, technological features of production.

The facts of distortions of the financial statements of the audit organization revealed during the audit should be reflected in detail in its working documentation, and subsequently in the report or conclusion. The audit organization is responsible for expressing an objective and reasonable opinion on the reliability of the financial statements presented in writing in the audit report and (or) report to the management of the audited economic entity. She is also responsible for the correctness and completeness of the data reflected in the auditor's opinion and (or) report on the material misstatements of the financial statements identified by him.

The audit organization is responsible for non-compliance with the confidentiality of the commercial information of the economic entity, expressed in the disclosure of information about the identified misstatements of financial statements to third parties (except as expressly provided for by applicable law).

7.5. Analytical procedures in audit. Types and features of application

Federal Auditing Standard No. 20 "Analytical Procedures" obliges the auditor to apply analytical procedures at the planning stage and the final stage of the audit, while the auditor analyzes the ratios and patterns based on information about the activities of the audited entity, and also studies the relationship of these ratios and patterns with other existing the information at the auditor's disposal or the reasons for possible deviations from it.

Analytical procedures include:

a) consideration of financial and other information about the audited entity in comparison:

▪ with comparable information for previous periods;

▪ the expected results of the audited entity's activities, for example, estimates or forecasts, as well as the auditor's assumptions;

▪ information about organizations engaged in similar activities (for example, comparing the ratio of the audited entity's sales revenue to the amount of accounts receivable with industry averages or with indicators of other organizations of comparable size in the same industry);

b) consideration of relationships:

▪ between elements of information that are expected to correspond to a predicted pattern, based on the experience of the audited entity;

▪ financial information and other information (eg between labor costs and number of employees).

Analytical procedures can be carried out in different ways (simple comparison, complex analysis using complex statistical methods, etc.). Analytical procedures are performed on the consolidated financial statements, financial statements of subsidiaries, divisions or segments, and certain elements of financial information.

The application of analytical procedures is based on the assumption that the relationship between numerical indicators exists and continues to exist insofar as there is no evidence to the contrary. The presence of such a relationship provides audit evidence regarding the completeness, accuracy and reliability of the data obtained in accounting. The extent to which the auditor can rely on the results of analytical procedures depends on the auditor's assessment of the risk that analytical procedures based on forward-looking data may indicate the absence of error when, in fact, the amount being tested is materially misstated.

The choice of method for conducting analytical procedures or designing a test depends on the goal. With a consistent analysis of financial statements, it is first advisable for the auditor to apply the so-called method of reading financial statements. This method consists in studying the absolute values ​​of the indicators presented in external reporting, and on this basis determining the main sources of the enterprise's funds and profits (reasons for losses), directions for their use over the past period, as well as the leading provisions of the accounting policy. Particular attention should be paid to the presence of unusual indicators and amounts in the statements.

The method of sectoral comparative analysis is used to compare the financial performance of an enterprise with industry average data. The benefit of industry benchmarking is that it provides the auditor with a deeper understanding of the client's business. Of course, this is true, provided that the financial position of enterprises and the dynamics of industry indicators reflect the objective pattern of the industry's development. In addition, information of the required quality must be available on the basis of which the financial position of various enterprises can be analyzed.

In a comparative analysis of actual and planned indicators, the auditor examines the content and procedure for drawing up estimates, discusses it with the client, and also conducts detailed testing of actual indicators. As a rule, enterprises make preliminary calculations for various aspects of their business activities. Since these calculations are nothing more than the client's forecast for the relevant period, an examination of those aspects in which there are sharp deviations of actual indicators from planned ones can reveal errors.

The auditor can also draw up his own balance sheet based on the development trends of the enterprise and his own understanding of the client's business. Comparison of the actual data of the client with the calculations of the auditor will allow for a more thorough check.

Note that it is often very effective to compare the accounting and reporting data of the client for several time periods, as well as the auditor's study of deviations that give different techniques and methods. Comparison of financial indicators in the context of each of the methods can occur in absolute terms, in relative terms and in a mixed version. As practice shows, conclusions based on the study of absolute reporting indicators require the greatest caution. This is explained by the fact that the interpretation of changes in absolute values ​​due to the influence of inflation cannot be unambiguous. In this regard, the analysis of relative indicators is considered to be a generally accepted analytical procedure. Relative indicators, in turn, are differentiated into balance indicators, indicators of the statement of financial results and their use, and mixed indicators.

