Annual Report 2016

14
Financial Audit | FAOA 2016
Figure 2
Type and number of findings from the 2016 file reviews
at the five largest audit firms (total 38 Findings)
1
Communication with TCWG (ISA 260)
2
Auditor reporting (ISA 700 f.)
Quality control for an audit (ISA 220)
Examination of the existence of an internal control system (SAS 890)
Fraud (ISA 240)
3
3
3
6
Risk assessment and response (ISA 300f.)
6
Estimates (ISA 540)
Audit sampling (ISA 530)
Group audits (ISA 600-620)
7
7
In the year under review the FAOA
identified the most findings in the
areas of «group audits«, «audit
sampling», «estimates» and «risk
assessment and response».
In various file reviews it was found
that the group auditor obtained
insufficient positive assurance from
component auditors on material
account balances. Against this backdrop,
robust audit procedures by
the group auditor on non-significant
components are of great importance.
Examples include auditing the effectiveness
of group-wide controls
and performing appropriate analytical
review procedures. If the group
auditor nonetheless concludes that
audit procedures performed on significant
components do not provide
sufficient audit evidence to support
the audit opinion, the group auditor
is also required to perform specific
audit procedures on certain non-significant
components. The planning
phase is thereby of central importance.
The group auditor is only in
a position to determine the type of
work to be performed at components
and draft detailed audit instructions
to the component auditors based on
this, once a good understanding has
been obtained of the group, its components
and its environment. In some
instances, it was found that the component
auditors failed to comply with
the requirements of the group audit
instructions without this being taken
account of adequately in the group
auditor’s risk assessment. It is also
of note that the larger public companies
generate their material sales
abroad. Here it is important that the
group auditor utilises on-site working
paper reviews to a greater extent in
assessing the quality of component
auditors’ work. The inclusion of a
multi-year rotation plan within audit
planning is to be recommended.
The auditing standard on audit sampling
includes clear requirements that
have generally been further refined
within the individual internal audit
methodologies of the respective audit
firms. Audit sampling is used in auditing
the effectiveness of controls as
well as for substantive testing. Due to
the importance and number of findings
in this area, the FAOA has determined
it to be a point of focus for the
2017 inspections (see section «Points
of focus for 2017 inspections»).
The following issues were found
repeatedly here.
– Sample selection was not performed
in such a way that every
item within the overall population
had a chance of being selected;
– Where sample testing was performed
at the interim, the period
remaining to the balance sheet date
was not adequately considered;
– Substantive testing samples did
not cover the whole population
sufficiently. No meaningful conclusion
could thus be drawn for the
total population;
– The nature and cause of exceptions
and incorrect presentation were
not appropriately assessed.
As in the prior year, findings on
the audit of estimates relate most
particularly to the account balances
goodwill and other intangible
assets. Contrary to auditing standard
requirements, certain audit teams
obtained insufficient audit evidence
to support management’s estimates
and assumptions for these balances.
This also includes, for example, a critical
assessment of the assumptions
used in the business plans of the
prior year. Information received from