IAASB Main Agenda (September 2005) Page 2005·1869 Agenda Item

4-D.1

Prepared by: Michael Nugent (August 2005) Page 1 of 30

Analysis of ISA 330 and Mapping Document

1. Exhibit 1 sets out statements in ISA 330 that use the present tense to describe auditor actions, and the proposed treatment of whether the actions should be redrafted as a requirement, or redrafted to make clear that it is explanatory material. Paragraph references to extant ISA 330 and to the redrafted ISA 330 (shown in Agenda Item 4-D) are provided.

2. Exhibit 2 sets out extant ISA 330 and maps each of its paragraphs (which may have been reworded as necessary) to the redrafted ISA 330. The highlight material indicates sentences and paragraphs that are proposed to be deleted as part of the redrafting. An explanation of the proposed deletion and other comments are provided, where appropriate.

Exhibit 1

Para Existing present tense statements Change to

“shall”

New para

Rationale and comment

3 … the auditor also complies with the requirements and guidance in ISA 240, “The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements” in responding to assessed risks of material misstatement due to fraud.

No – Deleted as part of revised format

7 In designing further audit procedures, the auditor considers such matters as the following:

• The significance of the risk.

• The likelihood that a material misstatement will occur

• The characteristics of the class of transactions, account balance, or disclosure involved.

• The nature of the specific controls used by the entity and in particular whether they are manual or automated.

• Whether the auditor expects to obtain audit evidence to determine if the entity’s controls are effective in preventing, or detecting and correcting, material misstatements.

Yes

No

No

Yes

Yes

Yes

6

– – 7(a)(i)

7(a) (ii)

7(a) (ii)

These 2 dot points are very generic and are covered by new para 6.

) ) ) These considerations are ) essential in all cases to ) give effect to new para 7 ) ) )

8 … the auditor needs to be satisfied that performing only substantive procedures for the relevant assertion would be effective in reducing the risk of material misstatement to an acceptably low level. … Irrespective of the approach selected, the auditor designs and performs substantive procedures for each material class of transactions, account balance, and disclosure as required by paragraph 49.

No

Yes

–

18 & F/n 2

A restatement of the general principle of the ISA

Repetition of existing “bold” requirement

9 … in addition to the matters referred to in paragraph 8 above, the auditor considers whether in the absence of controls it is possible to obtain sufficient appropriate audit evidence.

No A5 Rephrased as a statement of fact, rather than appearing to impose an additional responsibility on SMSs

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1870

Agenda Item 4-D.1 Page 2 of 30

11 The auditor’s selection of audit procedures is based on the assessment of risk. The higher the auditor’s assessment of risk, the more reliable and relevant is the audit evidence sought by the auditor from substantive procedures. This may affect both the types of audit procedures to be performed and their combination.

Y/N

Y/N

Covered by new para 6

New 7(b) contains a similar thought

12 In determining the audit procedures to be performed, the auditor considers the reasons for the assessment of the risk of material misstatement at the assertion level for each class of transactions, account balance, and disclosure. … For example, if …. On the other hand, if the auditor expects that there is a lower risk that a material misstatement may arise because an entity has effective controls and the auditor intends to design substantive procedures based on the effective operation of those controls, then the auditor performs tests of controls to obtain audit evidence about their operating effectiveness.

Yes

No

7(a)

A8

Clearly intended as an example only

13 The auditor is required to obtain audit evidence about the accuracy and completeness of information produced by the entity’s information system when that information is used in performing audit procedures. For example, if the auditor uses non-financial information or budget data produced by the entity’s information system in performing audit procedures, such as substantive analytical procedures or tests of controls, the auditor obtains audit evidence about the accuracy and completeness of such information. See ISA 500, “Audit Evidence” paragraph 11 for further guidance.

No – This para deleted as it is a repeat of requirements contained in ISA 500.11

15 If the auditor performs tests of controls or substantive procedures prior to period end, the auditor considers the additional evidence required for the remaining period (see paragraphs 37-38 and 56-61).

No – Sentence deleted – generic repetition of requirement under new paras 11 and 21-23.

16 In considering when to perform audit procedures, the auditor also considers such matters as the following: • The control environment • When relevant information is available (for example,

electronic files may subsequently be overwritten, or procedures to be observed may occur only at certain times).

• The nature of the risk (for example, if there is a risk of inflated revenues to meet earnings expectations by subsequent creation of false sales agreements, the auditor may wish to examine contracts available on the date of the period end).

• The period or date to which the audit evidence relates.

No A13 These are not matters auditors should necessarily consider individually each time they plan substantive procedure.

17 If there is a risk that the entity may have entered into improper sales contracts or transactions may not have been finalized at period end, the auditor performs procedures to respond to that specific risk. For example, when transactions are individually material or an error in cutoff may lead to a material misstatement, the auditor ordinarily inspects transactions near the period end.

No A12 This is an illustration only

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1871

Agenda Item 4-D.1 Page 3 of 30

21 However, the auditor considers whether the extent of testing is appropriate when performing different audit procedures in combination.

No A15 Application only - the principle is adequately covered by the general requirement of new para 6

22 The auditor is required to perform tests of controls when the auditor’s risk assessment includes an expectation of the operating effectiveness of controls or when substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion level.

No – Para deleted – repetition of new paras 8(a) and 8(b)

24 The auditor’s assessment of risk of material misstatement at the assertion level may include an expectation of the operating effectiveness of controls, in which case the auditor performs tests of controls to obtain audit evidence as to their operating effectiveness.

No – Para deleted – repetition of new para 8(a).

26 When obtaining audit evidence of implementation by performing risk assessment procedures, the auditor determines that the relevant controls exist and that the entity is using them. When performing tests of the operating effectiveness of controls, the auditor obtains audit evidence that controls operate effectively…. If substantially different controls were used at different times during the period under audit, the auditor considers each separately.

No

Y/N

No

A17

Deleted – repetition of ISA 315

Now in definition at new 4(b)

Adequately covered by the principle in new para 10

27 For example, the auditor may have made inquiries about…, and inspected …. These audit procedures provide knowledge about …, and may also provide audit evidence about …. In such circumstances, the auditor considers whether the audit evidence provided by those audit procedures is sufficient.

No

Deleted - repeats general principle of ISA 500 to gather sufficient appropriate audit evidence.

28 The auditor selects audit procedures to obtain assurance about the operating effectiveness of controls. As the planned level of assurance increases, the auditor seeks more reliable audit evidence.

No

Y/N

Now in the definition

Similar to new para 7(b)

29 Since inquiry alone is not sufficient, the auditor uses a combination of audit procedures to obtain sufficient appropriate audit evidence regarding the operating effectiveness of controls.

No A23 Covered by redrafted IA 500.

31 In designing tests of controls, the auditor considers the need to obtain audit evidence supporting the effective operation of controls directly related to the assertions as well as other indirect controls on which these controls depend. For example, the auditor may identify a user review of an exception report of credit sales over a customer’s authorized credit limit as a direct control related to an assertion. In such cases, the auditor considers the effectiveness of the user review of the report and also the controls related to the accuracy of the information in the report (for example, the general IT-controls).

Yes

No

9(c)

A25

Important step to consider in all cases before relying on controls

Application of principle – example only

33 (Re dual-purpose tests) The auditor carefully considers the design and evaluation of such tests to accomplish both objectives.

No A20

Achieving objectives is inherent in basic requirements; this is application only.

34 However, misstatements that the auditor detects by Yes 16 This should be done in all

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1872

Agenda Item 4-D.1 Page 4 of 30

performing substantive procedures are considered by the auditor when assessing the operating effectiveness of related controls. A material misstatement detected by the auditor’s procedures that was not identified by the entity ordinarily is indicative of the existence of a material weakness in internal control, which is communicated to management and those charged with governance.

No

A37

material cases.

ISA 260 will require communication of weaknesses

35 The timing of tests of controls depends on the auditor’s objective and determines the period of reliance on those controls. If the auditor tests controls at a particular time, the auditor only obtains audit evidence that the controls operated effectively at that time However, if the auditor tests controls throughout a period, the auditor obtains audit evidence of the effectiveness of the operation of the controls during that period.

Yes 10 Important principles for universal application – substantially redrafted

36 . If, on the other hand, the auditor requires audit evidence of the effectiveness of a control over a period, audit evidence pertaining only to a point in time may be insufficient and the auditor supplements those tests with other tests of controls that are capable of providing audit evidence that the control operated effectively at relevant times during the period under audit.

No A27 Application of a principle in preceding paragraph

37 … the auditor should determine what additional audit evidence should be obtained for the remaining period. In making that determination, the auditor considers the significance of the assessed risks of material misstatement at the assertion level, the specific controls that were tested during the interim period, the degree to which audit evidence about the operating effectiveness of those controls was obtained, the length of the remaining period, the extent to which the auditor intends to reduce further substantive procedures based on the reliance of controls, and the control environment. The auditor obtains audit evidence about the nature and extent of any significant changes in internal control, including changes in the information system, processes, and personnel that occur subsequent to the interim period.

No

Yes

A28

11(a)

Examples of matters the auditor ordinarily considers.

Essential step in relying on controls based on interim testing

39 The auditor obtains audit evidence to determine whether changes to the automated control have been made that affect its continued effective functioning, for example, through inquiries of management and the inspection of logs to indicate what controls have been changed.

No A30 Application guidance for IT – principle is in new para 13

42 In considering whether it is appropriate to use audit evidence about the operating effectiveness of controls obtained in prior audits, and, if so, the length of the time period that may elapse before retesting a control, the auditor considers the following: • The effectiveness of other elements of internal control,

including the control environment, the entity’s monitoring of controls, and the entity’s risk assessment process.

• The risks arising from the characteristics of the control, including whether controls are manual or automated (see ISA 315, paragraphs 57-63 for a

Yes 12 Although detailed, each consideration is essential to a high quality audit

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1873

Agenda Item 4-D.1 Page 5 of 30

discussion of specific risks arising from manual and automated elements of a control).

• The effectiveness of general IT-controls. • The effectiveness of the control and its application by

the entity, including the nature and extent of deviations in the application of the control from tests of operating effectiveness noted in prior audits.

• Whether the lack of a change in a particular control poses a risk due to changing circumstances.

• The risk of material misstatement and the extent of reliance on the control.

43 Therefore, when the auditor determines in accordance with paragraphs 39-42 that it is appropriate to use audit evidence obtained in prior audits for a number of controls, the auditor plans to test a sufficient portion of the controls in that population in each audit period, and at a minimum, each control is tested at least every third audit.

No

Repeats requirement of new para 13(b)

44 The greater the risk of material misstatement, the more audit evidence the auditor obtains that relevant controls are operating effectively. Accordingly, although the auditor often considers information obtained in prior audits in designing tests of controls to mitigate a significant risk, the auditor does not rely on audit evidence obtained in a prior audit about the operating effectiveness of controls over such risks, but instead obtains the audit evidence about the operating effectiveness of controls over such risks in the current period.

Y/N

No

Substantially covered by new para 7(b)

Deleted - already covered by principle in new para 14

45 The auditor designs tests of controls to obtain sufficient appropriate audit evidence that the controls operated effectively throughout the period of reliance.:

No Unnecessary repetition

46 The more the auditor relies on the operating effectiveness of controls in the assessment of risk, the greater is the extent of the auditor's tests of controls. In addition, as the rate of expected deviation from a control increases, the auditor increases the extent of testing of the control. However, the auditor considers whether the rate of expected deviation indicates that the control will not be sufficient to reduce the risk of material misstatement at the assertion level to that assessed by the auditor.

Yes

No

No

15

(A38)

Key determinant of the extent of tests of control

Only one of the matters the auditor may consider per old para 45, rather than a key determinant.

Deleted, related more to audit efficiency than effectiveness. The effectiveness issue is adequately picked up in new para 17

47 Once the auditor determines that an automated control is functioning as intended (which could be done at the time the control is initially implemented or at some other date), the auditor considers performing tests to determine that the control continues to function effectively..

No

A36

Procedural guidance only – application of the general principle in new para 10

48 The auditor plans and performs substantive procedures to be responsive to the related assessment of the risk of material misstatement.

Y/N

Now part of the definition at new 4(a)

49 … the auditor always performs substantive procedures No Deleted - repetition of

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1874

Agenda Item 4-D.1 Page 6 of 30

for each material class of transactions, account balance, and disclosure.

Requirement at new para 18.

52 The auditor considers the guidance in paragraphs 53-64 in designing the nature, timing, and extent of substantive procedures for significant risks.

No Deleted - cross reference only

54 The auditor designs tests of details responsive to the assessed risk with the objective of obtaining sufficient appropriate audit evidence to achieve the planned level of assurance at the assertion level. In designing substantive procedures related to the existence or occurrence assertion, the auditor selects from items contained in a financial statement amount and obtains the relevant audit evidence. On the other hand, in designing audit procedures related to the completeness assertion, the auditor selects from audit evidence indicating that an item should be included in the relevant financial statement amount and investigates whether that item is so included.

Y/N

No

No

A42

A42

Deleted – repetition old para 48

) Procedural matters, now )expressed as statements of ) fact e.g. “tests of details related) to the existence or ) occurrence assertion involve )selecting from items ) contained in a financial )statement amount”.

55 In designing substantive analytical procedures, the auditor considers such matters as the following: The suitability of using substantive analytical procedures given the assertions…(a list)

No Deleted – covered by ISA 520 “Analytical Procedures”

55 The auditor considers testing the controls, if any, over the entity’s preparation of information used by the auditor in applying analytical procedures. … In determining the audit procedures to apply to the information upon which the expectation for substantive analytical procedures is based, the auditor considers the guidance in paragraph 11 of ISA 500.

No Deleted – repeats ISA 500.11

57 In considering whether to perform substantive procedures at an interim date, the auditor considers such factors as the following: • The control environment and other relevant controls. • The availability of information at a later date that is

necessary for the auditor’s procedures. • The objective of the substantive procedure. • The assessed risk of material misstatement. • The nature of the class of transactions or account

balance and related assertions. • The ability of the auditor to perform appropriate

substantive procedures or substantive procedures combined with tests of controls to cover the remaining period in order to reduce the risk that misstatements that exist at period end are not detected.

No A46 Application guidance only – a “grab bag” of generally relevant matters, rather than a list of specific items that should be considered individually each time the auditor considers substantive procedures at an interim date

58 Although the auditor is not required to obtain audit evidence about the operating effectiveness of controls in order to have a reasonable basis for extending audit conclusions from an interim date to the period end, the auditor considers whether performing only substantive procedures to cover the remaining period is sufficient. If the auditor concludes that substantive procedures alone would not be sufficient, tests of the operating effectiveness of relevant controls are performed or the

No

Deleted – repetition of principle in new para 21

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1875

Agenda Item 4-D.1 Page 7 of 30

substantive procedures are performed as of the period end.

60 When the auditor plans to perform substantive analytical procedures with respect to the intervening period, the auditor considers whether the period end balances of the particular classes of transactions or account balances are reasonably predictable with respect to amount, relative significance, and composition. The auditor considers whether the entity’s procedures for analyzing and adjusting such classes of transactions or account balances at interim dates and for establishing proper accounting cutoffs are appropriate. In addition, the auditor considers whether the information system relevant to financial reporting will provide information concerning the balances at the period end and the transactions in the remaining period that is sufficient to permit investigation of: significant unusual transactions or entries (including those at or near period end); other causes of significant fluctuations, or expected fluctuations that did not occur; and changes in the composition of the classes of transactions or account balances.