Analysis of the results and drawing conclusions after the implementation of audit procedures can be thought of as a whole as a process of analyzing, interpreting and summarizing unusual deviations found by the auditor. The application of these procedures improves the quality and reduces the cost of auditing. The results of the analysis of unusual deviations, as well as the results of planning and performing analytical procedures, the auditor should reflect in the working documentation for the audit; use to obtain audit evidence necessary for the preparation of an audit report, as well as for the preparation of written information by the auditor to the management of an economic entity based on the results of the audit.

7.6. Peculiarities of auditing estimated values

The issue is regulated by the Federal Auditing Standard No. 21 "Peculiarities of Auditing Estimated Values", which establishes uniform requirements for the audit of estimated values ​​contained in financial (accounting) statements. The Standard does not apply to the review of forecast or expected financial information, but many of its procedures can be used for this purpose.

Estimated values ​​are approximate values ​​of certain indicators determined or calculated by employees of the entity on the basis of professional judgment in the absence of precise methods for determining them, including:

a) estimated reserves;

b) depreciation charges;

c) accrued income;

d) deferred tax assets and liabilities;

e) a reserve to cover losses incurred as a result of financial and economic activities;

f) losses on construction contracts recognized before the termination of these contracts.

Estimated values ​​are usually calculated under conditions of uncertainty in the outcome of events that have occurred in the past or with some probability will occur in the future, and require professional judgment. If financial (accounting) statements contain estimated values, the risk of material misstatement increases.

An accounting estimate may be part of an ongoing accounting system or part of a system that operates only at the end of an accounting period. In many cases, estimates are calculated using formulas and ratios based on the experience of the entity being audited (for example, standard depreciation rates for a group of property, plant and equipment, a standard percentage of sales revenue to calculate a reserve for future warranty repairs and warranty service for products that are life time). In such cases, the entity's management should periodically review the formulas and ratios, for example by re-estimating the remaining useful life of the assets or comparing actual results with the estimate and adjusting the formula if necessary.

The auditor's actions taken in general and detailed review of the procedures used by the entity's management include:

a) evaluation of the input data and consideration of the assumptions on which the estimate is based;

b) arithmetic verification of calculations;

c) comparison of calculations in relation to previous periods with actual results for these periods (if possible);

d) consideration of procedures for the approval of accounting estimates by the management of the audited entity.

When evaluating the assumptions on which the accounting estimate is based, the auditor should consider whether they are:

a) reasonable, taking into account actual results for previous periods;

b) applied consistently with the assumptions used to calculate other estimates;

c) consistent with the plans of the management of the entity being audited.

The auditor should check the correctness of the formulas used by the management of the audited entity in calculating estimates. This general check is based on the auditor's knowledge of the following:

a) the financial results of the audited entity for previous periods;

b) the practice followed by other economic entities of the given sector of the economy;

c) the plans of the management of the entity being audited as communicated to the auditor.

The auditor should carry out an arithmetic check of the calculations. The nature, timing and extent of the audit procedures for such an audit depend on the complexity of calculating estimated values, the auditor's assessment of the reliability of the procedures and methods used by the audited entity, as well as the materiality of the estimated values ​​for the financial (accounting) statements as a whole. Because of the uncertainty inherent in an accounting estimate, evaluating discrepancies can be more difficult than in other areas of the audit. If there is a discrepancy between the audit estimate of the amount, confirmed by audit evidence, and the estimated value reflected in the financial (accounting) statements, the auditor must determine whether there is a need to adjust the financial (accounting) statements due to the existence of such a discrepancy. If the difference is reasonable (for example, due to the fact that the amount in the financial (accounting) statements does not go beyond the permissible error), the auditor does not need to require an adjustment. If the auditor believes that the existing difference is not reasonable, he should contact the management of the audited entity with a proposal to revise the accounting estimate. In case of refusal, the difference should be considered a misstatement and considered together with other misstatements when assessing whether the consequences of such misstatements are significant for the financial (accounting) statements.

7.7. Audit in the conditions of computer data processing

Computer data processing (COD) of an economic entity takes place in cases where computer technology is used to process significant amounts of accounting information, regardless of the following factors:

a) the computer is used by the economic entity independently or under an agreement with a third party;

b) a computer is used by an economic entity to process economic information in all aspects of economic activity and its accounting, or only to automate the processing of information on certain types of facts of economic life, certain areas of accounting.

