[19:08:57] balbina: P7 STUDY SESSION 4 [19:09:09] balbina: Topic for today is [19:09:27] balbina: D Audit of historical financial information

1. Planning, materiality and assessing the risk of misstatement 2. Evidence [19:09:55] balbina: we follow the syllabus [19:10:02] balbina: http://www.accaglobal.com/content/dam/acca/global/PDFstudents/acca/p7/studyguides/p7int-SyllandSG%202013.pdf [19:10:19] balbina: 1. Planning, materiality and assessing the risk of misstatement [19:10:44] balbina: In that area we need to cover [19:10:59] balbina: ISA 300 Planning an audit of fin stat [19:11:13] balbina: Audit risk [19:11:28] balbina: cover RoMM Risk of material misstatement [19:11:46] balbina: ISA 320 & 450 [19:12:06] balbina: and also ISA 520 Analytical procedures [19:12:13] balbina: now [19:12:17] hashmiking: yup [19:12:18] balbina: ISA 300 [19:12:24] balbina: what is it about? [19:12:55] aarsh: about planning of audit [19:13:05] balbina: {aarsh} great warm up :) [19:13:11] aarsh: :D [19:13:18] bubblygirl: in planning we identify risk [19:13:34] balbina: what is the difference between audit strategy and audit plan? [19:13:40] hashmiking: plaaning is for set audit strategy [19:13:56] balbina: {hashmiking} yep [19:14:02] MMShuvo: starategy is a loosely made plan [19:14:10] MMShuvo: in broader view [19:14:12] hashmiking: planning is detailed

[19:14:28] balbina: yes [19:14:32] hashmiking: strtegy is overall vision means less detailed [19:14:42] aarsh: well i guess strategy is a bug picture [19:14:42] balbina: great [19:14:47] aarsh: big* [19:14:53] fgassita: audit strategy is undrstding the business and its environment [19:14:56] MMShuvo: why is strategy needed? [19:15:02] balbina: why do we plan audit? [19:15:06] aarsh: and planning is for objectives [19:15:18] MMShuvo: no, the strategy [19:15:33] hashmiking: so proper time can devote major issues [19:15:39] fgassita: audit plan is the plan to reach our objectives......e.g high risk areas....how many staff [19:15:42] MMShuvo: because we make our plan based on that strategy [19:15:43] hashmiking: for quality audit [19:16:02] balbina: time, quality ok [19:16:12] balbina: be more specific now [19:16:33] bubblygirl: audit plan is detailed program giving instruction as how each area ov d audit will b conducted [19:16:44] MMShuvo: exactly [19:17:09] fgassita: ok....wats an audit procedures?? [19:17:25] Plen: heyyyyyyyyyyyyyyyyyyyyyy [19:17:25] balbina: {fgassita} not yet [19:17:31] balbina: {Plen} hi [19:17:34] Plen: oops sorry :) [19:17:51] fgassita: i asked wats an audit procedure? [19:17:55] balbina: what about problems arising during audit? [19:18:27] MMShuvo: {balbina} continue pls

[19:18:45] balbina: what about pproblems? [19:18:51] balbina: which may arise? [19:18:51] hashmiking: if audit is planned then auditor is able to reduce the risk to an acceptable level [19:19:10] MMShuvo: problems can be unforeseen [19:19:12] MMShuvo: right? [19:19:19] hashmiking: problems may be many [19:19:22] balbina: {hashmiking} good point! [19:19:32] hashmiking: means buiness risk audit risk etc [19:19:46] balbina: also [19:19:48] hashmiking: :) [19:19:54] bubblygirl: :) [19:20:02] balbina: question [19:20:11] bubblygirl: planning all abt identyfying risk [19:20:15] bubblygirl: main issues [19:21:03] balbina: You are an audit manager planning the audit in new company. What general matteris would you consider when planning engagement? [19:21:51] MMShuvo: first due diligence [19:22:00] MMShuvo: is the client legit? [19:22:02] balbina: first? [19:22:10] MMShuvo: is there money laundering issue? [19:22:25] MMShuvo: r we competent? [19:22:44] MMShuvo: do we have the resources? [19:22:52] balbina: {MMShuvo} how would you check if client is not afected in money laundering issue? [19:23:08] hashmiking: if it is new client firstly we will consider whether or not to ccept engagment( ethical issues) [19:23:11] MMShuvo: thats part of my due diligence [19:23:22] hashmiking: *accept