) ) ) ) Yes ) ) ) ) ) ) ) ) ) ) ) ) )

) ) ) ) 23 ) ) ) ) ) ) ) ) ) ) ) ) )

) ) ) ) Statement of the ) principles to be applied ) whenever substantive ) analytical procedures are ) used with respect to ) an intervening period ) ) ) ) ) ) ) )

62 As required by paragraph 23 of ISA 500, if the auditor plans to use audit evidence obtained from the performance of substantive procedures in a prior audit, the auditor performs audit procedures during the current period to establish the continuing relevance of the audit evidence.

Yes

24

Statement of the general principle to be applied whenever evidence is used from substantive procedures in a prior audit

64 In designing tests of details, the extent of testing is ordinarily thought of in terms of the sample size, which is affected by the risk of material misstatement. However, the auditor also considers other matters, including whether it is more effective to use other selective means of testing, such as … In designing substantive analytical procedures, the auditor increases the desired level of assurance as the risk of material misstatement increases.

No

No

A43

Intended as an example of other matters that may be relevant.

Deleted – repeats ISA 520.12f

65 The auditor considers whether the individual financial statements are presented in a manner that reflects the appropriate classification and description of financial information. … The auditor considers whether management should have disclosed a particular matter in light of the circumstances and facts of which the auditor is aware at the time. In performing the evaluation of the overall presentation of the financial statements, including the related disclosures, the auditor considers the assessed risk of material misstatement at the assertion level. See paragraph 17 of ISA 500 for a description of the assertions related to presentation and disclosure.

No

No

No

A48

Deleted - already in ISA 500

Deleted: application of 500, Materiality and ISA 700

Now stated as an explanation, that “Evaluating presentation and disclosure relates to the assessed risk of material misstatement at the assertion level …”

68 … When such deviations are detected during the performance of tests of controls, the auditor makes specific inquiries to understand these matters and their potential consequences, for example, by inquiring about the timing of personnel changes in key internal control

Yes

17

) ) Both these matters are ) essential follow up if tests ) of controls are to be

Clarity – ISA 330 Mapping Documents IAASB Main Agenda (September 2005) Page 2005·1876

Agenda Item 4-D.1 Page 8 of 30

functions. The auditor determines whether the tests of controls performed provide an appropriate basis for reliance on the controls, whether additional tests of controls are necessary, or whether the potential risks of misstatement need to be addressed using substantive procedures.

Yes 17 ) effective ) )

69 The auditor cannot assume that an instance of fraud or error is an isolated occurrence, and therefore considers how the detection of a misstatement affects the assessed risks of material misstatement. Before the conclusion of the audit, the auditor evaluates whether audit risk has been reduced to an acceptably low level and whether the nature, timing, and extent of the audit procedures may need to be reconsidered.

No

No

Y

A50

26/7

Repeats ISA 240

Repeats old para 70

Redrafted - Necessary to ensure other steps in the audit process have achieved the objective of reducing risk to an acceptable level.

70 In developing an opinion, the auditor considers all relevant audit evidence, regardless of whether it appears to corroborate or to contradict the assertions in the financial statements.

No Moved to ISA 500

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

877

Prep

ared

by:

Mic

hael

Nug

ent (

Aug

ust 2

005)

Pa

ge 9

of 3

0

Map

ping

Doc

umen

t

Exhi

bit 2

Ori

gina

l ISA

330

N

ew

Par

Ref

Com

men

t on

prop

osed

del

etio

n of

hi

ghlig

hted

mat

eria

l an

d ot

her

note

s In

trod

uctio

n

1.

The

purp

ose

of th

is In

tern

atio

nal S

tand

ard

on A

uditi

ng (I

SA) i

s to

esta

blis

h st

anda

rds a

nd p

rovi

de g

uida

nce

on d

eter

min

ing

over

all

resp

onse

s an

d de

sign

ing

and

perf

orm

ing

furth

er a

udit

proc

edur

es t

o re

spon

d to

the

ass

esse

d ris

ks o

f m

ater

ial

mis

stat

emen

t at t

he fi

nanc

ial s

tate

men

t and

ass

ertio

n le

vels

in a

fina

ncia

l sta

tem

ent a

udit.

The

aud

itor’

s und

erst

andi

ng o

f the

entit

y an

d its

envi

ronm

ent,

incl

udin

g its

inte

rnal

cont

rol,

and

asse

ssm

ent o

f the

risk

s of m

ater

ial m

isst

atem

ent a

re d

escr

ibed

in

ISA

315

, “U

nder

stan

ding

the

Entit

y an

d Its

Env

ironm

ent a

nd A

sses

sing

the

Ris

ks o

f Mat

eria

l Mis

stat

emen

t.”

Pu

rpos

e re

stat

ed

in

new

pa

ra 1

Not

ne

cess

ary

in

new

fo

rmat

2.

The

follo

win

g is

an

over

view

of t

he re

quire

men

ts o

f thi

s sta

ndar

d:

• O

vera

ll re

spon

ses.

This

sect

ion

requ

ires t

he au

dito

r to

dete

rmin

e ove

rall

resp

onse

s to

addr

ess r

isks o

f mat

eria

l miss

tate

men

t at

the

finan

cial

stat

emen

t lev

el a

nd p

rovi

des g

uida

nce

on th

e na

ture

of t

hose

resp

onse

s.

• Au

dit p

roce

dure

s res

pons

ive t

o ri

sks o

f mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l. Th

is se

ctio

n re

quire

s the

audi

tor t

o de

sign

and

perf

orm

furth

er au

dit p

roce

dure

s, in

clud

ing

test

s of t

he o

pera

ting

effe

ctiv

enes

s of c

ontro

ls, w

hen

rele

vant

or r

equi

red,

and

subs

tant

ive

proc

edur

es, w

hose

nat

ure,

tim

ing,

and

ext

ent a

re re

spon

sive

to th

e as

sess

ed ri

sks o

f mat

eria

l mis

stat

emen

t at t

he

asse

rtion

leve

l. In

addi

tion,

this

sect

ion

incl

udes

mat

ters

the a

udito

r con

side

rs in

det

erm

inin

g th

e nat

ure,

tim

ing,

and

exte

nt o

f

such

aud

it pr

oced

ures

.

• Ev

alua

ting

the s

uffic

ienc

y and

app

ropr

iate

ness

of a

udit

evid

ence

obt

aine

d. T

his s

ectio

n re

quire

s the

audi

tor t

o ev

alua

te w

heth

er

the

risk

asse

ssm

ent r

emai

ns a

ppro

pria

te a

nd to

con

clud

e w

heth

er su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce h

as b

een

obta

ined

.

• D

ocum

enta

tion.

Thi

s sec

tion

esta

blis

hes r

elat

ed d

ocum

enta

tion

requ

irem

ents

.

O

verv

iew

not

inc

lude

d in

ne

w fo

rmat

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

878

Age

nda

Item

4-D

.1

Page

10

of 3

0

3.

In o

rder

to re

duce

aud

it ri

sk to

an

acce

ptab

ly lo

w le

vel,

the a

udito

r sho

uld

dete

rmin

e ove

rall

resp

onse

s to

asse

ssed

risk

s

at th

e fin

anci

al st

atem

ent l

evel

, and

shou

ld d

esig

n an

d pe

rfor

m fu

rthe

r aud

it pr

oced

ures

to re

spon

d to

ass

esse

d ri

sks a

t

the a

sser

tion

leve

l. Th

e ove

rall

resp

onse

s and

the n

atur

e, ti

min

g, an

d ex

tent

of t

he fu

rther

audi

t pro

cedu

res a

re m

atte

rs fo

r the

prof

essi

onal

jud

gmen

t of

the

aud

itor.

In a

dditi

on t

o th

e re

quire

men

ts o

f th

is I

SA,

the

audi

tor

also

com

plie

s w

ith t

he

requ

irem

ents

and

guid

ance

in IS

A 2

40, “

The A

udito

r’s R

espo

nsib

ility

to C

onsi

der F

raud

in an

Aud

it of

Fin

anci

al S

tate

men

ts”

in re

spon

ding

to a

sses

sed

risks

of m

ater

ial m

isst

atem

ent d

ue to

frau

d.

5 &

6

Not

e: S

plit

and

rew

orde

d U

nnec

essa

ry re

fere

nce

to

“pro

fess

iona

l jud

gem

ent”

Unn

eces

sary

re

fere

nce

to

need

to

com

ply

with

oth

er

ISA

s

Ove

rall

Res

pons

es

4.

The

aud

itor s

houl

d de

term

ine o

vera

ll re

spon

ses t

o ad

dres

s the

risk

s of m

ater

ial m

issta

tem

ent a

t the

fina

ncia

l sta

tem

ent

leve

l. Su

ch re

spon

ses m

ay in

clud

e em

phas

izin

g to

the a

udit

team

the n

eed

to m

aint

ain

prof

essio

nal s

kept

icism

in g

athe

ring

and

eval

uatin

g au

dit e

vide

nce,

ass

igni

ng m

ore

expe

rienc

ed s

taff

or t

hose

with

spe

cial

ski

lls o

r usi

ng e

xper

ts,1 p

rovi

ding

mor

e

supe

rvis

ion,

or

inco

rpor

atin

g ad

ditio

nal

elem

ents

of

unpr

edic

tabi

lity

in t

he s

elec

tion

of f

urth

er a

udit

proc

edur

es t

o be

perf

orm

ed. A

dditi

onal

ly, t

he a

udito

r may

mak

e ge

nera

l cha

nges

to th

e na

ture

, tim

ing,

or e

xten

t of a

udit

proc

edur

es a

s an

over

all r

espo

nse,

for e

xam

ple,

per

form

ing

subs

tant

ive

proc

edur

es a

t per

iod

end

inst

ead

of a

t an

inte

rim d

ate.

5 A1

5.

The a

sses

smen

t of t

he ri

sks o

f mat

eria

l mis

stat

emen

t at t

he fi

nanc

ial s

tate

men

t lev

el is

affe

cted

by

the a

udito

r’s u

nder

stan

ding

of th

e con

trol e

nviro

nmen

t. A

n ef

fect

ive c

ontro

l env

ironm

ent m

ay al

low

the a

udito

r to

have

mor

e con

fiden

ce in

inte

rnal

cont

rol

and

the

relia

bilit

y of

aud

it ev

iden

ce g

ener

ated

inte

rnal

ly w

ithin

the

entit

y an

d th

us, f

or e

xam

ple,

allo

w th

e au

dito

r to

cond

uct

som

e au

dit p

roce

dure

s at

an

inte

rim d

ate

rath

er th

an a

t per

iod

end.

If th

ere

are

wea

knes

ses

in th

e co

ntro

l env

ironm

ent,

the

audi

tor o

rdin

arily

cond

ucts

mor

e aud

it pr

oced

ures

as o

f the

per

iod

end

rath

er th

an at

an in

terim

dat

e, se

eks m

ore e

xten

sive a

udit

evid

ence

from

subs

tant

ive

proc

edur

es, m

odifi

es th

e na

ture

of a

udit

proc

edur

es to

obt

ain

mor

e pe

rsua

sive

aud

it ev

iden

ce, o

r

incr

ease

s the

num

ber o

f loc

atio

ns to

be

incl

uded

in th

e au

dit s

cope

.

A2

Not

e: “

mod

ifies

the

nat

ure

of

audi

t pr

oced

ures

to

ob

tain

m

ore

pers

uasi

ve

audi

t ev

iden

ce”

mov

ed t

o A

1 la

st b

ulle

t

1 The

ass

ignm

ent o

f eng

agem

ent p

erso

nnel

to th

e pa

rticu

lar e

ngag

emen

t ref

lect

s the

aud

itor’s

risk

ass

essm

ent,

whi

ch is

bas

ed o

n th

e au

dito

r’s u

nder

stan

ding

of t

he e

ntity

.

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

879

Age

nda

Item

4-D

.1

Page

11

of 3

0

6.

Such

con

side

ratio

ns, t

here

fore

, hav

e a

sign

ifica

nt b

earin

g on

the

audi

tor’

s ge

nera

l app

roac

h, fo

r exa

mpl

e, a

n em

phas

is o

n

subs

tant

ive

proc

edur

es (s

ubst

antiv

e ap

proa

ch),

or a

n ap

proa

ch th

at u

ses

test

s of

con

trols

as

wel

l as

subs

tant

ive

proc

edur

es

(com

bine

d ap

proa

ch).

A3

Aud

it Pr

oced

ures

Res

pons

ive

to R

isks

of M

ater

ial M

isst

atem

ent a

t the

Ass

ertio

n L

evel

7.

The

aud

itor s

houl

d de

sign

and

per

form

furt

her a

udit

proc

edur

es w

hose

nat

ure,

tim

ing,

and

exte

nt a

re re

spon

sive t

o th

e as

sess

ed ri

sks o

f mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l. Th

e pur

pose

is to

pro

vide

a cl

ear l

inka

ge b

etw

een

the n

atur

e,

timin

g, an

d ex

tent

of t

he au

dito

r’s f

urth

er au

dit p

roce

dure

s and

the r

isk

asse

ssm

ent.

In d

esig

ning

furth

er au

dit p

roce

dure

s, th

e au

dito

r con

side

rs su

ch m

atte

rs a

s the

follo

win

g:

6

Not

e: In

new

par

a 6

“bas

ed

on”

adde

d

Rep

lace

d by

le

ad-in

w

ordi

ng fr

om o

ld p

ara

12

• Th

e si

gnifi

canc

e of

the

risk.

• Th

e lik

elih

ood

that

a m

ater

ial m

isst

atem

ent w

ill o

ccur

.

• Th

e ch

arac

teris

tics o

f the

cla

ss o

f tra

nsac

tions

, acc

ount

bal

ance

, or d

iscl

osur

e in

volv

ed.

• Th

e na

ture

of t

he sp

ecifi

c co

ntro

ls u

sed

by th

e en

tity

and

in p

artic

ular

whe

ther

they

are

man

ual o

r aut

omat

ed.

• W

heth

er th

e au

dito

r ex

pect

s to

obt

ain

audi

t evi

denc

e to

det

erm

ine

if th

e en

tity’

s co

ntro

ls a

re e

ffec

tive

in p

reve

ntin

g, o

r de

tect

ing

and

corr

ectin

g, m

ater

ial m

isst

atem

ents

.

The

natu

re o

f the

aud

it pr

oced

ures

is o

f mos

t im

porta

nce

in re

spon

ding

to th

e as

sess

ed ri

sks.

7(a)

(i)

7(a)

(ii)

7(a)

(ii)

7(b)

Thes

e 2

dot p

oint

s ar

e ve

ry

gene

ric a

nd a

re c

over

ed b

y ne

w p

ara

6

8.