When conducting an audit in the COD system, the purpose of the audit and the main elements of its methodology are preserved. The presence of the COD environment significantly affects the process of studying the accounting system of an economic entity and its accompanying internal controls by the auditor.

The use of technical means leads to a change in individual elements of the organization of accounting and internal control:

a) to verify business transactions, along with traditional primary accounting documents, primary accounting documents on a machine-readable medium are also used;

b) permanent reference indicators can be checked against data stored in computer memory or on machine-readable media;

c) instead of traditional manual forms of bookkeeping, a form of accounting can be used that is focused on progressive methods of generating output information and ensuring its reliability, combining synthetic accounting with analytical and systematic with chronological, as well as increasing the efficiency and ease of use of accounting and reporting information.

The auditor should not force (directly or indirectly) the audited economic entity to use the COD system known to the auditor.

An economic entity is obliged to provide the audit organization with the necessary access to the COD system. Non-fulfillment (incomplete fulfillment) of this condition is a limitation of the scope of the audit in the COD system, as a result of which the audit organization may require the provision of the documents it needs on paper.

It is desirable for the auditor to have an idea about the technical, software, mathematical and other types of computer equipment, as well as economic information processing systems. If the auditor does not have this knowledge, the work of an expert in the field of information technology should be used.

The following factors may influence the amount of audit risk when conducting an audit under the conditions of a code of conduct:

a) the organizational form of data processing, for example: whether the processing is carried out by a special unit (computer center, information and computer center, department of an automated enterprise management system) or computers are installed at the workplaces of accounting personnel and data processing is carried out directly by accountants; whether the processing of data is carried out by the economic entity independently or is carried out under an agreement with a third party;

b) the form of the software product (developers);

c) accounting sections and sections operating in the COD environment (degree of computerization);

d) the COD system is located on one or several computers;

e) processing of credentials is carried out locally on each computer or a network option is used;

e) ensuring archiving and storage of data;

g) data transmission is carried out: using communication channels, via external media (for example, floppy disks) or data is entered from the keyboard.

The auditor is obliged to check the compliance of the applied algorithms with the requirements of regulatory documentation for accounting and preparation of financial statements for the main automated calculations of an economic entity.

Sources of obtaining audit evidence in the course of audit procedures are data prepared in the COD system of an economic entity in the form of tables, statements, accounting registers of an economic entity. The auditor has the opportunity to use them, their copies, including photocopies, as the working documentation of the audit, accompanying the processing of these documents with links, notes, special characters. In the case of the auditor working directly in the COD system of an economic entity (without printing data), working documents confirming the fact of collecting audit evidence are compiled by the auditor independently.

The presence of the COD system does not release the economic entity from the obligation to document the facts of economic life in the prescribed manner.

Authors: Erofeeva V.A., Piskunov V.A., Bityukova T.A.

<< Back: Audit risk and its relationship with materiality and audit sampling (Audit risk and its assessment. Assessment of materiality (materiality) in an audit. Audit sampling. The concept of affiliates in an audit)

>> Forward: The final stage of the audit (Informing management about the results of the audit. Auditor's report. Date of signing of the audit report and reflection in it of events that occurred after the date of preparation and presentation of financial statements. Auditor confidentiality)

We recommend interesting articles Section Lecture notes, cheat sheets:

▪ Nervous diseases. Lecture notes

▪ Theory of accounting. Lecture notes

▪ Land law. Crib

See other articles Section Lecture notes, cheat sheets.

Read and write useful comments on this article.

<< Back

Latest news of science and technology, new electronics:

The existence of an entropy rule for quantum entanglement has been proven 09.05.2024

Quantum mechanics continues to amaze us with its mysterious phenomena and unexpected discoveries. Recently, Bartosz Regula from the RIKEN Center for Quantum Computing and Ludovico Lamy from the University of Amsterdam presented a new discovery that concerns quantum entanglement and its relation to entropy. Quantum entanglement plays an important role in modern quantum information science and technology. However, the complexity of its structure makes understanding and managing it challenging. Regulus and Lamy's discovery shows that quantum entanglement follows an entropy rule similar to that for classical systems. This discovery opens new perspectives in the field of quantum information science and technology, deepening our understanding of quantum entanglement and its connection to thermodynamics. The results of the study indicate the possibility of reversibility of entanglement transformations, which could greatly simplify their use in various quantum technologies. Opening a new rule ... >>