[19:23:31] MMShuvo: i get previous auditors papers [19:23:52] balbina: {MMShuvo} ok you ask for previous paper [19:24:10] balbina: {MMShuvo} what if client doesnt give you permission to receive it? [19:24:12] MMShuvo: i ask the client's lawyers [19:24:45] MMShuvo: if i see the client is resisting at such an early stage, they will resist much more later for sure [19:24:52] MMShuvo: i turn way from them [19:25:02] MMShuvo: better now that regret later [19:25:06] MMShuvo: than* [19:25:06] balbina: {MMShuvo} yes, resign [19:25:07] hashmiking: if client does not give permission then new auditos should not accept engagmnt [19:25:14] balbina: {hashmiking} right [19:25:39] MMShuvo: i also do one other thing about money laundering [19:25:56] balbina: geoklean what else can we do while planning engagement? [19:26:04] MMShuvo: i check if there was a story in the media associated with this client [19:26:11] balbina: {MMShuvo} great [19:26:27] fgassita: {balbina} assertein high risk areas [19:26:38] balbina: {fgassita} yep [19:26:38] fgassita: contact previous auditor [19:26:44] balbina: yes [19:26:45] geoklean: {balbina} sorry but am bit lost today on these.. [19:26:56] balbina: common sense :) [19:27:03] fgassita: prepare letter of engagement [19:27:10] balbina: you would like to know your client in basic [19:27:12] MMShuvo: {fgassita} thats later [19:27:30] balbina: such as size of company, to assess if we have enough competence for example [19:27:38] MMShuvo: {fgassita} there is a particular sequence of doing things in audit

[19:27:54] MMShuvo: yes [19:27:56] balbina: if we have knowlege abou the industry [19:28:13] balbina: if we are also big enough company [19:28:17] hashmiking: confirm we have enough resources that we can audit [19:28:27] balbina: do we know law and regulations [19:28:30] MMShuvo: {balbina} resources and our competence [19:28:41] balbina: yep [19:28:53] balbina: when is the audit? [19:29:00] MMShuvo: yes [19:29:03] balbina: are we able to perform audit in certain time? [19:29:08] MMShuvo: can we finish it in time? [19:29:11] balbina: what fee can we expect [19:29:32] balbina: {MMShuvo} yep [19:29:35] balbina: ok then [19:29:45] MMShuvo: lets take an extra sec on fees [19:29:53] MMShuvo: its a p7 topic [19:30:02] balbina: fee? [19:30:05] MMShuvo: yes [19:30:10] balbina: ok [19:30:14] balbina: go on [19:30:27] MMShuvo: how do we decide fees? [19:30:57] hashmiking: gain co knowledge. and evaluate co controls [19:31:28] MMShuvo: do we check what our competetors r charging for similar engagement? [19:31:29] hashmiking: fees is decided on basis of work time (Deadline) [19:31:36] MMShuvo: ok [19:31:39] balbina: {hashmiking} yes [19:31:56] balbina: we calculate expected time and salary and here we go

[19:32:04] MMShuvo: but if a competetor is charging less, we lose the contract [19:32:26] balbina: {MMShuvo} isnt tendering subject we covered session before? [19:32:39] MMShuvo: hmm [19:32:44] MMShuvo: i dont know [19:32:48] hashmiking: also fees is based on risk. if high profile audit client means moe risky fees will be high bcoz more work will be carried [19:32:50] MMShuvo: ok, lets move on [19:32:56] balbina: yep [19:32:57] geoklean: you have to think also the quality of the work [19:33:14] MMShuvo: {hashmiking} understood [19:33:20] hashmiking: *more [19:33:25] MMShuvo: {geoklean} yes [19:33:32] balbina: do you remember all assertions? [19:33:58] MMShuvo: remind me pls [19:34:10] balbina: ACCA COVER [19:34:31] hashmiking: existence accuracy cut off completeness [19:34:38] bubblygirl: valuation [19:34:39] hashmiking: valuation [19:34:45] MMShuvo: im guessing thats a mnemonic [19:34:53] balbina: yes [19:34:55] balbina: :) [19:34:56] aarsh: where u apply assertions [19:35:02] hashmiking: yes but forget [19:35:13] MMShuvo: {balbina} ok, even im judging myself now [19:35:16] balbina: c [19:35:22] MMShuvo: {balbina} pls elaborate [19:35:25] hashmiking: at planning level [19:35:42] balbina: i still miss 4 asseertions

[19:35:51] balbina: CAOR [19:36:00] aarsh: assertions used on transaction,events and notes [19:36:05] MMShuvo: whats ACCA? [19:36:19] MMShuvo: O = ownership [19:36:25] balbina: nope [19:36:36] balbina: who can help [19:36:38] balbina: ? [19:36:47] aarsh: obligation [19:37:02] bubblygirl: existence or accurance [19:37:05] MMShuvo: {aarsh} thats an assertion? :O [19:37:06] bubblygirl: valuation [19:37:08] aarsh: :D [19:37:16] geoklean: completeness of the transaction [19:37:21] aarsh: guess so [19:37:22] bubblygirl: rights nd obligations [19:37:25] balbina: R rights & obligations [19:37:36] bubblygirl: presentation nd disclosure [19:37:38] balbina: completeness it was before [19:37:53] geoklean: cut-off then [19:37:58] balbina: nope [19:38:00] balbina: lol [19:38:04] aarsh: completenss cut off classification [19:38:06] hashmiking: for asset: We check existence means is it in co and 2nd valuation means value is right in fin statment [19:38:12] balbina: classification [19:38:23] balbina: A [19:38:49] aarsh: accuracy [19:39:06] aarsh: arithmatic check