The

audi

tor’

s as

sess

men

t of t

he id

entif

ied

risks

at t

he a

sser

tion

leve

l pro

vide

s a

basi

s fo

r con

side

ring

the

appr

opria

te a

udit

appr

oach

for

des

igni

ng a

nd p

erfo

rmin

g fu

rther

aud

it pr

oced

ures

. In

som

e ca

ses,

the

audi

tor

may

det

erm

ine

that

onl

y by

pe

rfor

min

g te

sts o

f con

trols

may

the

audi

tor a

chie

ve a

n ef

fect

ive

resp

onse

to th

e as

sess

ed ri

sk o

f mat

eria

l mis

stat

emen

t for

a

parti

cula

r ass

ertio

n. In

oth

er c

ases

, the

aud

itor m

ay d

eter

min

e th

at p

erfo

rmin

g on

ly su

bsta

ntiv

e pr

oced

ures

is a

ppro

pria

te fo

r sp

ecifi

c as

serti

ons a

nd, t

here

fore

, the

aud

itor e

xclu

des t

he e

ffec

t of c

ontro

ls fr

om th

e re

leva

nt ri

sk a

sses

smen

t. Th

is m

ay b

e be

caus

e the

audi

tor’

s ris

k as

sess

men

t pro

cedu

res h

ave n

ot id

entif

ied

any

effe

ctiv

e con

trols

rele

vant

to th

e ass

ertio

n, o

r bec

ause

te

stin

g th

e ope

ratin

g ef

fect

iven

ess o

f con

trols

wou

ld b

e ine

ffic

ient

. How

ever

, the

audi

tor n

eeds

to b

e sat

isfie

d th

at p

erfo

rmin

g on

ly su

bsta

ntiv

e pr

oced

ures

for t

he re

leva

nt a

sser

tion

wou

ld b

e ef

fect

ive

in re

duci

ng th

e ris

k of

mat

eria

l mis

stat

emen

t to

an

acce

ptab

ly lo

w le

vel.

Ofte

n th

e aud

itor m

ay d

eter

min

e tha

t a co

mbi

ned

appr

oach

usin

g bo

th te

sts o

f the

ope

ratin

g ef

fect

iven

ess

A4

A re

stat

emen

t of t

he g

ener

al

prin

cipl

e of

the

ISA

and

th

eref

ore

not

a se

para

te

requ

irem

ent

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

880

Age

nda

Item

4-D

.1

Page

12

of 3

0

of co

ntro

ls an

d su

bsta

ntiv

e pro

cedu

res i

s an

effe

ctiv

e app

roac

h. Ir

resp

ectiv

e of t

he ap

proa

ch se

lect

ed, t

he au

dito

r des

igns

and

perf

orm

s su

bsta

ntiv

e pr

oced

ures

for

eac

h m

ater

ial c

lass

of

trans

actio

ns, a

ccou

nt b

alan

ce, a

nd d

iscl

osur

e as

req

uire

d by

pa

ragr

aph

49.

18

&

F/n

2

9.

In th

e ca

se o

f ver

y sm

all e

ntiti

es, t

here

may

not

be

man

y co

ntro

l act

iviti

es th

at c

ould

be

iden

tifie

d by

the

audi

tor.

For t

his

reas

on, t

he au

dito

r’s f

urth

er au

dit p

roce

dure

s are

like

ly to

be p

rimar

ily su

bsta

ntiv

e pro

cedu

res.

In su

ch ca

ses,

in ad

ditio

n to

the

mat

ters

ref

erre

d to

in p

arag

raph

8 a

bove

, the

aud

itor c

onsi

ders

whe

ther

in th

e ab

senc

e of

con

trols

it is

pos

sibl

e to

obt

ain

suff

icie

nt a

ppro

pria

te a

udit

evid

ence

.

A5

Not

e:

Fina

l se

nten

ce

rew

orde

d

Con

side

ring

the

Nat

ure,

Tim

ing,

and

Ext

ent o

f Fur

ther

Aud

it Pr

oced

ures

Nat

ure

10.

The n

atur

e of f

urth

er au

dit p

roce

dure

s ref

ers t

o th

eir p

urpo

se (t

ests

of c

ontro

ls or

subs

tant

ive p

roce

dure

s) an

d th

eir t

ype,

that

is,

insp

ectio

n, o

bser

vatio

n, in

quiry

, con

firm

atio

n, re

calc

ulat

ion,

repe

rform

ance

, or a

naly

tical

pro

cedu

res.

Cer

tain

audi

t pro

cedu

res

may

be

mor

e ap

prop

riate

for s

ome

asse

rtion

s tha

n ot

hers

. For

exa

mpl

e, in

rela

tion

to re

venu

e, te

sts o

f con

trols

may

be

mos

t re

spon

sive

to th

e as

sess

ed ri

sk o

f mis

stat

emen

t of t

he c

ompl

eten

ess a

sser

tion,

whe

reas

subs

tant

ive

proc

edur

es m

ay b

e m

ost

resp

onsi

ve to

the

asse

ssed

risk

of m

isst

atem

ent o

f the

occ

urre

nce

asse

rtion

.

A6

A7

11.

The a

udito

r’s s

elec

tion

of au

dit p

roce

dure

s is b

ased

on

the a

sses

smen

t of r

isk.

The

hig

her t

he au

dito

r’s a

sses

smen

t of r

isk,

the

mor

e re

liabl

e an

d re

leva

nt is

the

audi

t evi

denc

e so

ught

by

the

audi

tor f

rom

subs

tant

ive

proc

edur

es. T

his m

ay a

ffec

t bot

h th

e ty

pes o

f aud

it pr

oced

ures

to b

e per

form

ed an

d th

eir c

ombi

natio

n. F

or ex

ampl

e, th

e aud

itor m

ay co

nfirm

the c

ompl

eten

ess o

f the

te

rms o

f a c

ontra

ct w

ith a

third

par

ty, i

n ad

ditio

n to

insp

ectin

g th

e do

cum

ent.

A7

Cov

ered

by

ne

w

para

6

This

sent

ence

is v

ery

simila

r to

the

req

uire

men

t of

new

pa

ra 7

(b)

12.

In d

eter

min

ing

the a

udit

proc

edur

es to

be p

erfo

rmed

, the

audi

tor c

onsid

ers t

he re

ason

s for

the a

sses

smen

t of t

he ri

sk o

f mat

eria

l m

isst

atem

ent a

t the

ass

ertio

n le

vel f

or e

ach

clas

s of t

rans

actio

ns, a

ccou

nt b

alan

ce, a

nd d

iscl

osur

e. T

his i

nclu

des c

onsi

derin

g bo

th th

e pa

rticu

lar c

hara

cter

istic

s of

eac

h cl

ass

of tr

ansa

ctio

ns, a

ccou

nt b

alan

ce, o

r dis

clos

ure

(i.e.

, the

inhe

rent

risk

s) a

nd

whe

ther

the

audi

tor’

s ris

k as

sess

men

t tak

es a

ccou

nt o

f the

ent

ity’s

con

trols

(i.e

., th

e co

ntro

l ris

k). F

or e

xam

ple,

if th

e au

dito

r co

nsid

ers t

hat t

here

is a

low

er ri

sk th

at a

mat

eria

l mis

stat

emen

t may

occ

ur b

ecau

se o

f the

par

ticul

ar ch

arac

teris

tics o

f a cl

ass o

f tra

nsac

tions

with

out c

onsi

dera

tion

of th

e re

late

d co

ntro

ls, t

he a

udito

r may

det

erm

ine

that

sub

stan

tive

anal

ytic

al p

roce

dure

s al

one m

ay p

rovi

de su

ffic

ient

appr

opria

te au

dit e

vide

nce.

On

the o

ther

han

d, if

the a

udito

r exp

ects

that

ther

e is a

low

er ri

sk th

at

a m

ater

ial m

isst

atem

ent m

ay a

rise

beca

use

an e

ntity

has

eff

ectiv

e co

ntro

ls a

nd th

e au

dito

r in

tend

s to

des

ign

subs

tant

ive

7(a)

7(a)

(i)

7(a)

(ii)

A8

Not

e: R

edra

fted

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

881

Age

nda

Item

4-D

.1

Page

13

of 3

0

proc

edur

es b

ased

on

the

effe

ctiv

e op

erat

ion

of th

ose

cont

rols

, the

n th

e au

dito

r pe

rfor

ms

test

s of

con

trols

to o

btai

n au

dit

evid

ence

abo

ut th

eir o

pera

ting

effe

ctiv

enes

s. Th

is m

ay b

e th

e ca

se, f

or e

xam

ple,

for a

cla

ss o

f tra

nsac

tions

of r

easo

nabl

y un

iform

, non

-com

plex

cha

ract

eris

tics t

hat a

re ro

utin

ely

proc

esse

d an

d co

ntro

lled

by th

e en

tity’

s inf

orm

atio

n sy

stem

.

13.

The a

udito

r is r

equi

red

to o

btai

n au

dit e

vide

nce a

bout

the a

ccur

acy

and

com

plet

enes

s of i

nfor

mat

ion

prod

uced

by

the e

ntity

’s

info

rmat

ion

syst

em w

hen

that

info

rmat

ion

is u

sed

in p

erfo

rmin

g au

dit p

roce

dure

s. Fo

r ex

ampl

e, if

the

audi

tor

uses

non

-fin

anci

al in

form

atio

n or

bud

get d

ata

prod

uced

by

the

entit

y’s

info

rmat

ion

syst

em in

per

form

ing

audi

t pro

cedu

res,

such

as

subs

tant

ive a

naly

tical

pro

cedu

res o

r tes

ts of

cont

rols,

the a

udito

r obt

ains

audi

t evi

denc

e abo

ut th

e acc

urac

y an

d co

mpl

eten

ess o

f su

ch in

form

atio

n. S

ee IS

A 5

00, “

Aud

it Ev

iden

ce”

para

grap

h 11

for f

urth

er g

uida

nce.

R

epet

ition

of I

SA 5

00.1

1

Tim

ing

14.

Tim

ing

refe

rs to

whe

n au

dit p

roce

dure

s are

per

form

ed o

r the

per

iod

or d

ate

to w

hich

the

audi

t evi

denc

e ap

plie

s. A

9

15.

The

audi

tor m

ay p

erfo

rm te

sts o

f con

trols

or s

ubst

antiv

e pro

cedu

res a

t an

inte

rim d

ate

or a

t per

iod

end.

The

hig

her t

he ri

sk o

f m

ater

ial m

isst

atem

ent,

the

mor

e lik

ely

it is

that

the

audi

tor m

ay d

ecid

e it

is m

ore

effe

ctiv

e to

per

form

subs

tant

ive

proc

edur

es

near

er to

, or a

t, th

e pe

riod

end

rath

er th

an a

t an

earli

er d

ate,

or t

o pe

rfor

m a

udit

proc

edur

es u

nann

ounc

ed o

r at u

npre

dict

able

tim

es (f

or ex

ampl

e, p

erfo

rmin

g au

dit p

roce

dure

s at s

elec

ted

loca

tions

on

an u

nann

ounc

ed b

asis)

. On

the o

ther

han

d, p

erfo

rmin

g au

dit p

roce

dure

s bef

ore t

he p

erio

d en

d m

ay as

sist t

he au

dito

r in

iden

tifyi

ng si

gnifi

cant

mat

ters

at an

early

stag

e of t

he au

dit,

and

cons

eque

ntly

reso

lvin

g th

em w

ith th

e as

sist

ance

of m

anag

emen

t or d

evel

opin

g an

eff

ectiv

e au

dit a

ppro

ach

to a

ddre

ss su

ch

mat

ters

. If

the

audi

tor

perf

orm

s te

sts

of c

ontro

ls o

r su

bsta

ntiv

e pr

oced

ures

prio

r to

per

iod

end,

the

audi

tor

cons

ider

s th

e ad

ditio

nal e

vide

nce

requ

ired

for t

he re

mai

ning

per

iod

(see

par

agra

phs 3

7-38

and

56-

61).

A10

A11

Unn

eces

sary

int

erna

l cr

oss

refe

renc

e

16.

In c

onsi

derin

g w

hen

to p

erfo

rm a

udit

proc

edur

es, t

he a

udito

r als

o co

nsid

ers s

uch

mat

ters

as t

he fo

llow

ing:

• Th

e co

ntro

l env

ironm

ent

• W

hen

rele

vant

info

rmat

ion

is a

vaila

ble

(for

exa

mpl

e, e

lect

roni

c fil

es m

ay s

ubse

quen

tly b

e ov

erw

ritte

n, o

r pro

cedu

res t

o be

ob

serv

ed m

ay o

ccur

onl

y at

cer

tain

tim

es).

• Th

e nat

ure o

f the

risk

(for

exam

ple,

if th

ere i

s a ri

sk o

f inf

late

d re

venu

es to

mee

t ear

ning

s exp

ecta

tions

by

subs

eque

nt cr

eatio

n of

fals

e sa

les a

gree

men

ts, t

he a

udito

r may

wis

h to

exa

min

e co

ntra

cts a

vaila

ble

on th

e da

te o

f the

per

iod

end)

.

• Th

e pe

riod

or d

ate

to w

hich

the

audi

t evi

denc

e re

late

s

A13

17.

Cer

tain

aud

it pr

oced

ures

can

be

perf

orm

ed o

nly

at o

r afte

r per

iod

end,

for e

xam

ple,

agr

eein

g th

e fin

anci

al st

atem

ents

to th

e A

12

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

882

Age

nda

Item

4-D

.1

Page

14

of 3

0

acco

untin

g re

cord

s and

exam

inin

g ad

just

men

ts m

ade d

urin

g th

e cou

rse o

f pre

parin

g th

e fin

anci

al st

atem

ents

. If t

here

is a

risk

that

the

entit

y m

ay h

ave

ente

red

into

impr

oper

sale

s con

tract

s or t

rans

actio

ns m

ay n

ot h

ave

been

fina

lized

at p

erio

d en

d, th

e au

dito

r per

form

s pro

cedu

res t

o re

spon

d to

that

spec

ific

risk.

For

exa

mpl

e, w

hen

trans

actio

ns a

re in

divi

dual

ly m

ater

ial o

r an

erro

r in

cuto

ff m

ay le

ad to

a m

ater

ial m

isst

atem

ent,

the

audi

tor o

rdin

arily

insp

ects

tran

sact

ions

nea

r the

per

iod

end.

Unn

eces

sary

exa

mpl

e

Exte

nt

18.

Exte

nt in

clud

es th

e qu

antit

y of

a s

peci

fic a

udit

proc

edur

e to

be

perf

orm

ed, f

or e

xam

ple,

a s

ampl

e si

ze o

r th

e nu

mbe

r of

ob

serv

atio

ns o

f a

cont

rol a

ctiv

ity. T

he e

xten

t of

an a

udit

proc

edur

e is

det

erm

ined

by

the

judg

men

t of

the

audi

tor

afte

r co

nsid

erin

g th

e mat

eria

lity,

the a

sses

sed

risk,

and

the d

egre

e of a

ssur

ance

the a

udito

r pla

ns to

obt

ain.

In p

artic

ular

, the

audi

tor

ordi

naril

y in

crea

ses

the

exte

nt o

f aud

it pr

oced

ures

as

the

risk

of m

ater

ial m

isst

atem

ent i

ncre

ases

. How

ever

, inc

reas

ing

the

exte

nt o

f an

audi

t pro

cedu

re is

effe

ctiv

e onl

y if

the a

udit

proc

edur

e its

elf i

s rel

evan

t to

the s

peci

fic ri

sk; t

here

fore

, the

nat

ure o

f th

e au

dit p

roce

dure

is th

e m

ost i

mpo

rtant

con

side

ratio

n.