Mini air conditioner Sony Reon Pocket 5 09.05.2024

Summer is a time for relaxation and travel, but often the heat can turn this time into an unbearable torment. Meet a new product from Sony - the Reon Pocket 5 mini-air conditioner, which promises to make summer more comfortable for its users. Sony has introduced a unique device - the Reon Pocket 5 mini-conditioner, which provides body cooling on hot days. With it, users can enjoy coolness anytime, anywhere by simply wearing it around their neck. This mini air conditioner is equipped with automatic adjustment of operating modes, as well as temperature and humidity sensors. Thanks to innovative technologies, Reon Pocket 5 adjusts its operation depending on the user's activity and environmental conditions. Users can easily adjust the temperature using a dedicated mobile app connected via Bluetooth. Additionally, specially designed T-shirts and shorts are available for convenience, to which a mini air conditioner can be attached. The device can oh ... >>

Energy from space for Starship 08.05.2024

Producing solar energy in space is becoming more feasible with the advent of new technologies and the development of space programs. The head of the startup Virtus Solis shared his vision of using SpaceX's Starship to create orbital power plants capable of powering the Earth. Startup Virtus Solis has unveiled an ambitious project to create orbital power plants using SpaceX's Starship. This idea could significantly change the field of solar energy production, making it more accessible and cheaper. The core of the startup's plan is to reduce the cost of launching satellites into space using Starship. This technological breakthrough is expected to make solar energy production in space more competitive with traditional energy sources. Virtual Solis plans to build large photovoltaic panels in orbit, using Starship to deliver the necessary equipment. However, one of the key challenges ... >>

Random news from the Archive Bacteria to turn sugars into synthetic oil 25.11.2021 American biochemists have created a strain of E. coli that can produce biofuels using various sugars as raw materials. "We have created a two-step biochemical process whereby glucose can be directly converted into unsaturated hydrocarbons using living and non-living catalysts. Biofuel production in this way will bring humanity closer to the creation of a full-fledged green energy," said Wang Zhen, associate professor at the University at Buffalo and one of the authors of the study. . Over the past decades, scientists have come up with several methods for converting plant biomass into fuel. As a rule, it is produced in several stages with the participation of fungi and different types of bacteria. These fuels can be used, but they are quite expensive to produce, and they are inferior to gasoline in terms of energy intensity. Wang Zhen and her colleagues proposed to solve this problem with the help of bacteria that can directly convert vegetable raw materials and the sugars contained in it into a mixture of unsaturated hydrocarbons, which are similar in composition and properties to gasoline, diesel fuel and other petroleum products. To do this, scientists have built into the genome of the common E. coli four genes with "instructions" for the production of enzymes that gradually convert glucose and other sugars into fatty acids. Specialists selected these proteins in such a way that they did not interfere with the work of all other cellular systems associated with the synthesis of fats, so they did not threaten the life of microbes. All these enzymes were borrowed from the genomes of other bacteria, in particular, the pathogenic microbe Treponema denticola, associated with the development of periodontitis. Biochemists adapted these proteins to work with each other, and then tested whether the E. coli they created could turn sugar into an analogue of gasoline and other petroleum products. Experiments have shown that one more component is needed for its production - a catalyst based on niobium oxide. It converts fatty acids into unsaturated hydrocarbons. In combination with microbes, this catalyst can convert about 8% of the initial mass of glucose into a biological analogue of oil.

Other interesting news:

▪ Butterflies fly like birds

▪ How to catch a rainbow

▪ Interaction of photons with pairs of atoms

▪ Viruses get sick too

▪ Electronic viewfinder for conventional DSLR

News feed of science and technology, new electronics

Interesting materials of the Free Technical Library:

▪ section of the site Assembling the Rubik's Cube. Article selection

▪ article Bow and arrow. History of invention and production

▪ article What is the ozone hole? Detailed answer

▪ article Accountant-auditor. Job description

▪ article DC voltage converter 12 V to AC 220 V. Encyclopedia of radio electronics and electrical engineering

▪ article Inverter for a triac. Encyclopedia of radio electronics and electrical engineering

Leave your comment on this article:

All languages ​​of this page

Arabic	Hebrew	Polish
Bengali	Hindi	Portuguese
Chinese	Italian	Spanish
English	Japanese	Turkish
French	Korean	Ukrainian
German	Malay	Vietnamese

Home page | Library | Articles | Website map | Site Reviews

www.diagram.com.ua
2000-2024