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Audit Presentation Template

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AUDIT PRESENTATION

Transcript: ERUDITE - COMPLEX BUSINESS MODEL - PRICE INSTABILITY - TECHNOLOGY RISK BUSINESS RISK - Ensure that the company is operating efficiently in the sake of the stakeholders -Ensure that the internal control is efficient - Determine the business strategies and plans RESPONSIBILITIES OF BOARD OF DIRECTORS RESPONSIBILITIES SPE The independence issues arise when an auditor provides external auditing, internal auditing and management consulting services include whether or not the auditors can be independent and exercise good professional judgement in appearance to both services, auditing and consulting. AUDITOR INDEPENDENCE - Rules-based provide detailed rules that must be followed - Principles-based avoid rules and use professional judgment PRINCIPLES-BASED VS RULES-BASED Define as a surge of individuals withdrawing funds from a financial institution due to fear that the entity will become insolvent in the near future. RUN ON THE BANK The withdrawal of the shares and loss of confidence by trading partners and customers possibly speed up the collapse Might be hard for them to maintain the good relationship with the client. Losing revenues gain by the main services and ad on services CONFLICT Conflict between client or public's interest INTEGRITY - Bad examples portrayed by Enron and Anderson regarding integrity - It is important for an individual to live an act in with your values Sarbanes-Oxley Act of 2002 Public Company Accounting Oversight Board (PCAOB) Restore public trust in auditing and financial reporting RESTORE THE PUBLIC TRUST

Audit Presentation

Transcript: An audit is the independent examination of the financial report of an organisation Weaknesses Why ? 4 gold mines require a large audit team Flexibility Threats WANT TO AUDIT LARGER FIRMS Opportunities Career Progression Career development "Without BDO we couldn’t have fulfilled our legal obligations" Audit SWOT Analysis Has experience in medium and large firms - Won Auditor of the Year 2012 - Offers various services within audit - 2000 applicants for about 120 audit places each year Size of audit teams allocated to Randgold Resources - Teamwork - Communication Tim Fullwood, Financial Director, Law Debenture Audit Partner interview with Gary Hanson When examining the financial report, auditors must follow auditing standards which are set by a government body. - Mark Bristow, CEO of Randgold Resources - Two types of audit - Different objectives and responsibilities - BDO provides external auditing services Transferable skills "We appointed BDO as our auditor in late 2008. The firm quickly grasped the complexities of our diverse and international businesses. BDO's hands-on approach - with the support of its offices in NY, HK, Jersey and the Cayman Islands delivered a timely, effective and efficient audit." Strengths Network is large enough Investment into quality & expertise Market capitalisation does not correspond to audit complexity Significant global reach Audit at Internal/External Audit African-focused gold mining and exploration company Largest BDO audit client - FTSE 100 Specialised -> complex audits Change from PWC Important to “choose your firm carefully” Award-winning firm Everyday is different with new challenges February 2012 Only firm outside of the 'Big 4' to have a FTSE 100 client Currently pitching to high street names such as M&S New audit guidelines by CC Change Limitations FTSE 350 Diversity Daniel Marino, Jessica Boase, Amy Herbertson & Shamima Manzoor - Achievable entry requirements - Corporate culture - Networking opportunities Audit Partner interview with David Campbell Change "Audit is a great grounding for the learning and understanding of business" What is external audit? Repetition Variety Case Studies The purpose of an audit is to form a view on whether the information presented in the financial report, taken as a whole, reflects the financial position of the organisation