A14

A15

7 (b

)

19.

The

use

of c

ompu

ter-

assi

sted

aud

it te

chni

ques

(CA

ATs

) may

ena

ble

mor

e ex

tens

ive

test

ing

of e

lect

roni

c tra

nsac

tions

and

ac

coun

t file

s. Su

ch te

chni

ques

can

be

used

to s

elec

t sam

ple

trans

actio

ns fr

om k

ey e

lect

roni

c fil

es, t

o so

rt tra

nsac

tions

with

sp

ecifi

c ch

arac

teris

tics,

or to

test

an

entir

e po

pula

tion

inst

ead

of a

sam

ple.

A16

20.

Val

id c

oncl

usio

ns m

ay o

rdin

arily

be

draw

n us

ing

sam

plin

g ap

proa

ches

. How

ever

, if t

he q

uant

ity o

f sel

ectio

ns m

ade

from

a

popu

latio

n is

too

smal

l, th

e sa

mpl

ing

appr

oach

sel

ecte

d is

not

app

ropr

iate

to

achi

eve

the

spec

ific

audi

t ob

ject

ive,

or

if ex

cept

ions

are n

ot ap

prop

riate

ly fo

llow

ed u

p, th

ere w

ill b

e an

unac

cept

able

risk

that

the a

udito

r’s co

nclu

sion

base

d on

a sa

mpl

e m

ay b

e di

ffer

ent f

rom

the

conc

lusi

on re

ache

d if

the

entir

e po

pula

tion

was

sub

ject

ed to

the

sam

e au

dit p

roce

dure

. ISA

530

, “A

udit

Sam

plin

g an

d O

ther

Mea

ns o

f Tes

ting”

con

tain

s gui

danc

e on

the

use

of sa

mpl

ing.

U

nnec

essa

ry r

epet

ition

of

conc

epts

from

ISA

530

21.

This

stan

dard

rega

rds t

he u

se o

f diff

eren

t aud

it pr

oced

ures

in c

ombi

natio

n as

an

aspe

ct o

f the

nat

ure

of te

stin

g as

dis

cuss

ed

abov

e. H

owev

er, t

he au

dito

r con

side

rs w

heth

er th

e ext

ent o

f tes

ting

is ap

prop

riate

whe

n pe

rfor

min

g di

ffer

ent a

udit

proc

edur

es

in c

ombi

natio

n.

A15

N

ote:

R

edra

fted

as

2nd

sent

ence

of A

15

Tes

ts o

f Con

trol

s

22.

The a

udito

r is r

equi

red

to p

erfo

rm te

sts o

f con

trols

whe

n th

e aud

itor’

s ris

k as

sess

men

t inc

lude

s an

expe

ctat

ion

of th

e ope

ratin

g ef

fect

iven

ess

of c

ontro

ls o

r whe

n su

bsta

ntiv

e pr

oced

ures

alo

ne d

o no

t pro

vide

suf

ficie

nt a

ppro

pria

te a

udit

evid

ence

at t

he

asse

rtion

leve

l.

R

epea

ts n

ew p

ara

8(a)

R

epea

ts n

ew p

ara

8(b)

23.

Whe

n th

e au

dito

r’s

asse

ssm

ent o

f ris

ks o

f mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l inc

lude

s an

exp

ecta

tion

that

8(

a)

Not

e:

Rew

orde

d –

in

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

883

Age

nda

Item

4-D

.1

Page

15

of 3

0

cont

rols

are

ope

ratin

g ef

fect

ivel

y, th

e au

dito

r sh

ould

per

form

test

s of c

ontr

ols t

o ob

tain

suff

icie

nt a

ppro

pria

te a

udit

evid

ence

that

the c

ontr

ols w

ere o

pera

ting

effe

ctiv

ely

at re

leva

nt ti

mes

dur

ing

the p

erio

d un

der a

udit.

See

par

agra

phs 3

9-44

bel

ow fo

r dis

cuss

ion

of u

sing

aud

it ev

iden

ce a

bout

the

oper

atin

g ef

fect

iven

ess o

f con

trols

obt

aine

d in

prio

r aud

its.

parti

cula

r re

fere

nce

to

timin

g de

lete

d (p

icke

d up

in

new

par

a 10

)

Unn

eces

sary

int

erna

l cr

oss

refe

renc

e

24.

The

audi

tor’

s ass

essm

ent o

f ris

k of

mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l may

incl

ude

an e

xpec

tatio

n of

the

oper

atin

g ef

fect

iven

ess

of c

ontro

ls, i

n w

hich

cas

e th

e au

dito

r per

form

s te

sts

of c

ontro

ls to

obt

ain

audi

t evi

denc

e as

to th

eir o

pera

ting

effe

ctiv

enes

s. Te

sts

of th

e op

erat

ing

effe

ctiv

enes

s of

con

trols

are

per

form

ed o

nly

on th

ose

cont

rols

that

the

audi

tor

has

dete

rmin

ed ar

e sui

tabl

y de

sign

ed to

pre

vent

, or d

etec

t and

corr

ect,

a mat

eria

l miss

tate

men

t in

an as

serti

on. P

arag

raph

s 104

-106

of

ISA

315

dis

cuss

the

iden

tific

atio

n of

con

trols

at t

he a

sser

tion

leve

l lik

ely

to p

reve

nt, o

r de

tect

and

cor

rect

, a m

ater

ial

mis

stat

emen

t in

a cl

ass o

f tra

nsac

tions

, acc

ount

bal

ance

or d

iscl

osur

e.

A17

New

pa

ra

8(a)

re

quire

s te

stin

g of

con

trols

in

this

ca

se

Unn

eces

sary

re

fere

nce

to

ISA

315

25.

Whe

n, in

acc

orda

nce w

ith p

arag

raph

115

of I

SA 3

15, t

he a

udito

r has

det

erm

ined

that

it is

not

pos

sible

or p

ract

icab

le to

re

duce

the r

isks

of m

ater

ial m

isst

atem

ent a

t the

ass

ertio

n le

vel t

o an

acc

epta

bly

low

leve

l with

aud

it ev

iden

ce o

btai

ned

only

from

subs

tant

ive p

roce

dure

s, th

e aud

itor s

houl

d pe

rfor

m te

sts o

f rel

evan

t con

trol

s to

obta

in a

udit

evid

ence

abo

ut

thei

r op

erat

ing

effe

ctiv

enes

s. Fo

r exa

mpl

e, a

s dis

cuss

ed in

par

agra

ph 1

15 o

f ISA

315

, the

aud

itor m

ay fi

nd it

impo

ssib

le to

de

sign

effe

ctiv

e sub

stan

tive p

roce

dure

s tha

t by

them

selv

es p

rovi

de su

ffic

ient

appr

opria

te au

dit e

vide

nce a

t the

asse

rtion

leve

l w

hen

an e

ntity

con

duct

s its

bus

ines

s us

ing

IT a

nd n

o do

cum

enta

tion

of tr

ansa

ctio

ns is

pro

duce

d or

mai

ntai

ned,

oth

er th

an

thro

ugh

the

IT sy

stem

.

8(b)

A21

Not

e: R

edra

fted

26.

Test

ing

the o

pera

ting

effe

ctiv

enes

s of c

ontro

ls is

diff

eren

t fro

m o

btai

ning

audi

t evi

denc

e tha

t con

trols

have

bee

n im

plem

ente

d.

Whe

n ob

tain

ing

audi

t evi

denc

e of

impl

emen

tatio

n by

per

form

ing

risk

asse

ssm

ent p

roce

dure

s, th

e au

dito

r det

erm

ines

that

the

rele

vant

con

trols

exi

st a

nd th

at th

e en

tity

is u

sing

them

. Whe

n pe

rfor

min

g te

sts o

f the

ope

ratin

g ef

fect

iven

ess o

f con

trols

, the

au

dito

r obt

ains

audi

t evi

denc

e tha

t con

trols

oper

ate e

ffect

ivel

y. T

his i

nclu

des o

btai

ning

audi

t evi

denc

e abo

ut h

ow co

ntro

ls w

ere

appl

ied

at re

leva

nt ti

mes

dur

ing

the p

erio

d un

der a

udit,

the c

onsi

sten

cy w

ith w

hich

they

wer

e app

lied,

and

by w

hom

or b

y w

hat

mea

ns th

ey w

ere

appl

ied.

If s

ubst

antia

lly d

iffer

ent c

ontro

ls w

ere

used

at d

iffer

ent t

imes

dur

ing

the

perio

d un

der a

udit,

the

audi

tor c

onsi

ders

eac

h se

para

tely

. The

aud

itor m

ay d

eter

min

e th

at te

stin

g th

e op

erat

ing

effe

ctiv

enes

s of c

ontro

ls a

t the

sam

e tim

e as

eva

luat

ing

thei

r des

ign

and

obta

inin

g au

dit e

vide

nce

of th

eir i

mpl

emen

tatio

n is

eff

icie

nt.

A18

9(b)

A

17

A18

Cov

ered

in IS

A 3

15

Now

par

t of t

he d

efin

ition

at

new

par

a 4(

b)

27.

Alth

ough

som

e ris

k as

sess

men

t pro

cedu

res t

hat t

he a

udito

r per

form

s to

eval

uate

the

desi

gn o

f con

trols

and

to d

eter

min

e th

at

they

hav

e bee

n im

plem

ente

d m

ay n

ot h

ave b

een

spec

ifica

lly d

esig

ned

as te

sts o

f con

trols

, the

y m

ay n

ever

thel

ess p

rovi

de au

dit

evid

ence

abou

t the

ope

ratin

g ef

fect

iven

ess o

f the

cont

rols

and,

cons

eque

ntly

, ser

ve as

tests

of c

ontro

ls. F

or ex

ampl

e, th

e aud

itor

A19

N

ote:

W

ordi

ng

of

1st

sent

ence

con

tract

ed

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

884

Age

nda

Item

4-D

.1

Page

16

of 3

0

may

hav

e mad

e inq

uirie

s abo

ut m

anag

emen

t’s u

se o

f bud

gets

, obs

erve

d m

anag

emen

t’s co

mpa

rison

of m

onth

ly b

udge

ted

and

actu

al ex

pens

es, a

nd in

spec

ted

repo

rts p

erta

inin

g to

the i

nves

tigat

ion

of v

aria

nces

bet

wee

n bu

dget

ed an

d ac

tual

amou

nts.

Thes

e au

dit

proc

edur

es p

rovi

de k

now

ledg

e ab

out

the

desi

gn o

f th

e en

tity’

s bu

dget

ing

polic

ies

and

whe

ther

the

y ha

ve b

een

impl

emen

ted,

and

may

also

pro

vide

audi

t evi

denc

e abo

ut th

e eff

ectiv

enes

s of t

he o

pera

tion

of b

udge

ting

polic

ies i

n pr

even

ting

or d

etec

ting

mat

eria

l mis

stat

emen

ts in

the c

lass

ifica

tion

of ex

pens

es. I

n su

ch ci

rcum

stan

ces,

the a

udito

r con

side

rs w

heth

er th

e au

dit e

vide

nce

prov

ided

by

thos

e au

dit p

roce

dure

s is s

uffic

ient

.

Rep

etiti

on

of

gene

ral

requ

irem

ent o

f IS

A 5

00 to

ob

tain

suffi

cien

t app

ropr

iate

au

dit e

vide

nce

Nat

ure

of T

ests

of C

ontr

ols

28.

The a

udito

r sel

ects

audi

t pro

cedu

res t

o ob

tain

assu

ranc

e abo

ut th

e ope

ratin

g ef

fect

iven

ess o

f con

trols

. As t

he p

lann

ed le

vel o

f as

sura

nce

incr

ease

s, th

e au

dito

r see

ks m

ore

relia

ble

audi

t evi

denc

e. In

circ

umst

ance

s w

hen

the

audi

tor a

dopt

s an

app

roac

h co

nsis

ting

prim

arily

of t

ests

of c

ontro

ls, i

n pa

rticu

lar r

elat

ed to

thos

e ris

ks w

here

it is

not

pos

sibl

e or

pra

ctic

able

to o

btai

n su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce o

nly

from

sub

stan

tive

proc

edur

es, t

he a

udito

r ord

inar

ily p

erfo

rms

test

s of

con

trols

to

obta

in a

hig

her l

evel

of a

ssur

ance

abo

ut th

eir o

pera

ting

effe

ctiv

enes

s.

A22

Subs

umed

in

defin

ition

at

new

pa

ra

4(b)

Sim

ilar t

houg

ht to

new

par

a 7(

b)

29.

The

aud

itor

shou

ld p

erfo

rm o

ther

aud

it pr

oced

ures

in c

ombi

natio

n w

ith in

quir

y to

test

the

oper

atin

g ef

fect

iven

ess o

f co

ntro

ls. A

lthou

gh d

iffer

ent f

rom

obt

aini

ng a

n un

ders

tand

ing

of th

e de

sign

and

impl

emen

tatio

n of

con

trols

, tes

ts o

f th

e op

erat

ing

effe

ctiv

enes

s of

con

trols

ord

inar

ily in

clud

e th

e sa

me

type

s of

aud

it pr

oced

ures

use

d to

eva

luat

e th

e de

sign

and

im

plem

enta

tion

of co

ntro

ls, a

nd m

ay al

so in

clud

e rep

erfo

rman

ce o

f the

appl

icat

ion

of th

e con

trol b

y th

e aud

itor.

Sinc

e inq

uiry

al

one

is n

ot s

uffic

ient

, the

aud

itor

uses

a c

ombi

natio

n of

aud

it pr

oced

ures

to o

btai

n su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce

rega

rdin

g th

e op

erat

ing

effe

ctiv

enes

s of

con

trols

. Tho

se c

ontro

ls s

ubje

ct to

test

ing

by p

erfo

rmin

g in

quiry

com

bine

d w

ith

insp

ectio

n or

repe

rfor

man

ce o

rdin

arily

pro

vide

mor

e ass

uran

ce th

an th

ose c

ontro

ls fo

r whi

ch th

e aud

it ev

iden

ce co

nsist

s sol

ely

of in

quiry

and

obse

rvat

ion.

For

exam

ple,

an au

dito

r may

inqu

ire ab

out a

nd o

bser

ve th

e ent

ity’s

pro

cedu

res f

or o

peni

ng th

e mai

l an

d pr

oces

sing

cas

h re

ceip

ts to

test

the

oper

atin

g ef

fect

iven

ess

of c

ontro

ls o

ver

cash

rec

eipt

s. B

ecau

se a

n ob

serv

atio

n is

perti

nent

onl

y at

the p

oint

in ti

me a

t whi

ch it

is m

ade,

the a

udito

r ord

inar

ily su

pple

men

ts th

e obs

erva

tion

with

inqu

iries

of e

ntity

pe

rson

nel,

and

may

als

o in

spec

t doc

umen

tatio

n ab

out t

he o

pera

tion

of su

ch c

ontro

ls a

t oth

er ti

mes

dur

ing

the

audi

t per

iod

in

orde

r to

obta

in su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce.

9(a)

A18

A23

Ade

quat

e m

entio

n be

low

of

repe

rfor

man

ce

Not

e: R

edra

fted

Unn

eces

sary

exa

mpl

es

30.