[19:39:07] balbina: it was [19:39:45] MMShuvo: this summary is good: http://en.wikipedia.org/wiki/Management_assertions [19:40:04] hashmiking: there r change assertion for balnnce sheet and change for income statement [19:40:13] geoklean: shuvo u google it finally :p [19:40:23] MMShuvo: {geoklean} yes :P [19:40:25] bubblygirl: lol [19:40:29] balbina: :( [19:40:36] balbina: i dont like it [19:40:42] MMShuvo: {balbina} lets move on, we got a lot to cover [19:40:46] bubblygirl: {balbina} me or audit [19:40:47] bubblygirl: ;p [19:40:56] hashmiking: what bablina? [19:41:06] balbina: we come prepared, we dont read google during session [19:41:23] hashmiking: ok thats fine [19:41:27] MMShuvo: ooooooook [19:41:37] balbina: assertions were crucial F8, i dont know if you can pass P7 without knowing them but its shame not know it [19:41:51] balbina: its important [19:41:55] hashmiking: now next move on [19:42:08] balbina: we will not go further before you name all of assestions [19:42:20] aarsh: :D [19:42:21] hashmiking: yup but it is not so much emphasized in p7 [19:42:30] aarsh: it is dude [19:42:32] geoklean: ok [19:42:35] hashmiking: think so that all assertion is named [19:42:36] aarsh: basic of audit [19:42:37] geoklean: which letters are left? [19:42:44] balbina: so once again

[19:42:49] balbina: A [19:42:56] aarsh: accuracy [19:42:59] balbina: C [19:43:00] geoklean: accurate valuation [19:43:01] hashmiking: accuracy [19:43:07] aarsh: completeness [19:43:09] geoklean: cut off [19:43:11] hashmiking: completeness] [19:43:11] balbina: C [19:43:14] balbina: A [19:43:21] aarsh: arithmatic [19:43:24] aarsh: check [19:43:32] balbina: nope [19:43:32] aarsh: guess so [19:43:34] aarsh: :D [19:43:56] MMShuvo: {balbina} where did the second C go? [19:44:00] balbina: A allocation [19:44:05] balbina: to cut off [19:44:06] aarsh: o ryt [19:44:07] aarsh: :D [19:44:11] balbina: C [19:44:18] MMShuvo: {balbina} got it [19:44:20] hashmiking: allocation means???? [19:44:32] geoklean: classification [19:44:39] balbina: {geoklean} thank you [19:44:58] geoklean: :) [19:45:15] balbina: Allocation if assets are properly allocated in accounts

[19:45:19] balbina: O [19:45:29] hashmiking: ok [19:45:34] geoklean: occurence [19:45:38] balbina: V [19:45:57] hashmiking: authorizatin is or not??? [19:46:06] hashmiking: valuation [19:46:07] balbina: not [19:46:10] hashmiking: ok [19:46:22] geoklean: Verification? [19:46:27] balbina: valuation is correct [19:46:33] balbina: E [19:46:38] hashmiking: :) [19:46:47] geoklean: existence of assets and liabilites [19:46:48] MMShuvo: existence? [19:46:56] balbina: R [19:47:05] balbina: Rights and Obligations [19:47:11] geoklean: Rights and obligations of the company [19:47:17] balbina: {geoklean} :) [19:47:22] balbina: ok [19:47:42] MMShuvo: {geoklean} which company? client or us? [19:47:58] geoklean: clinet [19:48:01] MMShuvo: thx [19:48:01] geoklean: client [19:48:15] balbina: now [19:48:32] balbina: we assessed the risk [19:48:37] balbina: how can we response? [19:49:04] balbina: what kind of testing can we perform?

[19:49:30] MMShuvo: substantive procedures [19:49:40] balbina: we need to gather sufficient appropriate audit evidence [19:49:45] balbina: {MMShuvo} yes [19:49:53] balbina: and? [19:49:58] balbina: ToC [19:50:07] balbina: which is? [19:50:39] geoklean: ? :/ [19:50:46] balbina: test of ... [19:50:52] hashmiking: 1 minute [19:50:52] MMShuvo: controls [19:50:59] balbina: yes :) [19:51:07] balbina: ok [19:51:18] balbina: lets move to audit risk in particular [19:51:37] balbina: do you know that formula? AR=IR*CR*DR [19:51:48] MMShuvo: of course not :D [19:51:53] geoklean: yeap :D [19:51:58] geoklean: :p [19:52:02] balbina: {geoklean} please tell us [19:52:11] geoklean: hmm :/ [19:52:11] geoklean: ok [19:52:22] geoklean: AR is Audit risk [19:52:33] balbina: yes [19:52:42] MMShuvo: inherit risk [19:52:48] MMShuvo: inherent [19:52:51] MMShuvo: sorry [19:52:54] geoklean: which is the risk that the auditor might give the wrong audit opinion [19:53:00] MMShuvo: yes