Audit Presentation

Transcript: Other Risk Factors * Analyze and understand your company’s financial records * Identify key areas for improvement in your company * Assess risks, economy, efficiency and quality * Evaluate new technology * Uncover fraudulent or other illegal activities within your company * Reinforce and strengthen internal control 28.82 Walmart Items To Select Audit Risk Model Items with large dollar value & randomly selected items 1.23 Recognizes sales revenue net of sales taxes and estimated sales returns at the time it sells merchandise to the customer Purchases of shopping cards are not recognized as revenue until the card is redeemed for purchases Sam’s Club membership fees recognized over term of membership (12 months) Documentation Costco Specialized Accounting Treatments ... small -.006 (cc) image by anemoneprojectors on Flickr Completeness Completeness 6.23 .200 12.67 Earthquake in Japan Effect of inability to estimate value of damages and insurance recovery from event "...do not believe that any damages would be material to our financial position." Social Matters Earnings per Share Occurance .883 1.14 Physical Examination Classification % Change From 2011 Existence 3.43 -.1685 How to Manage Business Risk Industry 1.95 Times Interest Earned Transactions with large dollar value & randomly selected items Applying Analytical Procedures Subsequent Events Return on Assets % Change From 2011 Walmart Gross Margin Inventories: primarily lower of cost or market LIFO Sam's Club: weighted-average LIFO Walmart International: FIFO Recording markdowns Estimating Shrinkage - inventory losses based on physical inventory counts recorded as % of sales .466 Mostly undrawn lines of credit from 28 financial institutions totaling $11.5 billion Strictest covenants limit maximum amounts in secured debt and long-term leases Application of Evidence to Decisions Sample Size Items to Select Balance sheet date .470 .587 Ability to Meet Long Term Debt Obligations Management Assertions 4.52 Valuation & Allocation In the first quarter of fiscal 2011, certain information systems' expenses previously included in unallocated corporate overhead have been allocated to the segment that is directly benefitting from those costs. 6.12 Occurance and rights and oblications Accuracy Posting & Summarization Balance sheet date Existence Puerto Rico Segment Realignment -.061 Inventory Turnover Walmart 11.43 Segment Reporting Timing Net deferred tax liabilities has greatly risen from $891 million on Jan 31, 2010 to $1.695 billion on Jan 31, 2011. Accounting Risk Considerations 1.16 Completeness Compare invoices to purchase orders and general ledger accounts 4.28 Possible Effects of Audit/Examinations on Income Tax Positions Client Business Risk Walmart and Its Industry FY 2011 Company Review Understanding the Client Business & Industry Audit Evidence Decisions Cash and Cash Equivalents Investments with maturity ≤ 3 months Credit/Debit card transactions and EBT (electronic business transactions) to be processed within < 7 days 8.70 Auditing Walmart Presented by: Walmart Business Risks Transactions with large dollar value & randomly selected items 58.61 Classification (cc) photo by medhead on Flickr Retail Method of Accounting Current Ratio Management Assertions Transaction-Related Objectives 1.71 Audit Objectives .059 Audit Objectives Walmart Balance-Related Objectives Audit Procedures Collecting Audit Evidence Factors affecting business risk can be internal or external Examples: fluctuations in the economy, performance/addition of competitors, success/failure of client’s strategies and operations 21.03 Liquidity Activity Ratios Net Sales: $419 billion Total Assets: $181 billion Employees: 2.1 million worldwide 1.4 million in the U.S Assets and liabilities: translation using exchange rates at balance sheet date Income statements: translated using average exchange rates for the respective period -.0269 Walmart -.0095 Compare cash balances to bank statements, & credit card purchases to A/R Expansion strategies risk Worldwide operations Natural disasters Legal proceedings .105 Completeness Completeness Rights & Obligations U.S: 4,400+ stores International: 4,000+ stores Audit Evidence .099 Walmart Sample Size Identifying Key Risk Areas Costco Legal & Regulatory Matters Accuracy Linking Management Assertions to Audit Objectives Accuracy & Evaluation Management's responsibility to address business risks Disclosed in MD&A in 10-K for investors Auditors perform analytical procedures Address liquidity, profitability, etc. Residual risk Balance sheet date Audit Objectives Timing .077 Type of Evidence Timing Occurance and rights and oblications Labor law Anti-discrimination laws International trade laws Predatory pricing Products must meet federal regulations short term debt deferred taxes inventory .126 .081 Management’s Report to Shareholders (Low Risk) Days to Sell Inventory Classification & Understandability Target Profit Margin Cassandra Salcedo Max Weinstein Maurine