The n

atur

e of t

he p

artic

ular

cont

rol i

nflu

ence

s the

type

of a

udit

proc

edur

e req

uire

d to

obt

ain

audi

t evi

denc

e abo

ut w

heth

er th

e co

ntro

l was

ope

ratin

g ef

fect

ivel

y at

rele

vant

tim

es d

urin

g th

e per

iod

unde

r aud

it. F

or so

me c

ontro

ls, o

pera

ting

effe

ctiv

enes

s is

evid

ence

d by

doc

umen

tatio

n. In

suc

h ci

rcum

stan

ces,

the

audi

tor m

ay d

ecid

e to

insp

ect t

he d

ocum

enta

tion

to o

btai

n au

dit

evid

ence

abou

t ope

ratin

g ef

fect

iven

ess.

For o

ther

cont

rols

, how

ever

, suc

h do

cum

enta

tion

may

not

be a

vaila

ble o

r rel

evan

t. Fo

r

A24

Unn

eces

sary

rep

etiti

on o

f co

ncep

t

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

885

Age

nda

Item

4-D

.1

Page

17

of 3

0

exam

ple,

doc

umen

tatio

n of

ope

ratio

n m

ay n

ot e

xist

for

som

e fa

ctor

s in

the

cont

rol e

nviro

nmen

t, su

ch a

s as

sign

men

t of

auth

ority

and

resp

onsi

bilit

y, o

r for

som

e typ

es o

f con

trol a

ctiv

ities

, suc

h as

cont

rol a

ctiv

ities

per

form

ed b

y a c

ompu

ter.

In su

ch

circ

umst

ance

s, au

dit e

vide

nce a

bout

ope

ratin

g ef

fect

iven

ess m

ay b

e obt

aine

d th

roug

h in

quiry

in co

mbi

natio

n w

ith o

ther

audi

t pr

oced

ures

such

as o

bser

vatio

n or

the

use

of C

AA

Ts.

31.

In d

esig

ning

test

s of

con

trols

, the

aud

itor c

onsi

ders

the

need

to o

btai

n au

dit e

vide

nce

supp

ortin

g th

e ef

fect

ive

oper

atio

n of

co

ntro

ls d

irect

ly re

late

d to

the

asse

rtion

s as w

ell a

s oth

er in

dire

ct c

ontro

ls o

n w

hich

thes

e co

ntro

ls d

epen

d. F

or e

xam

ple,

the

audi

tor m

ay id

entif

y a

user

revi

ew o

f an

exce

ptio

n re

port

of c

redi

t sal

es o

ver a

cus

tom

er’s

aut

horiz

ed c

redi

t lim

it as

a d

irect

co

ntro

l rel

ated

to an

asse

rtion

. In

such

case

s, th

e aud

itor c

onsid

ers t

he ef

fect

iven

ess o

f the

use

r rev

iew

of t

he re

port

and

also

the

cont

rols

rela

ted

to th

e ac

cura

cy o

f the

info

rmat

ion

in th

e re

port

(for

exa

mpl

e, th

e ge

nera

l IT-

cont

rols

).

9(c)

A25

Not

e: R

edra

fted

in 9

(c)

Not

e: R

edra

fted

in A

25

32.

In th

e cas

e of a

n au

tom

ated

appl

icat

ion

cont

rol,

beca

use o

f the

inhe

rent

cons

iste

ncy

of IT

pro

cess

ing,

audi

t evi

denc

e abo

ut th

e im

plem

enta

tion

of t

he c

ontro

l, w

hen

cons

ider

ed i

n co

mbi

natio

n w

ith a

udit

evid

ence

obt

aine

d re

gard

ing

the

oper

atin

g ef

fect

iven

ess o

f the

entit

y’s g

ener

al co

ntro

ls (a

nd in

par

ticul

ar, c

hang

e con

trols

) may

pro

vide

subs

tant

ial a

udit

evid

ence

abou

t its

ope

ratin

g ef

fect

iven

ess d

urin

g th

e re

leva

nt p

erio

d.

A26

33.

Whe

n re

spon

ding

to th

e ris

k as

sess

men

t, th

e au

dito

r may

des

ign

a te

st o

f con

trols

to b

e pe

rfor

med

con

curr

ently

with

a te

st o

f de

tails

on

the

sam

e tra

nsac

tion.

The

obj

ectiv

e of

test

s of c

ontro

ls is

to e

valu

ate

whe

ther

a c

ontro

l ope

rate

d ef

fect

ivel

y. T

he

obje

ctiv

e of

test

s of d

etai

ls is

to d

etec

t mat

eria

l mis

stat

emen

ts a

t the

ass

ertio

n le

vel.

Alth

ough

thes

e ob

ject

ives

are

diff

eren

t, bo

th m

ay b

e acc

ompl

ishe

d co

ncur

rent

ly th

roug

h pe

rfor

man

ce o

f a te

st o

f con

trols

and

a tes

t of d

etai

ls o

n th

e sam

e tra

nsac

tion,

al

so k

now

n as

a du

al-p

urpo

se te

st. F

or ex

ampl

e, th

e aud

itor m

ay ex

amin

e an

invo

ice t

o de

term

ine w

heth

er it

has

bee

n ap

prov

ed

and

to p

rovi

de su

bsta

ntiv

e au

dit e

vide

nce

of a

tran

sact

ion.

The

aud

itor c

aref

ully

con

side

rs th

e de

sign

and

eva

luat

ion

of su

ch

test

s to

acco

mpl

ish

both

obj

ectiv

es.

A20

A20

Rep

etiti

ve o

f def

initi

on

s

34.

The a

bsen

ce o

f mis

stat

emen

ts d

etec

ted

by a

subs

tant

ive p

roce

dure

doe

s not

pro

vide

audi

t evi

denc

e tha

t con

trols

rela

ted

to th

e as

serti

on b

eing

test

ed ar

e eff

ectiv

e. H

owev

er, m

isst

atem

ents

that

the a

udito

r det

ects

by

perf

orm

ing

subs

tant

ive p

roce

dure

s are

co

nsid

ered

by

the a

udito

r whe

n as

sess

ing

the o

pera

ting

effe

ctiv

enes

s of r

elat

ed co

ntro

ls. A

mat

eria

l mis

stat

emen

t det

ecte

d by

th

e aud

itor’

s pro

cedu

res t

hat w

as n

ot id

entif

ied

by th

e ent

ity o

rdin

arily

is in

dica

tive o

f the

exis

tenc

e of a

mat

eria

l wea

knes

s in

inte

rnal

con

trol,

whi

ch is

com

mun

icat

ed to

man

agem

ent a

nd th

ose

char

ged

with

gov

erna

nce.

16

A37

ISA

26

0 w

ill

requ

ire

com

mun

icat

ion

of

wea

knes

ses

Tim

ing

of T

ests

of C

ontr

ols

35.

The t

imin

g of

test

s of c

ontro

ls d

epen

ds o

n th

e aud

itor’

s obj

ectiv

e and

det

erm

ines

the p

erio

d of

relia

nce o

n th

ose c

ontro

ls. If

the

10

Not

e:

Subs

tant

ially

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

886

Age

nda

Item

4-D

.1

Page

18

of 3

0

audi

tor t

ests

con

trols

at a

par

ticul

ar ti

me,

the

audi

tor o

nly

obta

ins a

udit

evid

ence

that

the

cont

rols

ope

rate

d ef

fect

ivel

y at

that

tim

e H

owev

er, i

f the

aud

itor t

ests

con

trols

thro

ugho

ut a

per

iod,

the

audi

tor o

btai

ns a

udit

evid

ence

of t

he e

ffec

tiven

ess o

f the

op

erat

ion

of th

e co

ntro

ls d

urin

g th

at p

erio

d.

redr

afte

d

36.

Aud

it ev

iden

ce p

erta

inin

g on

ly to

a po

int i

n tim

e may

be s

uffic

ient

for t

he au

dito

r’s p

urpo

se, f

or ex

ampl

e, w

hen

testi

ng co

ntro

ls ov

er th

e ent

ity’s

phy

sica

l inv

ento

ry co

untin

g at

the p

erio

d en

d. If

, on

the o

ther

han

d, th

e aud

itor r

equi

res a

udit

evid

ence

of t

he

effe

ctiv

enes

s of a

con

trol o

ver a

per

iod,

aud

it ev

iden

ce p

erta

inin

g on

ly to

a p

oint

in ti

me

may

be

insu

ffic

ient

and

the

audi

tor

supp

lem

ents

thos

e te

sts

with

oth

er te

sts

of c

ontro

ls th

at a

re c

apab

le o

f pro

vidi

ng a

udit

evid

ence

that

the

cont

rol o

pera

ted

effe

ctiv

ely

at re

leva

nt ti

mes

dur

ing

the

perio

d un

der a

udit.

Suc

h ot

her t

ests

may

con

sist

of t

ests

of t

he e

ntity

’s m

onito

ring

of

cont

rols

.

A27

37.

Whe

n th

e au

dito

r ob

tain

s aud

it ev

iden

ce a

bout

the

oper

atin

g ef

fect

iven

ess o

f con

trol

s dur

ing

an in

teri

m p

erio

d, th

e au

dito

r sh

ould

det

erm

ine

wha

t add

ition

al a

udit

evid

ence

shou

ld b

e obt

aine

d fo

r th

e re

mai

ning

per

iod.

In

mak

ing

that

de

term

inat

ion,

the

audi

tor c

onsi

ders

the

signi

fican

ce o

f the

ass

esse

d ris

ks o

f mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l, th

e sp

ecifi

c co

ntro

ls t

hat

wer

e te

sted

dur

ing

the

inte

rim p

erio

d, t

he d

egre

e to

whi

ch a

udit

evid

ence

abo

ut t

he o

pera

ting

effe

ctiv

enes

s of

thos

e co

ntro

ls w

as o

btai

ned,

the

leng

th o

f the

rem

aini

ng p

erio

d, th

e ex

tent

to w

hich

the

audi

tor i

nten

ds to

re

duce

furth

er su

bsta

ntiv

e pro

cedu

res b

ased

on

the r

elia

nce o

f con

trols,

and

the c

ontro

l env

ironm

ent.

The a

udito

r obt

ains

audi

t ev

iden

ce a

bout

the

natu

re a

nd e

xten

t of

any

sign

ifica

nt c

hang

es in

inte

rnal

con

trol,

incl

udin

g ch

ange

s in

the

info

rmat

ion

syst

em, p

roce

sses

, and

per

sonn

el th

at o

ccur

subs

eque

nt to

the

inte

rim p

erio

d.

11(b

)

A28

11(a

)

Not

e: S

ubst

antia

lly

redr

afte

d

38.

Add

ition

al au

dit e

vide

nce m

ay b

e obt

aine

d, fo

r exa

mpl

e, b

y ex

tend

ing

the t

estin

g of

the o

pera

ting

effe

ctiv

enes

s of c

ontro

ls ov

er

the

rem

aini

ng p

erio

d or

test

ing

the

entit

y’s m

onito

ring

of c

ontro

ls.

A29

39.

If th

e au

dito

r pl

ans

to u

se a

udit

evid

ence

abo

ut th

e op

erat

ing

effe

ctiv

enes

s of

con

trol

s ob

tain

ed in

pri

or a

udits

, the

au

dito

r sho

uld

obta

in a

udit

evid

ence

abo

ut w

heth

er ch

ange

s in

thos

e spe

cific

cont

rols

hav

e occ

urre

d su

bseq

uent

to th

e pr

ior a

udit.

The

aud

itor s

houl

d ob

tain

aud

it ev

iden

ce a

bout

whe

ther

such

chan

ges h

ave o

ccur

red

by p

erfo

rmin

g in

quir

y in

com

bina

tion

with

obs

erva

tion

or in

spec

tion

to co

nfir

m th

e und

erst

andi

ng o

f tho

se sp

ecifi

c con

trol

s. Pa

ragr

aph

23 o

f IS

A 5

00 st

ates

that

the

audi

tor p

erfo

rms a

udit

proc

edur

es to

est

ablis

h th

e co

ntin

uing

rele

vanc

e of

aud

it ev

iden

ce o

btai

ned

in

prio

r per

iods

whe

n th

e aud

itor p

lans

to u

se th

e aud

it ev

iden

ce in

the c

urre

nt p

erio

d. F

or ex

ampl

e, in

per

form

ing

the p

rior a

udit,

th

e aud

itor m

ay h

ave d

eter

min

ed th

at an

auto

mat

ed co

ntro

l was

func

tioni

ng as

inte

nded

. The

audi

tor o

btai

ns au

dit e

vide

nce t

o de

term

ine

whe

ther

cha

nges

to th

e au

tom

ated

con

trol h

ave

been

mad

e th

at a

ffec

t its

con

tinue

d ef

fect

ive

func

tioni

ng, f

or

exam

ple,

thr

ough

inq

uirie

s of

man

agem

ent

and

the

insp

ectio

n of

log

s to

ind

icat

e w

hat

cont

rols

hav

e be

en c

hang

ed.

Con

side

ratio

n of

audi

t evi

denc

e abo

ut th

ese c

hang

es m

ay su

ppor

t eith

er in

crea

sing

or d

ecre

asin

g th

e exp

ecte

d au

dit e

vide

nce t

o

13

A30

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

887

Age

nda

Item

4-D

.1

Page

19

of 3

0

be o

btai

ned

in th

e cu

rren

t per

iod

abou

t the

ope

ratin

g ef

fect

iven

ess o

f the

con

trols

.

40.

If t

he a

udito

r pl

ans

to r

ely

on c

ontr

ols

that

hav

e ch

ange

d si

nce

they

wer

e la

st t

este

d, t

he a

udito

r sh

ould

tes

t th

e op

erat

ing

effe

ctiv

enes

s of

suc

h co

ntro

ls in

the

cur

rent

aud

it. C

hang

es m

ay a

ffec

t the

rel

evan

ce o

f th

e au

dit e

vide

nce

obta

ined

in p

rior p

erio

ds su

ch th

at th

ere m

ay n

o lo

nger

be a

bas

is fo

r con

tinue

d re

lianc

e. F

or ex

ampl

e, ch

ange

s in

a sys

tem

that

en

able

an

entit

y to

rece

ive

a ne

w re

port

from

the

syst

em p

roba

bly

do n

ot a

ffec

t the

rele

vanc

e of

prio

r per

iod

audi

t evi

denc

e;

how

ever

, a c

hang

e th

at c

ause

s dat

a to

be

accu

mul

ated

or c

alcu

late

d di

ffer

ently

doe

s aff

ect i

t.

13(a

)

A31

41.

If th

e au

dito

r pl

ans

to r

ely

on c

ontr

ols t

hat h

ave

not c

hang

ed s

ince

they

wer

e la

st te

sted

, the

aud

itor

shou

ld te

st th

e op

erat

ing

effe

ctiv

enes

s of s

uch

cont

rols

at l

east

onc

e in

ever

y th

ird

audi

t. A

s ind

icat

ed in

par

agra

phs 4

0 an

d 44

, the

audi

tor

may

not

rely

on

audi

t evi

denc

e ab

out t

he o

pera

ting

effe

ctiv

enes

s of

con

trols

obt

aine

d in

prio

r aud

its fo

r con

trols

that

hav

e ch

ange

d si

nce

they

wer

e la

st te

sted

or c

ontro

ls th

at m

itiga

te a

sign

ifica

nt ri

sk.