[19:53:01] balbina: yes [19:53:22] MMShuvo: also, it means this risk is natural or inherent to this type of industry [19:53:32] MMShuvo: then control risk [19:53:46] geoklean: Inherent risk is the risk of material mistakes occuring due to nature of the company and its business transactions [19:53:55] MMShuvo: exactly [19:54:02] balbina: the best key word here would be inappropriate opinion [19:54:14] MMShuvo: yes [19:54:19] balbina: {geoklean} yep [19:54:19] geoklean: oh ok..yeap [19:54:22] balbina: go on [19:54:25] MMShuvo: thats in the standard [19:54:28] geoklean: ok [19:54:44] MMShuvo: control risk and detection risk [19:55:17] geoklean: Control risk is the risk that the inherent risk will npot be detected or prevented byt the company's control systems [19:55:31] hashmiking: what is inherent risk for example [19:55:36] balbina: {geoklean} :) [19:56:25] MMShuvo: {hashmiking} say, u r auditing a gas pump client, it possible that u wont be able to accuratelt know how much reserves they actually have [19:56:29] hashmiking: inherant risk meaning [19:56:36] geoklean: and Detection risk is that the auditor will not detect misttatements that exists that could be material individually or when aggregated with the other misstatements [19:57:17] balbina: {geoklean} :star: [19:57:26] hashmiking: yup [19:57:44] fgassita: {MMShuvo} u'll have to contact a gas expert who will use his equipment [19:57:54] balbina: which risk is connected with financial statement? [19:58:05] geoklean: inherent and control risk [19:58:14] hashmiking: and also an inherent risk in every co going concern

[19:58:18] hashmiking: is it? [19:58:25] balbina: {geoklean} yes [19:58:55] hashmiking: now next [19:59:01] geoklean: {balbina} also called as entity's risk [19:59:08] balbina: right [20:00:17] balbina: ok so we know that IR and CR may affect FS [20:01:15] geoklean: yes.. [20:01:20] balbina: we usually think about think about certain risk in FS [20:01:22] hashmiking: and if fin statement risk is high so auditor shoul low det risk [20:01:26] balbina: material misstatements [20:01:42] balbina: what is it? [20:01:58] balbina: Risk of material misstatement? [20:02:01] balbina: RoMM [20:02:25] geoklean: balbina..what u mean? [20:02:26] hashmiking: mm is that misstament that can effect decision of person who rely on fin stat [20:02:41] balbina: {hashmiking} yep [20:02:44] balbina: good one [20:02:57] hashmiking: :) [20:03:03] balbina: so financial statements might be materially misstated [20:03:03] geoklean: oh ok [20:03:18] hashmiking: yes [20:03:19] balbina: what kind of misstatement we can think of? [20:03:31] geoklean: fraud? [20:03:32] MMShuvo: {hashmiking} material means the misstatement is too big to ignore [20:03:42] balbina: fraud is one of them [20:03:47] geoklean: going concern issues [20:03:49] balbina: and 2nd

[20:03:50] balbina: ? [20:04:02] hashmiking: error [20:04:09] balbina: fraud and error [20:04:15] balbina: do you know the difference? [20:04:26] hashmiking: fraud is intenionally [20:04:31] balbina: yes [20:04:43] hashmiking: and error is not intended but by mistake [20:04:57] balbina: exactly [20:05:10] balbina: fraud can be performed at which level? [20:05:14] balbina: in the company [20:05:30] MMShuvo: {balbina} meaning? [20:05:35] geoklean: hihg level [20:05:38] geoklean: management [20:05:41] hashmiking: think so high level mean upper lvl [20:05:48] geoklean: *high [20:05:49] hashmiking: mgmt level [20:05:54] balbina: yes [20:06:07] hishamtax: hello [20:06:12] MMShuvo: a petty cashier can commit fraud too [20:06:18] balbina: when we detect fraud what should we do? [20:06:20] hashmiking: hishamtax hi [20:06:35] MMShuvo: {balbina} report to MLRO [20:06:40] balbina: mlro? [20:06:44] hashmiking: discuss mgmt audit commitee [20:06:51] balbina: always? [20:06:52] MMShuvo: money laundering reporting officer [20:06:59] MMShuvo: yes

[20:07:06] MMShuvo: thats a requirement [20:07:10] hishamtax: am doing P1 P3 P4 P5....any advices [20:07:15] MMShuvo: not a choice [20:07:34] balbina: {hishamtax} hi, we have p7 study session [20:07:53] hishamtax: ah ok sorri [20:08:01] balbina: {MMShuvo} usually we go to higher level than fraud is performed [20:08:04] hashmiking: if we see that mgmt is involved in fraud then audit comitte [20:08:05] balbina: {hishamtax} its ok :) [20:08:13] balbina: {hashmiking} thats right [20:08:19] hashmiking: yup [20:08:20] balbina: if CEO? [20:08:55] hashmiking: means [20:08:59] hashmiking: ? [20:09:08] geoklean: chief executive officer [20:09:27] hashmiking: what if ceo ? [20:09:37] hashmiking: i dont understand [20:09:51] geoklean: to shareholders? [20:09:56] balbina: yep [20:10:00] balbina: higher level [20:10:07] balbina: good [20:10:10] hashmiking: ok [20:10:26] balbina: ISA 320 says about materiality [20:10:38] hashmiking: mat guidelines [20:10:47] balbina: do you know how to set professional judgement that smth is material? [20:11:02] MMShuvo: 1% of profit? [20:11:14] MMShuvo: or 0.5% [20:11:18] balbina: no