Audit Presentation

Transcript: Change group members regularly Have protocols in place to reach decisions Individual interviews Consider outside opinions a) Audit Risk b) Control Risk c) Materiality d) Attestation Groupthink Definition - The mode of thinking when individuals in a group are so focused on cohesiveness that they override alternative courses of action. Subsets of Groupthink: Polarization Cascades Examples: Pearl Harbor, Bay of Pigs, Mini Case Study Overestimation of the Group Illusion of Invulnerability Inherent Morality Close Mindedness Rationalization Negative Stereotypes of Outsiders Pressure toward Uniformity Self Censorship Direct Pressure Mind Guarding What is the term for the Magnitude of an omission or misstatement? Auditors must understand the Control Environment AU 316.15 • ...include a consideration of the known external and internal factors affecting the entity that might... indicate a culture or environment that enable management to rationalize committing fraud. Groupthink and Audit a) AICPA b) PCAB c) AACPA d) PCAOB Main player: CEO Bernie Ebbers Inflated Assets by $11 Billion Ebbers did not work alone, 400 accounting/finance employees were terminated after the scandal Overcoming Groupthink Auditing Standard 10 p. 5 • b) Partners must direct engagement team members to bring significant accounting and auditing issues to the attention of the partner and other engagement team members. every team member has a responsibility to bring issues to the attention of a partner and other team members. Auditing Standard 12 p. 52 • ...exchange of ideas, or "brainstorming," among the engagement team members Q & A Auditors Must Identify Groupthink Tone of the organization... Manager: “these documents are sensitive and confidential and should not be distributed outside of the department without advising myself first” Employee: “Opps! I sent it to AA [Arthur Andersen]. IT’S A JOKE. I fully agree with your concerns” Manager: “smart a**. Just trying to be dramatic and liven things up a bit” Groupthink and WORLDCOM Cont. WORLDCOM Pressure The SEC said that “Ebbers created the pressure that led to the fraud. He demanded the results he had promised, and he appeared to scorn the procedures and people that should have been a check on misreporting” Rationalization CFO Scott Sullivan had a misguided reputation among employees for his integrity many believed that the strange accounting practices were new methodologies or loopholes in GAAP Groupthink and WORLDCOM Who sets audit standards for public companies? Groupthink leading to poor judgments One More Example Which of the following is part of the fraud triangle? a) Ability b) Rationalization c) Reason d) Ignorance Which of the following is not a part of the Audit Bucket? a) Risk Assessment Procedures b) Substantive Analytical Procedures c) Substantive Tests of Transactions d) Test of Controls e) Test of Details