The

audi

tor’

s dec

isio

n on

whe

ther

to re

ly o

n au

dit e

vide

nce

obta

ined

in p

rior a

udits

for o

ther

con

trols

is a

mat

ter o

f pro

fess

iona

l jud

gmen

t. In

add

ition

, the

leng

th o

f tim

e pe

riod

betw

een

rete

stin

g su

ch c

ontro

ls is

als

o a

mat

ter o

f pro

fess

iona

l jud

gmen

t, bu

t can

not e

xcee

d tw

o ye

ars.

13(b

)

A32

Unn

eces

sary

inte

rnal

cro

ss-

refe

renc

e

42.

In c

onsi

derin

g w

heth

er it

is a

ppro

pria

te to

use

aud

it ev

iden

ce a

bout

the

oper

atin

g ef

fect

iven

ess o

f con

trols

obt

aine

d in

prio

r au

dits

, and

, if s

o, th

e le

ngth

of t

he ti

me

perio

d th

at m

ay e

laps

e be

fore

rete

stin

g a

cont

rol,

the

audi

tor c

onsi

ders

the

follo

win

g:

• Th

e eff

ectiv

enes

s of o

ther

elem

ents

of i

nter

nal c

ontro

l, in

clud

ing

the c

ontro

l env

ironm

ent,

the e

ntity

’s m

onito

ring

of co

ntro

ls,

and

the

entit

y’s r

isk

asse

ssm

ent p

roce

ss.

• Th

e ris

ks a

risin

g fr

om th

e ch

arac

teris

tics o

f the

con

trol,

incl

udin

g w

heth

er c

ontro

ls a

re m

anua

l or a

utom

ated

(see

ISA

315

, pa

ragr

aphs

57-

63 fo

r a d

iscu

ssio

n of

spec

ific

risks

aris

ing

from

man

ual a

nd a

utom

ated

ele

men

ts o

f a c

ontro

l).

• Th

e ef

fect

iven

ess o

f gen

eral

IT-c

ontro

ls.

• Th

e eff

ectiv

enes

s of t

he co

ntro

l and

its a

pplic

atio

n by

the e

ntity

, inc

ludi

ng th

e nat

ure a

nd ex

tent

of d

evia

tions

in th

e app

licat

ion

of th

e co

ntro

l fro

m te

sts o

f ope

ratin

g ef

fect

iven

ess i

n pr

ior a

udits

.

• W

heth

er th

e la

ck o

f a c

hang

e in

a p

artic

ular

con

trol p

oses

a ri

sk d

ue to

cha

ngin

g ci

rcum

stan

ces.

• Th

e ris

k of

mat

eria

l mis

stat

emen

t and

the

exte

nt o

f rel

ianc

e on

the

cont

rol.

12

Unn

eces

sary

cros

s-re

fere

nce

In g

ener

al, t

he h

ighe

r the

risk

of m

ater

ial m

isst

atem

ent,

or th

e gre

ater

the r

elia

nce o

n co

ntro

ls, th

e sho

rter t

he ti

me p

erio

d el

apse

d, if

an

y, is

like

ly to

be.

Fac

tors

that

ord

inar

ily d

ecre

ase t

he p

erio

d fo

r ret

estin

g a c

ontro

l, or

resu

lt in

not

rely

ing

on au

dit e

vide

nce

obta

ined

in p

rior a

udits

at a

ll, in

clud

e th

e fo

llow

ing:

A33

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

888

Age

nda

Item

4-D

.1

Page

20

of 3

0

• A

wea

k co

ntro

l env

ironm

ent.

• W

eak

mon

itorin

g of

con

trols

.

• A

sign

ifica

nt m

anua

l ele

men

t to

the

rele

vant

con

trols

.

• Pe

rson

nel c

hang

es th

at si

gnifi

cant

ly a

ffec

t the

app

licat

ion

of th

e co

ntro

l.

• C

hang

ing

circ

umst

ance

s tha

t ind

icat

e th

e ne

ed fo

r cha

nges

in th

e co

ntro

l.

• W

eak

gene

ral I

T-co

ntro

ls.

43.

Whe

n th

ere

are

a nu

mbe

r of

con

trol

s fo

r w

hich

the

audi

tor

dete

rmin

es th

at it

is a

ppro

pria

te to

use

aud

it ev

iden

ce

obta

ined

in p

rior

aud

its, t

he a

udito

r sho

uld

test

the o

pera

ting

effe

ctiv

enes

s of s

ome c

ontr

ols e

ach

audi

t. Th

e pur

pose

of

this

requ

irem

ent i

s to

avoi

d th

e po

ssib

ility

that

the

audi

tor m

ight

app

ly th

e ap

proa

ch o

f par

agra

ph 4

1 to

all

cont

rols

on

whi

ch

the a

udito

r pro

pose

s to

rely

, but

test

all t

hose

cont

rols

in a

singl

e aud

it pe

riod

with

no

test

ing

of co

ntro

ls in

the s

ubse

quen

t tw

o au

dit p

erio

ds. I

n ad

ditio

n to

pro

vidi

ng a

udit

evid

ence

abo

ut th

e op

erat

ing

effe

ctiv

enes

s of

the

cont

rols

bei

ng te

sted

in th

e cu

rren

t aud

it, p

erfo

rmin

g su

ch te

sts p

rovi

des c

olla

tera

l evi

denc

e abo

ut th

e con

tinui

ng ef

fect

iven

ess o

f the

cont

rol e

nviro

nmen

t an

d th

eref

ore

cont

ribut

es to

the

deci

sion

abo

ut w

heth

er it

is a

ppro

pria

te to

rely

on

audi

t evi

denc

e ob

tain

ed in

prio

r aud

its.

Ther

efor

e, w

hen

the

audi

tor

dete

rmin

es in

acc

orda

nce

with

par

agra

phs

39-4

2 th

at it

is a

ppro

pria

te to

use

aud

it ev

iden

ce

obta

ined

in p

rior a

udits

for a

num

ber o

f con

trols

, the

audi

tor p

lans

to te

st a

suff

icie

nt p

ortio

n of

the c

ontro

ls in

that

pop

ulat

ion

in e

ach

audi

t per

iod,

and

at a

min

imum

, eac

h co

ntro

l is t

este

d at

leas

t eve

ry th

ird a

udit.

13(b

)

A34

Rep

eats

the

requ

irem

ent o

f ne

w p

ara

13(b

)

44.

Whe

n, in

acc

orda

nce

with

par

agra

ph 1

08 o

f ISA

315

, the

aud

itor

has

dete

rmin

ed th

at a

n as

sess

ed r

isk

of m

ater

ial

mis

stat

emen

t at t

he a

sser

tion

leve

l is a

sign

ifica

nt r

isk

and

the

audi

tor

plan

s to

rely

on

the

oper

atin

g ef

fect

iven

ess o

f co

ntro

ls in

tend

ed to

miti

gate

that

sig

nific

ant r

isk,

the

audi

tor

shou

ld o

btai

n th

e au

dit e

vide

nce

abou

t the

ope

ratin

g ef

fect

iven

ess

of th

ose

cont

rols

from

test

s of

con

trol

s pe

rfor

med

in th

e cu

rren

t per

iod.

The

gre

ater

the

risk

of m

ater

ial

mis

stat

emen

t, th

e m

ore

audi

t evi

denc

e th

e au

dito

r ob

tain

s th

at r

elev

ant c

ontro

ls a

re o

pera

ting

effe

ctiv

ely.

Acc

ordi

ngly

, al

thou

gh th

e aud

itor o

ften

cons

ider

s inf

orm

atio

n ob

tain

ed in

prio

r aud

its in

des

igni

ng te

sts o

f con

trols

to m

itiga

te a

sign

ifica

nt

risk,

the a

udito

r doe

s not

rely

on

audi

t evi

denc

e obt

aine

d in

a pr

ior a

udit

abou

t the

ope

ratin

g ef

fect

iven

ess o

f con

trols

over

such

ris

ks, b

ut in

stea

d ob

tain

s the

audi

t evi

denc

e abo

ut th

e ope

ratin

g ef

fect

iven

ess o

f con

trols

ove

r suc

h ris

ks in

the c

urre

nt p

erio

d.

14

Not

e: S

ubst

antia

lly

redr

afte

d

Subs

tant

ially

co

vere

d by

ne

w p

ara

7(b)

Unn

eces

sary

to st

ate

this

as

redr

afte

d.

Rep

eats

the

requ

irem

ent o

f ne

w p

ara

14

Exte

nt o

f Tes

ts o

f Con

trol

s

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

889

Age

nda

Item

4-D

.1

Page

21

of 3

0

45.

The

audi

tor

desi

gns

test

s of

con

trols

to o

btai

n su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce th

at th

e co

ntro

ls o

pera

ted

effe

ctiv

ely

thro

ugho

ut th

e per

iod

of re

lianc

e. M

atte

rs th

e aud

itor m

ay co

nsid

er in

det

erm

inin

g th

e ext

ent o

f the

audi

tor’

s tes

ts o

f con

trols

incl

ude

the

follo

win

g:

• Th

e fr

eque

ncy

of th

e pe

rfor

man

ce o

f the

con

trol b

y th

e en

tity

durin

g th

e pe

riod.

• Th

e le

ngth

of t

ime

durin

g th

e au

dit p

erio

d th

at th

e au

dito

r is r

elyi

ng o

n th

e op

erat

ing

effe

ctiv

enes

s of t

he c

ontro

l.

• Th

e rel

evan

ce an

d re

liabi

lity

of th

e aud

it ev

iden

ce to

be o

btai

ned

in su

ppor

ting

that

the c

ontro

l pre

vent

s, or

det

ects

and

corre

cts,

mat

eria

l mis

stat

emen

ts a

t the

ass

ertio

n le

vel.

• Th

e ex

tent

to w

hich

aud

it ev

iden

ce is

obt

aine

d fr

om te

sts o

f oth

er c

ontro

ls re

late

d to

the

asse

rtion

.

• Th

e ext

ent t

o w

hich

the a

udito

r pla

ns to

rely

on

the o

pera

ting

effe

ctiv

enes

s of t

he co

ntro

l in

the a

sses

smen

t of r

isk (a

nd th

ereb

y re

duce

subs

tant

ive

proc

edur

es b

ased

on

the

relia

nce

of su

ch c

ontro

l).

• Th

e ex

pect

ed d

evia

tion

from

the

cont

rol.

A35

Unn

eces

sary

repe

titio

n

Unn

eces

sary

rep

eat o

f ne

w

para

15

(old

par

a 46

)

46.

The

mor

e th

e au

dito

r rel

ies o

n th

e op

erat

ing

effe

ctiv

enes

s of c

ontro

ls in

the a

sses

smen

t of r

isk,

the

grea

ter i

s the

ext

ent o

f the

au

dito

r’s t

ests

of c

ontro

ls. I

n ad

ditio

n, as

the r

ate o

f exp

ecte

d de

viat

ion

from

a co

ntro

l inc

reas

es, t

he au

dito

r inc

reas

es th

e ext

ent

of te

stin

g of

the

cont

rol.

How

ever

, the

aud

itor c

onsi

ders

whe

ther

the

rate

of e

xpec

ted

devi

atio

n in

dica

tes t

hat t

he c

ontro

l will

no

t be

suff

icie

nt to

redu

ce th

e ris

k of

mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l to

that

ass

esse

d by

the

audi

tor.

If th

e ra

te o

f ex

pect

ed d

evia

tion

is ex

pect

ed to

be t

oo h

igh,

the a

udito

r may

det

erm

ine t

hat t

ests

of c

ontro

ls fo

r a p

artic

ular

asse

rtion

may

not

be

eff

ectiv

e.

15

(A38

)

Rep

etiti

on o

f fin

al d

ot

poin

t in

prev

ious

par

a.

Rel

ated

mor

e to

aud

it ef

ficie

ncy

than

ef

fect

iven

ess.

The

ef

fect

iven

ess i

ssue

is

adeq

uate

ly p

icke

d up

in

new

par

a 17

47.

Bec

ause

of t

he in

here

nt co

nsis

tenc

y of

IT p

roce

ssin

g, th

e aud

itor m

ay n

ot n

eed

to in

crea

se th

e ext

ent o

f tes

ting

of an

auto

mat

ed

cont

rol.

An

auto

mat

ed co

ntro

l sho

uld

func

tion

cons

iste

ntly

unl

ess t

he p

rogr

am (i

nclu

ding

the t

able

s, fil

es, o

r oth

er p

erm

anen

t da

ta u

sed

by th

e pro

gram

) is c

hang

ed. O

nce t

he au

dito

r det

erm

ines

that

an au

tom

ated

cont

rol i

s fun

ctio

ning

as in

tend

ed (w

hich

co

uld

be d

one a

t the

tim

e th

e co

ntro

l is i

nitia

lly im

plem

ente

d or

at s

ome

othe

r dat

e), t

he a

udito

r con

side

rs p

erfo

rmin

g te

sts t

o de

term

ine t

hat t

he co

ntro

l con

tinue

s to

func

tion

effe

ctiv

ely.

Suc

h te

sts m

ight

incl

ude d

eter

min

ing

that

chan

ges t

o th

e pro

gram

ar

e no

t mad

e w

ithou

t bei

ng su

bjec

t to

the

appr

opria

te p

rogr

am c

hang

e co

ntro

ls, t

hat t

he a

utho

rized

ver

sion

of t

he p

rogr

am is

us

ed f

or p

roce

ssin

g tra

nsac

tions

, an

d th

at o

ther

rel

evan

t ge

nera

l co

ntro

ls a

re e

ffec

tive.

Suc

h te

sts

also

mig

ht i

nclu

de

dete

rmin

ing

that

cha

nges

to th

e pr

ogra

ms

have

not

bee

n m

ade,

as

may

be

the

case

whe

n th

e en

tity

uses

pac

kage

d so

ftwar

e

A36

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

890

Age

nda

Item

4-D

.1

Page

22

of 3

0

appl

icat

ions

with

out m

odify

ing

or m

aint

aini

ng th

em. F

or ex

ampl

e, th

e aud

itor m

ay in

spec

t the

reco

rd o

f the

adm

inis

tratio

n of

IT

secu

rity

to o

btai

n au

dit e

vide

nce

that

una

utho

rized

acc

ess h

as n

ot o

ccur

red

durin

g th

e pe

riod.

Subs

tant

ive

Proc

edur

es

48.

Subs

tant

ive

proc

edur

es a

re p

erfo

rmed

in o

rder

to d

etec

t mat

eria

l mis

stat

emen

ts a

t the

ass

ertio

n le

vel,

and

incl

ude

test

s of

de

tails

of c

lass

es o

f tra

nsac

tions

, acc

ount

bal

ance

s, an

d di

sclo

sure

s and

subs

tant

ive a

naly

tical

pro

cedu

res.

The a

udito

r pla

ns an

d pe

rfor

ms s

ubst

antiv

e pr

oced

ures

to b

e re

spon

sive

to th

e re

late

d as

sess

men

t of t

he ri

sk o

f mat

eria

l mis

stat

emen

t.

4(a)

Rep

eats

par

a 6

49.

