The-Accountant-July-Aug-2018

More documents

Recommendations

Info

Finance and investment UNDERSTANDING THE CLIENT Gain a detailed knowledge of your customer By CPA Kipkoech Victor For many firms the audit evidence that they obtain does not focus on a client’s internal control systems, instead, work is focused on the control and substantive testing of the transactions and balances which make up the client’s accounts. Consequently many practitioners do not believe that they are required to spend much time documenting a client’s internal systems and controls or indeed to test whether any of the controls actually operate in practice in any detail. However, to ignore this area will mean that the requirements of ISA 315 “Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment” are not complied with. At the outset of every audit, an auditor must gain an understanding of their client. The purpose of this procedure is to assess the risk that the financial statements contain a material misstatement due to: 14 JULY - AUGUST 2018
Finance and investment • The nature of the client’s business • The industry in which the client operates • The level of competition within that industry • The client’s customers and suppliers • The regulatory environment in which the client operates. ISA 315 provides guidance on the steps to take when gaining an understanding of a client. It requires the auditor to do the following: 1. Make inquiries of management and of others within the entity who may have information to help identify the risk of material misstatements. This includes making inquiries of both financial and non-financial staff at all levels of the organization, including those charged with governance, internal audit, sales, and operational personnel. 2. Perform analytical procedures at the planning stage of the audit to identify any unusual or unexpected relationships that may highlight where risks exist. Analytical procedures are a study of plausible relationships between both financial and non-financial data. 3. Perform observation and inspection procedures to corroborate the responses made by management and others within the organization. These procedures also provide information about the entity and its environment. Examples of such audit procedures include observation or inspection of the entity’s operations, premises, and facilities; business plans and strategies; internal control manuals; and any reports prepared and reviewed by management (such as management reports, interim financial statements, and minutes of board of directors’ meetings). By performing these activities, the auditor will gain an understanding of the issues at the client’s level, the industry level, and the economy level. Client’s level It is important that an auditor gains a detailed knowledge of their client. Knowledge about the entity is gained through interviews with client personnel, including those charged with governance. The auditor will ask questions about what the client does, how it functions, how its ownership is structured, and what its sources of financing are. For new clients, this process is very detailed and time consuming. For a continuing client, this process is less complex and involves updating the knowledge gained on previous audits. By gaining an understanding of the client, the auditor Major customers are identified so that the auditor may consider whether those customers are on good terms with the client (that is, likely to remain a customer in future), and are likely to pay the client on a timely basis. JULY - AUGUST 2018 15
Page 1 and 2: JULY - AUGUST 2018 www.icpak.com Ks
Page 3 and 4: TABLE OF CONTENTS 10 Merging Intern
Page 5 and 6: EDITORIAL Dear Reader, Accountants
Page 7 and 8: Financial Reporting and Assurance o
Page 9 and 10: BUSINESS AND PRACTICE DEVELOPMENT U
Page 11 and 12: BUSINESS AND PRACTICE DEVELOPMENT I
Page 13 and 14: BUSINESS AND PRACTICE DEVELOPMENT o
Page 15: BUSINESS AND PRACTICE DEVELOPMENT l
Page 19 and 20: Finance and investment whether the
Page 21 and 22: COVER STORY county governments must
Page 23 and 24: National Assembly 2042 19,591 -
Page 25 and 26: Economy not just the wage bill but
Page 27 and 28: BEYOND MANAGEMENT SUMMIT Date: 17 t
Page 29 and 30: Governance present here and others
Page 31 and 32: Governance to establish and strengt
Page 33 and 34: WORK PLACE Insufficient pay has bee
Page 35 and 36: WORK PLACE If you’re just having
Page 37 and 38: @your desktop CPD EXAMS CPD CALENDA
Page 39 and 40: INFORMATION TECHNOLOGY expertise. T
Page 41 and 42: INFORMATION TECHNOLOGY run operatio
Page 43 and 44: INSPIRATION said Sleep is an invest
Page 45 and 46: INSPIRATION Sleep is so critical th
Page 47 and 48: ENVIRONMENT is why we must stop pla
Page 49 and 50: ENVIRONMENT JULY - AUGUST 2018 47
Page 51 and 52: HEALTH This article reveals some of
Page 53 and 54: HEALTH cholesterol (blood lipids),
Page 55 and 56: TID BITS The following are some bri
Page 57 and 58: MEMORABLE QUOTES “You know what t
Page 59 and 60: Star of the month What did your fir
Page 61 and 62: INSTITUTE NEWS ICPAK Chairman, FCPA
Page 63 and 64: TRAVEL Quite apart from hosting the
Page 65 and 66: TRAVEL Dubai Mall Aquarium One of D
Page 67 and 68:
PEN OFF Enhancing Manufacturing Hig
Page 69 and 70:
PEN OFF US manufacturing sector, me
Page 71 and 72:
Available to let CPA CENTRE 50% Let
show all

The-Accountant-July-Aug-2018

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?