[20:11:30] MMShuvo: then? [20:11:35] balbina: anyone? [20:11:37] hashmiking: 5 to 10% of pbt [20:11:48] balbina: {hashmiking} :) [20:11:57] hashmiking: 0.5 to 1% of revenue [20:12:03] balbina: :) [20:12:06] MMShuvo: {hashmiking} exactly. i mess up [20:12:09] hashmiking: and 1 to 2% of assets [20:12:19] balbina: :star: [20:12:25] balbina: great [20:12:28] hashmiking: :) [20:12:57] hashmiking: but this is qualitative materiality [20:13:16] MMShuvo: quantitative [20:13:17] balbina: {hashmiking} what other we have [20:13:20] balbina: yes [20:13:38] hashmiking: something ay be not material in quantitave but is mat in its nature qualitatve [20:13:50] balbina: what can be qualitative materiality? [20:13:52] hashmiking: res mmsh u r right [20:14:00] MMShuvo: {hashmiking} u mean cumulative? [20:14:11] geoklean: related party transactions [20:14:39] geoklean: and directors remunerations [20:14:43] MMShuvo: {hashmiking} individually they might not be material, but in aggregate they r [20:15:00] balbina: :) [20:15:07] balbina: great [20:15:35] balbina: isa 520 analytical procedures [20:16:05] balbina: can you tell me what they are? [20:16:15] geoklean: ratios :(

[20:16:20] balbina: hihihi [20:16:22] MMShuvo: {geoklean} lol [20:16:51] MMShuvo: substantive analytical procedures [20:16:57] geoklean: {MMShuvo} well.. invere like them :p [20:17:03] geoklean: *never [20:17:11] taimooriqbal: guys wud there b a regular session .. or is it general queries going on ? [20:17:12] MMShuvo: {geoklean} me neither [20:17:39] MMShuvo: {taimooriqbal} every monday at 6pm uk time [20:18:02] taimooriqbal: hw far hv u guys reached ? [20:18:05] MMShuvo: {taimooriqbal} unless balbina decides to catch a flu [20:18:22] balbina: :) [20:18:26] balbina: i hope not [20:18:29] MMShuvo: {taimooriqbal} chapter 6 bpp book [20:18:39] MMShuvo: {balbina} pls continue [20:18:50] balbina: ratios [20:19:03] balbina: budget ? [20:19:06] MMShuvo: which ratios we mostly use? [20:19:14] hashmiking: analytical procedure test of detail [20:19:27] hashmiking: what is the difference bw them [20:19:42] MMShuvo: ROCE, GPM, NPM [20:19:53] MMShuvo: CR [20:19:54] fgassita: analytical procedure is the use of ratios [20:20:06] geoklean: CR? current ratio? [20:20:09] MMShuvo: yes [20:20:16] geoklean: thanks [20:20:18] MMShuvo: aka acid test ratio [20:20:34] MMShuvo: what else? substantive procedure

[20:20:35] fgassita: {MMShuvo} false!!!!!! [20:20:48] MMShuvo: {fgassita} correct me [20:20:50] fgassita: quick ratio aka acid test [20:20:56] MMShuvo: {fgassita} excellent [20:20:59] MMShuvo: thx very much [20:21:03] balbina: ratios, trends, budgets, prior periods! [20:21:07] fgassita: current ratio is current ratio [20:21:14] MMShuvo: {fgassita} u r right [20:21:26] MMShuvo: {balbina} and? [20:21:44] balbina: industry information [20:21:50] balbina: what else? [20:22:20] MMShuvo: anyone? [20:22:39] MMShuvo: {balbina} maybe thats all [20:22:41] hashmiking: plz tell me difference betweem substantive testing and test of detail [20:22:42] balbina: ok [20:23:31] MMShuvo: substantive testing is where u go through from start to end of a transaction [20:23:46] MMShuvo: no? [20:23:58] balbina: isnt walkthrough test? [20:24:06] balbina: {MMShuvo} ? [20:24:07] MMShuvo: yes it is :( [20:24:10] geoklean: yea,, [20:24:19] hashmiking: and otherf [20:25:12] sali110: Tests of Controls are audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level. [20:25:45] balbina: Test of control is performed less, it says if operations are working effectively a [20:25:55] hashmiking: thanks [20:26:08] MMShuvo: {balbina} he asked test of detail

