Responsibilities of EA & IA on detect fraud

Main reason for audit work

EA main responsibility is to form an opinion on the financial statement.
Therefore the main focus of the audit work is therefore ensure true & fair view of the financial statement .
The detection of fraud is therefore not the main focus of EA

The main focus of the IA is to review the effectiveness of the Internal control system.Part of the IA responsibilty is to prevent and detect the fraud an errors being occured.

Materiality

In reaching the audit opinion & perform the audit work, EA takes into account the materiality concept which he is not responsible to check all transaction but choosing a sample of the material item. Audit procedure are planned to have a reasonable likelihood to identifying material fraud

However the IA may using much lower materiality limits to carry out detailed substantive testing review of transactions to detect fraud from their audit testing.

Identification of fraud

In situation where EA does detect fraud, then the EA may need to consider the implication for the entire audit ,therefore they have the responsibilities to extend testing to inot other areas because the risk of provide incorrect opinion will be increased

Where IA does detect fraud, they may need to extend testing to others areas to ensure similar fraud not occured in other areas.

Communication between audit firm & audit committee

Under the system of corporate gorvenance ,the external audit primary point of contact with the company is the audit committee, the reason being,

1. EA ensure there is an independent between the BOD and the audit committee.The audit committee consist of NED who by definition are independent of the Co therefore take an objective view of the audit report.

2. In audit committee, they have more time to review the audit report compare to the BOD . The EA therefore benefit from the audit report being reviewed carefully.

3. The AC can ensure the recommendations from EA are implemented because they have independent NED thet can pressurise the BOD to take in action on EA recommendation

4. The AC have more time to review the effectiveness & effiency of the EA work, therefore can make recommendations on re-appointment of EA

Director's action to meet corporate gorvenance requirement

1. Ensuring the chairman and the CEO is the different people
2. Appoint the non executive director to the board & ensuring the number of non-executive director = executive director - chairman
3. Ensuring at least one of the NED have relevant finacial experience
4. Appointing the NED to audit committee, remuneration committee & appointment remuneration
5. Establish the internal audit department to review internal control system & financial statement and make report to the audit committee
6. Ensure the management has appropriate adequate system of internal control & director have the responsibilities to maintain the system

Modification of audit report

1. Emphasis of matter para
Used when the auditor need to draw attention to the management of an item in the
financial statement

2. Qualification-Limitation on scope
Used where the auditor unable to obtain sufficient appropriate audit evidence
regarding an item in the financial statement

3. Qualification-Disagreement
Used where auditor disagree concerning the disclosure or amount of an item in the
financial statement

Contents of an engagement letter

1.Scope and objective of the audit financial statement
2.Acceptance of audit engagement
3.Fees calculation and billing arrangement
4.Extend of auditors & management responsibilities for the F/S
5.Management representation by the director for an additional audit evidence
6.Access to all relevant data and records by auditor
7.Standard accounting compliances & appropriate legislation applied

Types of audit evidence obtained by auditor

(1)Analytical Procedure
Evaluation of financial information made by a study of plausible relationship
among both financial & non financial data

(2)Examination / Inspection
examination of records or documents in any form , either by manual or computerised

(3)Inquiry
Seeking of information from a knowlegdeabe person both financial or non financial
from inside or outside the entity being audited

(4)Observation
Looking at the process or procedures being carried out by others

(5)Computation / recalculation
checking the arithmetically accuracy of the data

(6)Confirmation
Process of obtain a representation letter from the 3rd party. Eg: receivable
letter.

"myself"

sometimes
i don't really know who i am ?
what kind of person am ?
am i an optimistic or " thinking negative" gal?
many question marks appears onmy mind....

This month really have many good memory happened....
Suprises birthday party by my friends
Go to watch the night view in " Bukit Hulu Langat"(wow its really brilliant)
have an enjoyable night by celebrating Siew har's birthday
...............
but why i still feel so empty, unhappy?/?
isn't because of my exam is near....
and i already fail many times.....
plus this is again the new syallubus....
which give me more stresssssss on it?

i been try hard to relax & free my mind
by listening to radio, sleeping, jogging ....
but why i still feel so sad....

hai.....iiii
I think i really need a fresh and positive mind...
to confront my future....
its just an examination,
no big deal, what...!
just confront with it
what if i fail again???
Fail doen't mean u fail everything.....
Don't you forget the article you write before....
Hahaahah....
Don't you forget the words you always said....
Exter " GANBADEI "

"JIA YOU"..."JIA YOU"....