AUDIT PRACTICE

The main stages of our approach to the audit would be as follows;

  • Gathering Information
  • Understand Internal Control Structure and Test of Controls
  • Perform Substantive Tests
  • Finalise the Audit


AUDIT APPROACH


Gathering information This process will be led by the Engagement Partner, who with the assistance of the second Engagement Partner and the Review Partner has acquired experience in the control and regulatory environment relating to your Company. We would however specifically need to;
  • obtain knowledge of the Company's operations and any recent industry developments; particularly accounting, auditing and regulatory standards affecting your Company;
  • obtain recent financial information for the purpose of determining our materiality levels. Also by carrying out preliminary analytical reviews, we are in a position to identify exceptions to expected trends;
  • Identify inherent risks i.e. the susceptibility of account balances or class of transactions to material misstatement before our consideration of the internal control structure.

At the end of this stage of the audit, we should have identified your expectations and determined our service objectives.
The specific audit plan would also be agreed with senior management at the end of this stage.

 

Understand Internet Control Structure and Test of Controls

Our consideration of the internal control structure in planning the audit consists of obtaining an understanding of the internal control structure and assessing the control risks. Our understanding and assessment of the unit's control environment would consider the following;

  • The role of the Management
  • The effectiveness of the organisation and key management of the Company;
  • The role of internal audit
  • The reasonableness of management plans and estimates


We shall place a lot of emphasis on the operations of the Company, and in assessing the role of the Directors determine; whether regular meetings are held with agendas, together with supporting documents and reports being provided in good time. It is our belief that regular Directors meetings should deal with:

  • Cash receipts and disbursement and the position of cash and bank balances,
  • Corporate governance
  • Business development issues and performance evaluation
  • Operating cost and staff turnover ratio,


We shall also seek to gain an understanding of the control procedures performed by management as part of the normal course of monitoring the Company. In this regard, a specific international firm developed aid the Record of Monitoring Controls "RMC" would be completed. This aid shall enable us to identify the control procedures that are in place which ensure that;

  • the Management receives reliable financial information to monitor the operations of the unit on a regular timely basis; and
  • specific reports with key performance indicators and exceptions with regard to cash and bank balances, operating expenses, etc are received by the management.


Our understanding of the control structure would also focus on the control procedures that are performed to address specific control objectives relating to transaction level and cycle level controls over systems - derived accounts balances and classes of transactions. Based on the information obtained so far on the operations of the unit we shall be in a position to assess control risks in the areas of non-cycle, revenue and payment cycles. For each of these cycles, we shall seek assurance that there are control procedures, which address the following control objectives;

  • Authorisation
  • Completeness of input
  • Accuracy of input
  • Integrity of standing data
  • Completeness and accuracy of accumulated data
  • Restricted access to assets and records.


Our specific tool, the Record of Application Control "RAC" and the Assessment of Control Environment Form (ACE) should enable us recognise the positive features of your controls and also the negative features, where they exist. We proceed to test in details the control procedures identified to confirm that they indeed operate as prescribed. At the conclusion of this stage of the audit i.e the interim audit, we will be in a position to report our findings to the Management on;

  • control procedures that are not in place, and
  • break downs in procedures, if any.

Substantive Test

The level of our substantive testing work is usually systematically linked with and determined by the steps discussed above. Our audit tests for the major accounts balances seek to address the following audit objectives;

  • Completeness - all account balances and transactions that should be included in the financial statements are included.
  • Accuracy - recorded transactions and account balances are mathematically accurate, are based on correct amounts, are classified in the proper accounts and are accurately summarised in the general ledger.
    Existence/occurrence - recorded assets and liabilities exist as of the balance sheet date; recorded transactions have occurred and are not fictitious.
  • Cut-off - transactions are recorded in the proper accounting period.
  • Valuation - generally accepted accounting measurement and recognition principles are properly selected and applied.
  • Rights and obligations - recorded assets are rights of the entity and recorded liabilities are obligations of the entity at the balance sheet date.
  • Presentation and disclosure - financial statement components are properly classified and described, and appropriate disclosures are made.


Our risk assessment will affect the emphasis we give to particular objectives for an individual account balance or class of transactions.

 

Finalisation

The audit team leader and the partners will discuss with top management all significant issues arising from the audit.


In this regard, management reports and the audited financial statements would have to be discussed with management in draft in order to resolve areas of disagreement before the reports are finalised and formally distributed in accordance with the terms of our appointment.


In summary, we anticipate performing the following assurance services:

  • Reporting on the financial statements of your Company
  • Preparing management letter on internal control weaknesses and recommendations to the management and;
  • Holding regular meetings with management and presenting our major findings to the management of your company