[20:26:11] balbina: substantive testing is always(? correct me if i m wrong) [20:26:15] MMShuvo: not control [20:26:30] balbina: it can be test of detail or analytical procedures [20:26:44] balbina: aaaahh [20:26:45] MMShuvo: substantive test is what u do at the assertion level [20:27:01] balbina: test of detail is one of substantive testing [20:27:01] MMShuvo: that ACCA COVER thingy [20:27:20] MMShuvo: ToD is how far u want to dig [20:28:20] hashmiking: it is very confusing i never understan this thing entire my whole study [20:28:28] balbina: yeah [20:28:53] sali110: {hashmiking} its simple man [20:28:54] sali110: see [20:28:55] balbina: What audit evidence should be? [20:28:56] hashmiking: every time teacher asks and i am with blank face :) [20:28:58] sali110: Test of details [20:29:01] MMShuvo: {hashmiking} test of detail means how much detailed analysis u want, that means, ur sample sizes r smaller [20:29:21] hashmiking: thanks mmsh [20:29:30] MMShuvo: u analyse more smaples when ur ToD is higher [20:29:47] hashmiking: differant audit evidence for diffrnt things [20:29:54] MMShuvo: u can only do that when u have enough confidence in the internal controls [20:29:59] sali110: we check either controls effectivensss [20:30:24] sali110: and in Substantive test is where we increase the sample to reach at root of the transaction [20:30:37] sali110: like we collect evidence in it [20:30:46] MMShuvo: {hashmiking} if there is any indication of contro weakness, no matter how small, the test of detail goes up

[20:30:50] tusharacca: {hashmiking} substantive testing involves testing Financial statements figures....and tests of control are tests to check whether control system is working as intented or not....may b :P [20:31:07] sali110: {tusharacca} perfect ! [20:31:16] hashmiking: and if control is strong then [20:31:26] sali110: {hashmiking} stick with the lines of tusharacca [20:31:39] sali110: if controls are strong we put reliance on control [20:31:43] MMShuvo: {hashmiking} then u reduce ToD and choose larger sample sizes [20:31:45] sali110: and lessen the sample size [20:31:58] tusharacca: {sali110} :D [20:32:14] sali110: balbina [20:32:18] sali110: carry on [20:32:27] hashmiking: thank so much u all [20:32:28] balbina: your explainations are great! [20:32:32] MMShuvo: {sali110} u said the other way around [20:32:39] sali110: 529 Analytical Procedures [20:32:44] sali110: 520* [20:32:56] hashmiking: my internet is troubiling [20:33:04] fgassita: we do substentive procedures to check completeness,accuracy,valuation of a transaction [20:33:11] sali110: take my connection and concentrate [20:33:20] balbina: ok lets cover point 2 evidence [20:33:30] balbina: what audit evidence should be? [20:33:44] hashmiking: :) [20:33:55] fgassita: {balbina} i dont know.....im not there yet [20:34:06] balbina: key wods [20:34:08] balbina: words [20:34:28] hashmiking: audit evidence should be enough and........ [20:34:35] balbina: enough?

[20:34:39] balbina: what does it mean? [20:34:52] balbina: do yo umean sufficient? [20:35:01] hashmiking: yes [20:35:04] MMShuvo: sufficient, appropriate [20:35:05] sali110: sufficient and appripraite :) [20:35:05] fgassita: its evidence to prove our conclusion [20:35:05] balbina: :) [20:35:06] tusharacca: {balbina} Documents..Assets..Directiors...Accounting system..3rd parties....(DADA3) may be [20:35:09] hashmiking: reliable] [20:35:30] balbina: appriopriate means.... [20:35:35] balbina: RR [20:35:49] MMShuvo: related and reliable [20:35:59] hashmiking: relevant [20:35:59] sali110: hint: quantitave and qualitative [20:36:07] balbina: relevant and reliable [20:36:10] MMShuvo: {hashmiking} thats the word [20:36:15] MMShuvo: {hashmiking} thx [20:36:17] hashmiking: yup [20:36:25] balbina: stick to key words [20:36:30] balbina: ok [20:36:36] balbina: AEIOU [20:36:56] sali110: vowels :) [20:37:01] fgassita: {balbina} AEIOU relaates to what? [20:37:02] balbina: we can use mnemonic in remembering about procedures for obtaining evidence [20:37:19] hashmiking: e enquiry [20:37:19] fgassita: balbina....u r a genius [20:37:21] tusharacca: {balbina} AEIOU are procedure to get evidences

[20:37:29] balbina: yep [20:37:30] tusharacca: *procedures [20:37:39] hashmiking: arithmetical chek [20:37:44] balbina: can u name them for me please? [20:37:56] hashmiking: o observation [20:38:06] hashmiking: u recalculation [20:38:30] tusharacca: Analitycal procedure....Enquiry..Instection...Observation..recalcUlation [20:38:40] balbina: {tusharacca} :) [20:38:49] sali110: inspection [20:38:49] balbina: :star: [20:38:59] fgassita: u mean inspection? [20:39:08] tusharacca: u can relate Confirmation with Enquiry [20:39:17] balbina: very useful while doing Qs [20:39:18] tusharacca: :P yes Inspection :D [20:39:36] MMShuvo: {tusharacca} thx [20:39:36] balbina: yes [20:39:44] balbina: audit sampling [20:39:56] balbina: what methogds do we have? [20:40:06] tusharacca: {MMShuvo} welcome [20:40:11] balbina: methods of selecting samples? [20:40:19] MMShuvo: haphazard [20:40:22] fgassita: sampling ris [20:40:27] fgassita: *risk [20:40:29] MMShuvo: statistical [20:40:34] fgassita: random [20:40:38] MMShuvo: random [20:40:39] MMShuvo: yes