Irre

spec

tive

of t

he a

sses

sed

risk

of

mat

eria

l m

isst

atem

ent,

the

audi

tor

shou

ld d

esig

n an

d pe

rfor

m s

ubst

antiv

e pr

oced

ures

for e

ach

mat

eria

l cla

ss o

f tra

nsac

tions

, acc

ount

bal

ance

, and

disc

losu

re. T

his r

equi

rem

ent r

efle

cts t

he fa

ct th

at

the a

udito

r’s a

sses

smen

t of r

isk

is ju

dgm

enta

l and

may

not

be s

uffic

ient

ly p

reci

se to

iden

tify

all r

isks

of m

ater

ial m

isst

atem

ent.

Furth

er, t

here

are i

nher

ent l

imita

tions

to in

tern

al co

ntro

l inc

ludi

ng m

anag

emen

t ove

rrid

e. A

ccor

ding

ly, w

hile

the a

udito

r may

de

term

ine t

hat t

he ri

sk o

f mat

eria

l mis

stat

emen

t may

be r

educ

ed to

an ac

cept

ably

low

leve

l by

perfo

rmin

g on

ly te

sts o

f con

trols

fo

r a p

artic

ular

asse

rtion

rela

ted

to a

clas

s of t

rans

actio

ns, a

ccou

nt b

alan

ce o

r dis

clos

ure (

see p

arag

raph

8),

the a

udito

r alw

ays

perf

orm

s sub

stan

tive

proc

edur

es fo

r eac

h m

ater

ial c

lass

of t

rans

actio

ns, a

ccou

nt b

alan

ce, a

nd d

iscl

osur

e.

28

Unn

eces

sary

repe

titio

n of

ne

w p

ara

18

50.

The

aud

itor’

s sub

stan

tive p

roce

dure

s sho

uld

incl

ude t

he fo

llow

ing

audi

t pro

cedu

res r

elat

ed to

the f

inan

cial

stat

emen

t cl

osin

g pr

oces

s:

• A

gree

ing

the

finan

cial

stat

emen

ts to

the

unde

rlyi

ng a

ccou

ntin

g re

cord

s; a

nd

• E

xam

inin

g m

ater

ial

jour

nal

entr

ies

and

othe

r ad

just

men

ts m

ade

duri

ng t

he c

ours

e of

pre

pari

ng t

he f

inan

cial

st

atem

ents

.

The

nat

ure a

nd ex

tent

of t

he a

udito

r’s e

xam

inat

ion

of jo

urna

l ent

ries

and

oth

er a

djus

tmen

ts d

epen

ds o

n th

e nat

ure a

nd

com

plex

ity o

f the

ent

ity’s

fina

ncia

l rep

ortin

g pr

oces

s and

the

asso

ciat

ed r

isks

of m

ater

ial m

isst

atem

ent.

20

51.

Whe

n, in

acc

orda

nce

with

par

agra

ph 1

08 o

f ISA

315

, the

aud

itor

has

dete

rmin

ed th

at a

n as

sess

ed r

isk

of m

ater

ial

mis

stat

emen

t at t

he a

sser

tion

leve

l is

a si

gnifi

cant

ris

k, th

e au

dito

r sh

ould

per

form

sub

stan

tive

proc

edur

es th

at a

re

spec

ifica

lly re

spon

sive

to th

at ri

sk. F

or ex

ampl

e, if

the a

udito

r ide

ntifi

es th

at m

anag

emen

t is u

nder

pre

ssur

e to

mee

t ear

ning

s ex

pect

atio

ns, t

here

may

be

a ris

k th

at m

anag

emen

t is

infla

ting

sale

s by

impr

oper

ly r

ecog

nizi

ng r

even

ue r

elat

ed to

sal

es

agre

emen

ts w

ith te

rms t

hat p

recl

ude

reve

nue

reco

gniti

on o

r by

invo

icin

g sa

les b

efor

e sh

ipm

ent.

In th

ese

circ

umst

ance

s, th

e

19

A44

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

891

Age

nda

Item

4-D

.1

Page

23

of 3

0

audi

tor m

ay, f

or e

xam

ple,

des

ign

exte

rnal

con

firm

atio

ns n

ot o

nly

to c

onfir

m o

utst

andi

ng a

mou

nts,

but a

lso

to c

onfir

m th

e de

tails

of t

he s

ales

agr

eem

ents

, inc

ludi

ng d

ate,

any

righ

ts o

f ret

urn

and

deliv

ery

term

s. In

add

ition

, the

aud

itor m

ay fi

nd it

ef

fect

ive

to s

uppl

emen

t suc

h ex

tern

al c

onfir

mat

ions

with

inqu

iries

of

non-

finan

cial

per

sonn

el in

the

entit

y re

gard

ing

any

chan

ges i

n sa

les a

gree

men

ts a

nd d

eliv

ery

term

s.

52.

Whe

n th

e app

roac

h to

sign

ifica

nt ri

sks c

onsis

ts on

ly o

f sub

stant

ive p

roce

dure

s, th

e aud

it pr

oced

ures

appr

opria

te to

addr

ess s

uch

sign

ifica

nt ri

sks c

onsi

st o

f tes

ts o

f det

ails

onl

y, o

r a c

ombi

natio

n of

test

s of d

etai

ls a

nd su

bsta

ntiv

e an

alyt

ical

pro

cedu

res T

he

audi

tor c

onsi

ders

the

guid

ance

in p

arag

raph

s 53-

64 in

des

igni

ng th

e na

ture

, tim

ing,

and

ext

ent o

f sub

stan

tive

proc

edur

es fo

r si

gnifi

cant

risk

s. In

ord

er to

obt

ain

suff

icie

nt ap

prop

riate

audi

t evi

denc

e, th

e sub

stan

tive p

roce

dure

s rel

ated

to si

gnifi

cant

risk

s ar

e m

ost o

ften

desi

gned

to o

btai

n au

dit e

vide

nce

with

hig

h re

liabi

lity.

19

Not

e: R

ewor

ded

Unn

eces

sary

int

erna

l cr

oss

refe

renc

e

Purp

ose o

f sta

ting

this

is n

ot

clea

r –

does

no

t ad

d su

bsta

nce

Nat

ure

of S

ubst

antiv

e Pr

oced

ures

53.

Subs

tant

ive

anal

ytic

al p

roce

dure

s are

gen

eral

ly m

ore

appl

icab

le to

larg

e vo

lum

es o

f tra

nsac

tions

that

tend

to b

e pr

edic

tabl

e ov

er ti

me.

Tes

ts o

f det

ails

are o

rdin

arily

mor

e app

ropr

iate

to o

btai

n au

dit e

vide

nce r

egar

ding

certa

in as

serti

ons a

bout

acco

unt

bala

nces

, inc

ludi

ng e

xist

ence

and

val

uatio

n. In

som

e si

tuat

ions

, the

aud

itor m

ay d

eter

min

e th

at p

erfo

rmin

g on

ly su

bsta

ntiv

e an

alyt

ical

pro

cedu

res m

ay b

e suf

ficie

nt to

redu

ce th

e ris

k of

mat

eria

l miss

tate

men

t to

an ac

cept

ably

low

leve

l. Fo

r exa

mpl

e, th

e au

dito

r may

det

erm

ine

that

per

form

ing

only

subs

tant

ive

anal

ytic

al p

roce

dure

s is r

espo

nsiv

e to

the

asse

ssed

risk

of m

ater

ial

mis

stat

emen

t for

a c

lass

of t

rans

actio

ns w

here

the

audi

tor’

s ass

essm

ent o

f ris

k is

supp

orte

d by

obt

aini

ng a

udit

evid

ence

from

pe

rfor

man

ce o

f tes

ts o

f the

ope

ratin

g ef

fect

iven

ess o

f con

trols

. In

othe

r situ

atio

ns, t

he au

dito

r may

det

erm

ine t

hat o

nly

tests

of

deta

ils ar

e app

ropr

iate

, or t

hat a

com

bina

tion

of su

bsta

ntiv

e ana

lytic

al p

roce

dure

s and

tests

of d

etai

ls ar

e mos

t res

pons

ive t

o th

e as

sess

ed ri

sks.

A41

D

oes n

ot a

dd su

bsta

nce

Unn

eces

sary

stat

emen

t

Unn

eces

sary

exa

mpl

e

54.

The

audi

tor d

esig

ns te

sts o

f det

ails

resp

onsiv

e to

the

asse

ssed

risk

with

the

obje

ctiv

e of

obt

aini

ng su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce to

ach

ieve

the

plan

ned

leve

l of a

ssur

ance

at t

he a

sser

tion

leve

l. In

des

igni

ng s

ubst

antiv

e pr

oced

ures

rela

ted

to th

e ex

iste

nce

or o

ccur

renc

e as

serti

on, t

he a

udito

r sel

ects

from

item

s co

ntai

ned

in a

fina

ncia

l sta

tem

ent a

mou

nt a

nd o

btai

ns th

e re

leva

nt a

udit

evid

ence

. On

the

othe

r han

d, in

des

igni

ng a

udit

proc

edur

es re

late

d to

the

com

plet

enes

s ass

ertio

n, th

e au

dito

r se

lect

s fr

om a

udit

evid

ence

ind

icat

ing

that

an

item

sho

uld

be i

nclu

ded

in t

he r

elev

ant

finan

cial

sta

tem

ent

amou

nt a

nd

inve

stig

ates

whe

ther

that

item

is s

o in

clud

ed. F

or e

xam

ple,

the

audi

tor

mig

ht in

spec

t sub

sequ

ent c

ash

disb

urse

men

ts to

de

term

ine

whe

ther

any

pur

chas

es h

ad b

een

omitt

ed fr

om a

ccou

nts p

ayab

le.

A42

Rep

eats

old

par

a 48

Unn

eces

sary

exa

mpl

e

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

892

Age

nda

Item

4-D

.1

Page

24

of 3

0

55.

In d

esig

ning

subs

tant

ive

anal

ytic

al p

roce

dure

s, th

e au

dito

r con

side

rs su

ch m

atte

rs a

s the

follo

win

g:

• Th

e su

itabi

lity

of u

sing

subs

tant

ive

anal

ytic

al p

roce

dure

s giv

en th

e as

serti

ons

• Th

e rel

iabi

lity

of th

e dat

a, w

heth

er in

tern

al o

r ext

erna

l, fr

om w

hich

the e

xpec

tatio

n of

reco

rded

amou

nts o

r rat

ios i

s dev

elop

ed

• W

heth

er th

e ex

pect

atio

n is

suff

icie

ntly

pre

cise

to id

entif

y a

mat

eria

l mis

stat

emen

t at t

he d

esire

d le

vel o

f ass

uran

ce

• Th

e am

ount

of a

ny d

iffer

ence

in re

cord

ed a

mou

nts f

rom

exp

ecte

d va

lues

that

is a

ccep

tabl

e

The

audi

tor c

onsi

ders

test

ing

the

cont

rols

, if a

ny, o

ver t

he e

ntity

’s p

repa

ratio

n of

info

rmat

ion

used

by

the

audi

tor i

n ap

plyi

ng

anal

ytic

al p

roce

dure

s. W

hen

such

cont

rols

are e

ffec

tive,

the a

udito

r has

gre

ater

conf

iden

ce in

the r

elia

bilit

y of

the i

nfor

mat

ion

and,

ther

efor

e, in

the

resu

lts o

f ana

lytic

al p

roce

dure

s. A

ltern

ativ

ely,

the

audi

tor m

ay c

onsi

der w

heth

er th

e in

form

atio

n w

as

subj

ecte

d to

aud

it te

stin

g in

the

curr

ent o

r prio

r per

iod.

In d

eter

min

ing

the

audi

t pro

cedu

res t

o ap

ply

to th

e in

form

atio

n up

on

whi

ch th

e exp

ecta

tion

for s

ubst

antiv

e ana

lytic

al p

roce

dure

s is b

ased

, the

audi

tor c

onsid

ers t

he g

uida

nce i

n pa

ragr

aph

11 o

f ISA

50

0.

C

over

ed

by

ISA

52

0 “A

naly

tical

Pro

cedu

res”

Effe

ctiv

ely

repe

ats

ISA

33

0.13

, whi

ch r

epea

ts I

SA

500.

11

Tim

ing

of S

ubst

antiv

e Pr

oced

ures

56.

Whe

n su

bsta

ntiv

e pr

oced

ures

are

per

form

ed a

t an

inte

rim

dat

e, t

he a

udito

r sh

ould

per

form

fur

ther

sub

stan

tive

proc

edur

es o

r su

bsta

ntiv

e pr

oced

ures

com

bine

d w

ith te

sts

of c

ontr

ols

to c

over

the

rem

aini

ng p

erio

d th

at p

rovi

de a

re

ason

able

bas

is fo

r ex

tend

ing

the

audi

t con

clus

ions

from

the

inte

rim

dat

e to

the

peri

od e

nd.

21

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

893

Age

nda

Item

4-D

.1

Page

25

of 3

0

57.

In so

me c

ircum

stan

ces,

subs

tant

ive p

roce

dure

s may

be p

erfo

rmed

at an

inte

rim d

ate.

Thi

s inc

reas

es th

e risk

that

miss

tate

men

ts th

at m

ay e

xist

at t

he p

erio

d en

d ar

e no

t det

ecte

d by

the

audi

tor.

This

risk

incr

ease

s as t

he re

mai

ning

per

iod

is le

ngth

ened

. In

cons

ider

ing

whe

ther

to p

erfo

rm su

bsta

ntiv

e pro

cedu

res a

t an

inte

rim d

ate,

the a

udito

r con

side

rs su

ch fa

ctor

s as t

he fo

llow

ing:

• Th

e co

ntro

l env

ironm

ent a

nd o

ther

rele

vant

con

trols

.

• Th

e av

aila

bilit

y of

info

rmat

ion

at a

late

r dat

e th

at is

nec

essa

ry fo

r the

aud

itor’

s pro

cedu

res.

• Th

e ob

ject

ive

of th

e su

bsta

ntiv

e pr

oced

ure.

• Th

e as

sess

ed ri

sk o

f mat

eria

l mis

stat

emen

t.

• Th

e na

ture

of t

he c

lass

of t

rans

actio

ns o

r acc

ount

bal

ance

and

rela

ted

asse

rtion

s.

• Th

e ab

ility

of t

he a

udito

r to

perf

orm

app

ropr

iate

sub

stan

tive

proc

edur

es o

r sub

stan

tive

proc

edur

es c

ombi

ned

with

test

s of

co

ntro

ls to

cov

er th

e re

mai

ning

per

iod

in o

rder

to re

duce

the

risk

that

mis

stat

emen

ts th

at e

xist

at p

erio

d en

d ar

e no

t det

ecte

d.

A46

58.

Alth

ough

the

audi

tor i

s not

requ

ired

to o

btai

n au

dit e

vide

nce

abou

t the

ope

ratin

g ef

fect

iven

ess o

f con

trols

in o

rder

to h

ave

a re

ason

able

bas

is f

or e

xten

ding

aud

it co

nclu

sion

s fr

om a

n in

terim

dat

e to

the

perio

d en

d, th

e au

dito

r co

nsid

ers

whe

ther

pe

rfor

min

g on

ly su

bsta

ntiv

e pr

oced

ures

to c

over

the

rem

aini

ng p

erio

d is

suff

icie

nt. I

f the

aud

itor c

oncl

udes

that

subs

tant

ive

proc

edur

es a

lone

wou

ld n

ot b

e su

ffic

ient

, tes

ts o

f th

e op

erat

ing

effe

ctiv

enes

s of

rel

evan

t con

trols

are

per

form

ed o

r th

e su

bsta

ntiv

e pr

oced

ures

are

per

form

ed a

s of t

he p

erio

d en

d.

