SLAuS 330

The Auditors
Responses to
Assessed Risks

Objective

The objective
sufficient and
regarding the
misstatement,
implementing
those risks

of the auditor is to obtain

appropriate audit evidence
assessed risks of material
trough
designing
and
appropriate responses to

Requirements : Overall Responses

Design and implement overall responses to address the
assessed risks of material misstatement at the financial
statement level.
- Audit team should maintain professional
skepticism.
- Assigning more experienced staff who having
special skills or using experts.
- Providing more supervision.
- Incorporating additional element of
unpredictability.
- Making general changes to the nature, timing and
extent of audit procedures.

Requirements: Audit Procedures Responsive

to
the
Assessed
Risks
of
Material
Misstatement at the Assertion Level

Nature, timing and extent of Further Audit

Procedures.
Test of Control- To test the operating
effectiveness of the internal controls.
Substantive Procedures Auditors RAP have
not identified effective controls relevant to the
assertions, or testing of controls would be
inefficient.

Nature : Purpose of audit procedures (TOC or SP)

and type (inspection, observation, inquiry,
confirmation, recalculation, reperformance, or
analytical procedures)

Timing : When it is performed, or the period or

date to which the audit evidence applies.

Extent : Quantity to be performed. Sample size

or the number of observations of a control
activity.

Test of Controls

The auditor shall design and perform tests

of controls to be obtain sufficient
appropriate audit evidence as to the
operating effectiveness of relevant controls
if:
Auditor intends to rely on the operating
effectiveness of controls in determining nature,
timing and extent of substantive procedures.
Substantive procedures alone cannot provide
sufficient appropriate audit evidence at the
assertion level.

Substantive Procedures

Audit procedures designed to detect

material misstatements at the assertion
level.
Test of details
Substantive analytical procedures
Irrespective of assessed risks of material misstatement, the auditor shall
design and perform SP for each material class of transactions, account
balances, and disclosure. Since:
- Auditors assessment of risk is judgmental, so may not identify all
RMM
- There are inherent limitation to internal controls, including
management override.

Nature of Test of Controls

Examination

Level
of
Audit
Satisf
action

Re-performance
Observation
Inquiries

Extent of Test of Control

When more persuasive audit evidence is

needed, it may be appropriate to increase
the extent of testing of the control. Factors
that auditor consider in determining the
extent of TOC include:
Frequency of performing of control
Length of the time during the audit period
relying on the control
Expected rate of deviation from a control

auditor is

Timing of Tests Controls

The auditor shall test controls for the particular

time, or throughout the period, for which the
auditor intends to rely on those controls.

Using audit evidence obtained an interim

period
Obtain audit evidence about significant changes to those
controls subsequent to the interim period.
Determine the additional audit evidence to be obtained
for the remaining period.

Using audit evidence obtained from

previous audit
Establish continuing relevance of that evidence
(whether significant changes in those controls
have occurred subsequent to the previous audit)
If there have been changes tests the controls in the
current audit.
If there have not been such changes test the
controls at least once in every third audit.

Nature and Extent of Substantive

Procedures

Substantive analytical procedures are generally

more applicable to large volume of transactions
that tends to be predictable over time.

Depending on the circumstances auditor may

determine:
Performing only Substantive Analytical Procedures will be
sufficient
Only test of details are appropriate
A combination of both appropriate

Timing of Substantive
Procedures

If SP are performed at an interim date, the

auditor shall cover the remaining period by
performing:
SP, combined with TOC for the intervening period
If the auditor determines that it is sufficient,
further substantive procedures only, that provide
a reasonable basis for extending the audit
conclusions from the interim date to the period
end.

Using Audit Evidence Obtained During

an Interim Period

In some circumstances auditor may determine that it is

effective to perform substantive procedures at an interim
date, and to compare and reconcile information concerning
the balance at the period end with the comparable
information at the interim date.
Identify amounts that appear unusual
Investigate any such amounts
Perform substantive analytical procedures or tests of details to
test the intervening period.

THANK YOU