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CHAPTER 6 - Coggle Diagram

- - - - The lower the level of matreiality will be
        
        More work need to be performed
  - - - Revenue & Gross profit
        
        0.5% - 1%
      - Total assets
        
        1% - 2%
      - PBT
        
        5% - 10%
      - Net asset
        
        2% - 5%
    - - Lower than materiality set for fs as a whole
        
        Materiality applied directly to eg. different acc. balances/ transaction/ disclosure
        
        To reduce the probability aggregate undetected misstatement exceeds materiality as a whole
  - - - New info
      - Change of understanding
- - - - In making informed decisions
- - - - If its more effective than TOC
        
        In reducing detection risk
- - - - Intentional misstatement
        
        Omission of amounts/ disclosure in fs
    - - Theft
  - - - Not auditor's responsibilities
      - In some areas, is responsible
        
        Those that have a direct effect on the determination of material amounts & disclosures in fs
        
        Tax laws & regulations
        
        Pension laws & regulations
        
        Obtain sufficient appropriate audit evidence about compliance with those laws and regulations
        
        Compliance may be fundamental to operating aspects, ability to continue in business or to avoid material penalties
        
        Regulatory compliance
        
        Compliance with terms of an operating licence
        
        Undertake specified audit procedures to help identify non-compliance that may have a material effect on fs
        
        Enquiries of management
        
        Inspecting correspondence with relevant licensing /regulatory authorities
- - - - Select appropriate audit procedure
        
        Control effective
        
        TOC
        
        Reduce substantive audit procedure
        
        Overall review of fs
        
        Issue auditor's report
        
        Control ineffective
        
        Report to TCWG
        
        Full substantive audit procedure
        
        Overall review of fs
        
        Issue auditor's report
- - - - Audit evidence that contradicts other audit evidence
      - Conditions that may indicate possible fraud
      - Info that brings into question the reliability of documents & responses to questions
      - Circumstances that suggest additional audit procedures are needed in addition to those per ISA
- - - - Material misstatement arising in the fs
        
        Inherent risk
        
        Control risk
    - - Risk that auditor will not detect material misstatement
        
        Detection risk
        
        Sampling risk
        
        Only audit a sample of transactions
        
        Conclusion drawn is not suitable for the whole population
        
        Non-sampling risk
        
        Due to factors other than sample tested
        
        Lack of experience
        
        Time pressure
        
        Financial constraints
        
        Poor planning
        
        New client
        
        Lack of industry knowledge