AUDIT-PRESENTATION

Transcript: Expand the set of information, standardize that information and ensure its reliability through assurance process. Enable parties outside of audit committee to better judge how well each audit firm is managing its financial and human resource and addressing long-term sustainability concerns Facilitate the competitive process INPUT What is audit quality??? PROCESS THE END THANK YOU Introduction Transparency report What your audit committee needs to know in order to choose and oversee an independent auditor. Doing it right can keep you out of count. Why choose a suitable independent auditor is so important?? By Ed Smith, Jean C.Bedard and Karla M.Jonstone Prepared by: Chua Poh Yan OUTPUT FRC Audit Quality Framework key elements effect on the level of audit quality: Directorship June 26,2009 An public company ‘s Audit committee shares the responsibility for audit quality, through its responsibilities to select, compensate, oversee, and evaluate the company’s independent auditor. On October 2008 – report issued by US. Treasury Department’s Advisory Committee, co-chaired by former Securities and Exchange Commission chairman Arthur Levitt and former SEC chief accountant, Don Nicolaisen, direct the PCAOB-to examine the feasibility of requiring audit firms to periodically report on key indicators of audit quality. The characteristics of and the culture within an audit firm The skills and personal qualities of audit partners and staff The effectiveness of the audit process The reliability and usefulness of audit reports Factors outside the control of auditors that may affect audit quality Input – knowledge and independence of the audit- engagement team - provide resources in training and knowledge support - ensuring that individual engagement teams perform audits according to professional standards Process – the appropriate type and amount of audit tests - statistics on the firm’s partners, managers, and staff, and the average ratios of staff levels employed on engagements According to the Government Accountability Office- audit is conducted in accordance with GAAS to provide reasonable assurance that the audited financial statements and related disclose are: Presented in accordance with generally accepted accounting principle ( GAAP ) Are not materially misstated, whether due to errors or fraud. Output- reliable financial reports and an accurate audit opinion -proposed periodic report by auditing firm -the number of restatements or enforcement actions against the audit firm’s clients in the recent year - report on appropriateness of “ going concern” opinions Audit Quality

Audit presentation

Transcript: AUDITING Presentation by Kashika Laul 118120 INTRODUCTION INTRODUCTION Auditing is an important professional task carrying heavy responsibility and calling for equivalent skill and judgement . Auditing is an intelligent and critical scrutiny of books of accounts of a business with the documents and vouchers from which they have been written up, for the purpose of ascertaining whether the working results of a particular period as shown by Profit and Loss Account and also the financial position as reflected ERRORS Errors either major or minor are made unknowingly (also called mistakes) by anyone who lacks knowledge or due to oversight on the part of the individual, which if caught, can be corrected by taking appropriate measures to prevent it from happening again. Click to edit text TYPES FRAUDS Fraud is really a false representation or entry which is made intentionally with some mischievous objectives. Fraud occurs when someone purposefully produces deceptive data.Fraud can take the form of the falsification or alteration of accounting records or the financial statements. TYPES FRAUDS ERROR VS FRAUDS PRINCIPLES AND TECHNIQUES Audit principles are the basic rules and involve all those procedures which are completed during the course of the examination .Techniques are the devices which are adapted in applying these principles. Techniques TECHNIQUES 1 Vouching Confirming 2 3 Reconciling 4 Analysing Testing 5 PRINCIPLES Principles 1 Confidentiality 2 Materialistic 3 Impartiality 4 Evidence 5 Planning CLASSES OF AUDIT Classification According to organisational structure Internal Audit Government Audit Statutory Audit Private Audit From practical point of view ANNUAL OR PERIODICAL AUDIT BALANCE SHEET AUDIT CONTINUOUS AUDIT Cash Audit

Audit Presentation

Transcript: Wells Fargo Where was the Internal Audit? Fraud Triangle Incentives Incentives 1 Evoked verbatim by the Consumer Financial Protection Bureau (CFPB) statement, "Spurred by sales targets and compensation incentives, employees boosted sales figures..." Opportunity 2 Opportunity Bankers at even the lowest level were apparently empowered to: Covertly open accounts Transfer funds without authorization or consent Rationalization 3 Rationalization It becomes quickly apparent from the scale of this failure that there was a pervasive workplace culture permitting this behavior. 5,300 people lost their jobs, 2% of Wells Fargo's workforce. (This wasn't some isolated incident) Non-ironic quote from CEO during all of this, “Our entire culture is centered on doing what is right for our customers.” Do you think the internal auditors intentionally failed to detect this? Question: The Question

Audit Presentation

Transcript: Computer-Assisted Audit Tools and Techniques Application Control APPLICATION CONTROL INPUR CONTROL Source document controls Data coding controls Batch controls Validation Controls Input error correction Generalized data input systems INPUT CONTROL PROCESSING CONTROL OUTPUT CONTROL Testing Computer Application Computer-Assisted Audit Tools and Techniques

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