[20:40:42] balbina: {MMShuvo} great [20:40:53] MMShuvo: what else? [20:41:02] balbina: random and haphazard what kind are they? [20:41:09] fgassita: after each Nth term [20:41:18] MMShuvo: non-statistical [20:41:25] balbina: yessss [20:42:03] balbina: ok i think all of you should look for written representation [20:42:29] balbina: i dont have idea how to cover onthe session here [20:42:39] fgassita: question:wats a written representation??? [20:42:41] balbina: i suggest you do it on your own [20:42:50] balbina: {fgassita} good point :) [20:43:04] balbina: what is it? [20:43:10] MMShuvo: {fgassita} u get a written commitment from client management [20:43:21] MMShuvo: u, the auditor, draft it [20:43:26] hashmiking: yup [20:43:29] MMShuvo: and get it signed by them [20:43:37] balbina: what for? [20:44:01] fgassita: {MMShuvo} it literally means the duties of auditor & duties of management?????? [20:44:03] MMShuvo: u do that so that they r bound to assist u in the audit work [20:44:09] MMShuvo: {fgassita} no [20:44:17] fgassita: HUH!? [20:44:34] hashmiking: now what r v discussing [20:44:37] MMShuvo: {fgassita} sometimes mgt might try to avade questions or say thing verbally [20:44:42] MMShuvo: things [20:44:47] MMShuvo: and then deny later [20:44:48] fgassita: yes..... [20:44:58] MMShuvo: get them in writing

[20:45:00] MMShuvo: thats all [20:45:10] balbina: first of all what kind evidence is better oral or written confirmation? [20:45:15] fgassita: so...u write everything they say in a written representation?? [20:45:23] MMShuvo: written [20:45:37] balbina: why? [20:45:46] MMShuvo: {fgassita} there is a guideline what goes in WR [20:45:56] MMShuvo: {balbina} because u can verify them [20:46:14] fgassita: well......im confusing with letter of engagement [20:46:17] hashmiking: bcoz it is a proof and we can hold it in our working paper as evidence [20:46:27] hashmiking: it increase relabilty [20:46:32] MMShuvo: {hashmiking} exactly [20:47:09] fgassita: hmmm....i see lots of f8 stuff in p7 [20:47:21] MMShuvo: {fgassita} these r not tested in p7 [20:47:22] balbina: {fgassita} yeah lots of basic from f8 [20:47:25] geoklean: written representation isnt it a letter from the management that they confirm that they follow rules and regulations [20:47:30] geoklean: ? [20:47:40] MMShuvo: {geoklean} yes [20:47:47] fgassita: {geoklean} thats the definition of letter of engagement [20:48:20] geoklean: engagement?? [20:48:22] MMShuvo: {fgassita} in LoE u mention T&C, salery, etc [20:48:49] MMShuvo: {balbina} continue pls [20:49:05] balbina: istn that responsibilities of management are in letter of representation? [20:49:21] fgassita: {MMShuvo} .......LoE is like a contract between auditor & management where it ststes auditor has ben appointed [20:49:27] hashmiking: written rep can be taken at any part 4 gathering evidence if there is no other evidence available or if inc reliability of any thing [20:49:37] MMShuvo: {fgassita} u r absolutely correct [20:49:52] MMShuvo: {hashmiking} brilliant

[20:49:59] tusharacca: {hashmiking} it is reliable if the auditor has no other means of obtaining evidence :) [20:50:00] fgassita: {MMShuvo} LoE also tells the duties of management & auditor [20:50:01] hashmiking: thanks [20:50:16] MMShuvo: {fgassita} yes [20:50:23] balbina: in how many letters we management can confirm thet follow rules and regulations? [20:50:51] hashmiking: not known :( [20:50:53] MMShuvo: {balbina} there is a limitation? [20:51:00] balbina: just asking [20:51:03] balbina: want to know [20:51:17] MMShuvo: no such limitation, but usually one should suffice [20:51:18] balbina: auditor report, letter of engagement, letter of representation? [20:51:48] geoklean: well..am 100%confused now so i dont know either [20:51:49] MMShuvo: oh, that list can go on [20:51:53] hashmiking: loe includes respon of auditor and mgmt [20:52:12] MMShuvo: {balbina} u communicate with lots of ppl and letters keep piling [20:52:30] fgassita: audit report contains the conclusion of auditor......e.g true & fair view [20:52:35] fgassita: the opinion [20:52:50] hashmiking: {fgassita} u r right [20:52:59] MMShuvo: {balbina} lets move forward [20:53:08] balbina: ok i think our brains got burned :) [20:53:16] balbina: lets go to the end of the topic [20:53:22] hashmiking: {balbina} yup [20:53:25] sali110: {geoklean} why you are confused? [20:53:29] fgassita: u got a brain orgasm?? [20:53:31] balbina: and we come back to letters other session, when we all read more about it :) [20:53:46] balbina: lets remeber in thi topic also about

[20:53:47] hashmiking: :) [20:53:47] MMShuvo: {fgassita} not appropriate here [20:53:51] balbina: ISA 230 [20:54:08] balbina: ISA 620 [20:54:08] fgassita: yes....wts isa 230? [20:54:24] hashmiking: audit documentation [20:54:25] balbina: ISA 230 audit documentation [20:55:00] balbina: complete and detailed, accurated recorded and include auditors conclusions [20:55:25] balbina: ISA 620 its about using expertise, when its special skill or knowlege needed [20:55:28] hashmiking: sufficient and appropriate record how gather evidence [20:55:43] MMShuvo: plen, i cant answer u on pm. u have to unblock me first [20:56:12] balbina: when we take expert, who is responsible for opinion on fs? [20:56:34] hashmiking: we r responsible [20:56:36] MMShuvo: {balbina} auditor's expert? [20:56:39] fgassita: {balbina} auditor [20:56:39] balbina: if expert was wrong can auditor blame him for giving inappropriate opinion? [20:56:50] balbina: yes we are ressponsible [20:56:58] fgassita: who is that expert guy?? [20:57:00] hashmiking: no [20:57:30] MMShuvo: {fgassita} lol [20:57:36] MMShuvo: {fgassita} thats a term [20:57:54] MMShuvo: dont worry about everything now [20:58:03] fgassita: {MMShuvo} ok [20:58:20] balbina: ok ISA 610 it simmilar but about internal auditors [20:58:37] sali110: http://www.accaglobal.com/content/dam/acca/global/pdf/sa_sept10_audit.pdf [20:58:37] balbina: and ISA 550 related parites [20:58:42] fgassita: ok....ask ur question

[20:58:57] balbina: {sali110} nice one, thank you [20:59:06] sali110: http://www.accaglobal.com/content/dam/acca/global/PDFstudents/2012b/examiningEvidence.pdf [20:59:16] hashmiking: how mush further it will take [20:59:17] balbina: why should we disclose information about related parties? [20:59:35] hashmiking: it is imp very [20:59:51] balbina: {sali110} second one is very old :( [20:59:53] geoklean: {balbina} maybe is better to continue next monday? [20:59:59] fgassita: {sali110} i bet some ppl didnt even know abt that [21:00:05] balbina: its just related parties left [21:00:18] balbina: one question and we finish [21:00:19] sali110: http://www.accaglobal.com/en/student/acca-qual-student-journey/qualresource/acca-qualification/f8/technical-articles/audit-procedu [21:00:26] hashmiking: {geoklean} yes i m also thinking this [21:00:35] sali110: links given are relevant to todays topics covered [21:00:42] sali110: these all are technical articles [21:00:52] hashmiking: {sali110} thamks [21:01:01] sali110: {fgassita} it would be great if u have told others about link :) [21:01:01] MMShuvo: i dont leave a single article [21:01:04] MMShuvo: i read all [21:01:09] MMShuvo: they r very useful [21:01:17] sali110: http://www.accaglobal.com/en/student/acca-qual-student-journey/qualresource/acca-qualification/f8/technical-articles/audit-sampling. [21:01:28] balbina: ISA 550 in line with IAS 24 Related Parties disclosures [21:01:33] sali110: http://www.accaglobal.com/content/dam/acca/global/PDFstudents/2012/sa_feb07_F8P7.pdf [21:01:44] hashmiking: {balbina} when would be next session of p3 [21:02:07] balbina: ok guys read about ISA 550 on your own [21:02:12] balbina: noone is listening

[21:02:15] balbina: its too late [21:02:24] balbina: the session 4 is over [21:02:29] hashmiking: {balbina} tell me time and topic plz [21:02:33] balbina: session 5 will be next MOnday 6 pm uk [21:02:48] sali110: {balbina} Welldone! [21:02:52] balbina: D 3,4 [21:02:58] Plen: good job balbina :d [21:03:00] sali110: nice participartion from all of you [21:03:00] Plen: :star: [21:03:02] hashmiking: {balbina} plz tell me p3 plz [21:03:03] sali110: all the best [21:03:09] balbina: Evaluation and review 4. Group audit [21:03:13] sali110: :star: [21:03:14] hashmiking: {balbina} good job [21:03:23] balbina: ufff hard one [21:03:33] balbina: thank you everyone for hot discussion [21:03:39] tusharacca: :D [21:03:41] Plen: {balbina} thank u [21:03:41] geoklean: {balbina} thank you :) [21:03:43] balbina: that one pretty one :) [21:03:44] sali110: do you all want technical article on group audit? [21:03:53] MMShuvo: {balbina} thx for the ACCA COVER