U

nnec

essa

ry –

eff

ectiv

ely

repe

ats n

ew p

ara

21

59.

In ci

rcum

stan

ces w

here

the a

udito

r has

iden

tifie

d ris

ks o

f mat

eria

l mis

stat

emen

t due

to fr

aud,

the a

udito

r’s re

spon

se to

addr

ess

thos

e ris

ks m

ay in

clud

e cha

ngin

g th

e tim

ing

of au

dit p

roce

dure

s. Fo

r exa

mpl

e, th

e aud

itor m

ight

conc

lude

that

, giv

en th

e ris

ks

of in

tent

iona

l mis

stat

emen

t or m

anip

ulat

ion,

aud

it pr

oced

ures

to e

xten

d au

dit c

oncl

usio

ns fr

om a

n in

terim

dat

e to

the

perio

d en

d w

ould

not

be e

ffect

ive.

In su

ch ci

rcum

stanc

es, t

he au

dito

r mig

ht co

nclu

de th

at su

bsta

ntiv

e pro

cedu

res n

eed

to b

e per

form

ed

at o

r nea

r the

end

of t

he re

porti

ng p

erio

d to

add

ress

an

iden

tifie

d ris

k of

mat

eria

l mis

stat

emen

t due

to fr

aud

(see

ISA

240

).

A10

Rep

etiti

ve o

f ISA

240

Unn

eces

sary

exa

mpl

e

60.

Ord

inar

ily, t

he a

udito

r com

pare

s an

d re

conc

iles

info

rmat

ion

conc

erni

ng th

e ba

lanc

e at

the

perio

d en

d w

ith th

e co

mpa

rabl

e in

form

atio

n at

the

int

erim

dat

e to

ide

ntify

am

ount

s th

at a

ppea

r un

usua

l, in

vest

igat

es a

ny s

uch

amou

nts,

and

perf

orm

s su

bsta

ntiv

e ana

lytic

al p

roce

dure

s or t

ests

of d

etai

ls to

test

the i

nter

veni

ng p

erio

d. W

hen

the a

udito

r pla

ns to

per

form

subs

tant

ive

anal

ytic

al p

roce

dure

s w

ith re

spec

t to

the

inte

rven

ing

perio

d, th

e au

dito

r con

side

rs w

heth

er th

e pe

riod

end

bala

nces

of t

he

parti

cula

r cla

sses

of t

rans

actio

ns o

r acc

ount

bal

ance

s are

reas

onab

ly p

redi

ctab

le w

ith re

spec

t to

amou

nt, r

elat

ive s

igni

fican

ce,

A45

23

Not

e: R

edra

fted

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

894

Age

nda

Item

4-D

.1

Page

26

of 3

0

and

com

posit

ion.

The

audi

tor c

onsid

ers w

heth

er th

e ent

ity’s

pro

cedu

res f

or an

alyz

ing

and

adju

sting

such

clas

ses o

f tra

nsac

tions

or

acc

ount

bal

ance

s at

inte

rim d

ates

and

for e

stab

lishi

ng p

rope

r acc

ount

ing

cuto

ffs

are

appr

opria

te. I

n ad

ditio

n, th

e au

dito

r co

nsid

ers w

heth

er th

e in

form

atio

n sy

stem

rele

vant

to fi

nanc

ial r

epor

ting

will

pro

vide

info

rmat

ion

conc

erni

ng th

e ba

lanc

es a

t th

e pe

riod

end

and

the

trans

actio

ns in

the

rem

aini

ng p

erio

d th

at is

suf

ficie

nt to

per

mit

inve

stig

atio

n of

: sig

nific

ant u

nusu

al

trans

actio

ns o

r ent

ries (

incl

udin

g th

ose a

t or n

ear p

erio

d en

d); o

ther

caus

es o

f sig

nific

ant f

luct

uatio

ns, o

r exp

ecte

d flu

ctua

tions

th

at d

id n

ot o

ccur

; an

d ch

ange

s in

the

com

posi

tion

of t

he c

lass

es o

f tra

nsac

tions

or

acco

unt

bala

nces

. The

sub

stan

tive

proc

edur

es re

late

d to

the

rem

aini

ng p

erio

d de

pend

on

whe

ther

the

audi

tor h

as p

erfo

rmed

test

s of c

ontro

ls.

Unn

eces

sary

61.

If m

isst

atem

ents

are

det

ecte

d in

cla

sses

of t

rans

actio

ns o

r acc

ount

bal

ance

s at a

n in

terim

dat

e, th

e au

dito

r ord

inar

ily m

odifi

es

the

rela

ted

asse

ssm

ent o

f ris

k an

d th

e pl

anne

d na

ture

, tim

ing,

or e

xten

t of t

he su

bsta

ntiv

e pr

oced

ures

cov

erin

g th

e re

mai

ning

pe

riod

that

rela

te to

such

clas

ses o

f tra

nsac

tions

or a

ccou

nt b

alan

ces,

or ex

tend

s or r

epea

ts su

ch au

dit p

roce

dure

s at t

he p

erio

d en

d.

22

Not

e: F

inal

line

s red

rafte

d

62.

The u

se o

f aud

it ev

iden

ce fr

om th

e per

form

ance

of s

ubst

antiv

e pro

cedu

res i

n a

prio

r aud

it is

not

suff

icie

nt to

addr

ess a

risk

of

mat

eria

l mis

stat

emen

t in

the c

urre

nt p

erio

d. In

mos

t cas

es, a

udit

evid

ence

from

the p

erfo

rman

ce o

f sub

stan

tive p

roce

dure

s in

a pr

ior a

udit

prov

ides

littl

e or n

o au

dit e

vide

nce f

or th

e cur

rent

per

iod.

In o

rder

for a

udit

evid

ence

obt

aine

d in

a pr

ior a

udit

to b

e us

ed i

n th

e cu

rren

t pe

riod

as s

ubst

antiv

e au

dit

evid

ence

, th

e au

dit

evid

ence

and

the

rel

ated

sub

ject

mat

ter

mus

t no

t fu

ndam

enta

lly ch

ange

. An

exam

ple o

f aud

it ev

iden

ce o

btai

ned

from

the p

erfo

rman

ce o

f sub

stant

ive p

roce

dure

s in

a prio

r per

iod

that

may

be

rele

vant

in th

e cu

rren

t yea

r is a

lega

l opi

nion

rela

ted

to th

e st

ruct

ure

of a

secu

ritiz

atio

n to

whi

ch n

o ch

ange

s hav

e oc

curr

ed d

urin

g th

e cur

rent

per

iod.

As r

equi

red

by p

arag

raph

23

of IS

A 5

00, i

f the

audi

tor p

lans

to u

se au

dit e

vide

nce o

btai

ned

from

the p

erfo

rman

ce o

f sub

stant

ive p

roce

dure

s in

a prio

r aud

it, th

e aud

itor p

erfo

rms a

udit

proc

edur

es d

urin

g th

e cur

rent

per

iod

to e

stab

lish

the

cont

inui

ng re

leva

nce

of th

e au

dit e

vide

nce.

A47

24

A47

24

Exte

nt o

f the

Per

form

ance

of S

ubst

antiv

e Pr

oced

ures

63.

The

grea

ter t

he ri

sk o

f mat

eria

l mis

stat

emen

t, th

e gr

eate

r the

ext

ent o

f sub

stan

tive

proc

edur

es. B

ecau

se th

e ris

k of

mat

eria

l m

isst

atem

ent

take

s ac

coun

t of

int

erna

l co

ntro

l, th

e ex

tent

of

subs

tant

ive

proc

edur

es m

ay b

e in

crea

sed

as a

res

ult

of

unsa

tisfa

ctor

y re

sults

from

test

s of t

he o

pera

ting

effe

ctiv

enes

s of c

ontro

ls. H

owev

er, i

ncre

asin

g th

e ext

ent o

f an

audi

t pro

cedu

re

is a

ppro

pria

te o

nly

if th

e au

dit p

roce

dure

itse

lf is

rele

vant

to th

e sp

ecifi

c ris

k.

A39

64.

In d

esig

ning

test

s of d

etai

ls, t

he e

xten

t of t

estin

g is

ord

inar

ily th

ough

t of i

n te

rms o

f the

sam

ple

size

, whi

ch is

aff

ecte

d by

the

risk

of m

ater

ial m

isst

atem

ent.

How

ever

, the

audi

tor a

lso

cons

ider

s oth

er m

atte

rs, i

nclu

ding

whe

ther

it is

mor

e eff

ectiv

e to

use

othe

r se

lect

ive

mea

ns o

f te

stin

g, s

uch

as s

elec

ting

larg

e or

unu

sual

ite

ms

from

a p

opul

atio

n as

opp

osed

to

perf

orm

ing

A43

Ade

quat

ely

cove

red

in IS

A

530

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

895

Age

nda

Item

4-D

.1

Page

27

of 3

0

repr

esen

tativ

e sa

mpl

ing

or s

tratif

ying

the

popu

latio

n in

to h

omog

eneo

us s

ubpo

pula

tions

for

sam

plin

g. I

SA 5

30 c

onta

ins

guid

ance

on

the u

se o

f sam

plin

g an

d ot

her m

eans

of s

elec

ting

item

s for

test

ing.

In d

esig

ning

subs

tant

ive a

naly

tical

pro

cedu

res,

the

audi

tor c

onsi

ders

the

amou

nt o

f diff

eren

ce fr

om th

e ex

pect

atio

n th

at c

an b

e ac

cept

ed w

ithou

t fur

ther

inve

stig

atio

n. T

his

cons

ider

atio

n is

influ

ence

d pr

imar

ily b

y m

ater

ialit

y an

d th

e con

sist

ency

with

the d

esire

d le

vel o

f ass

uran

ce. D

eter

min

atio

n of

th

is a

mou

nt in

volv

es co

nsid

erin

g th

e pos

sibi

lity

that

a c

ombi

natio

n of

mis

stat

emen

ts in

the

spec

ific

acco

unt b

alan

ce, c

lass

of

trans

actio

ns, o

r dis

clos

ure

coul

d ag

greg

ate

to a

n un

acce

ptab

le a

mou

nt. I

n de

sign

ing

subs

tant

ive

anal

ytic

al p

roce

dure

s, th

e au

dito

r in

crea

ses

the

desi

red

leve

l of

ass

uran

ce a

s th

e ris

k of

mat

eria

l m

isst

atem

ent

incr

ease

s. IS

A 5

20,

“Ana

lytic

al

Proc

edur

es”

cont

ains

gui

danc

e on

the

appl

icat

ion

of a

naly

tical

pro

cedu

res d

urin

g an

aud

it.

A43

U

nnec

essa

ry e

xam

ples

Rep

eats

ISA

520

.12f

Ade

quac

y of

Pre

sent

atio

n an

d D

iscl

osur

e

65.

The

aud

itor s

houl

d pe

rfor

m a

udit

proc

edur

es to

eval

uate

whe

ther

the o

vera

ll pr

esen

tatio

n of

the f

inan

cial

stat

emen

ts,

incl

udin

g th

e re

late

d di

sclo

sure

s, ar

e in

acc

orda

nce

with

the

appl

icab

le fi

nanc

ial r

epor

ting

fram

ewor

k. T

he a

udito

r co

nsid

ers w

heth

er th

e ind

ivid

ual f

inan

cial

stat

emen

ts ar

e pre

sent

ed in

a m

anne

r tha

t ref

lect

s the

appr

opria

te cl

assi

ficat

ion

and

desc

riptio

n of

fin

anci

al in

form

atio

n. T

he p

rese

ntat

ion

of f

inan

cial

sta

tem

ents

in c

onfo

rmity

with

the

appl

icab

le f

inan

cial

re

porti

ng fr

amew

ork

also

incl

udes

adeq

uate

dis

clos

ure o

f mat

eria

l mat

ters

. The

se m

atte

rs re

late

to th

e for

m, a

rran

gem

ent,

and

cont

ent o

f the

fina

ncia

l sta

tem

ents

and

thei

r app

ende

d no

tes,

incl

udin

g, fo

r exa

mpl

e, th

e ter

min

olog

y us

ed, t

he am

ount

of d

etai

l gi

ven,

the

cla

ssifi

catio

n of

ite

ms

in t

he s

tate

men

ts, a

nd t

he b

ases

of

amou

nts

set

forth

. The

aud

itor

cons

ider

s w

heth

er

man

agem

ent s

houl

d ha

ve d

iscl

osed

a p

artic

ular

mat

ter i

n lig

ht o

f the

circ

umst

ance

s and

fact

s of w

hich

the

audi

tor i

s aw

are

at

the t

ime.

In p

erfo

rmin

g th

e eva

luat

ion

of th

e ove

rall

pres

enta

tion

of th

e fin

anci

al st

atem

ents

, inc

ludi

ng th

e rel

ated

dis

clos

ures

, th

e au

dito

r con

side

rs th

e as

sess

ed ri

sk o

f mat

eria

l mis

stat

emen

t at t

he a

sser

tion

leve

l. Se

e pa

ragr

aph

17 o

f ISA

500

for a

de

scrip

tion

of th

e as

serti

ons r

elat

ed to

pre

sent

atio

n an

d di

sclo

sure

.

25

A48

A48

Inco

mpl

ete

repe

titio

n of

IS

A 5

00.1

7

Mer

ely

an a

pplic

atio

n of

IS

A 5

00,

Mat

eria

lity

and

ISA

700

Eva

luat

ing

the

Suff

icie

ncy

and

App

ropr

iate

ness

of A

udit

Evi

denc

e O

btai

ned

66.

Bas

ed o

n th

e au

dit p

roce

dure

s per

form

ed a

nd th

e au

dit e

vide

nce

obta

ined

, the

aud

itor

shou

ld e

valu

ate

whe

ther

the

asse

ssm

ents

of t

he r

isks

of m

ater

ial m

isst

atem

ent a

t the

ass

ertio

n le

vel r

emai

n ap

prop

riat

e.

26

Not

e: R

edra

fted

67.

An

audi

t of f

inan

cial

stat

emen

ts is

a c

umul

ativ

e an

d ite

rativ

e pr

oces

s. A

s the

aud

itor p

erfo

rms p

lann

ed a

udit

proc

edur

es, t

he

audi

t evi

denc

e ob

tain

ed m

ay c

ause

the

audi

tor

to m

odify

the

natu

re, t

imin

g, o

r ex

tent

of

othe

r pla

nned

aud

it pr

oced

ures

. In

form

atio

n m

ay c

ome

to th

e au

dito

r’s a

ttent

ion

that

diff

ers s

igni

fican

tly fr

om th

e in

form

atio

n on

whi

ch th

e ris

k as

sess

men

t w

as b

ased

. For

exam

ple,

the e

xten

t of m

issta

tem

ents

that

the a

udito

r det

ects

by p

erfo

rmin

g su

bsta

ntiv

e pro

cedu

res m

ay al

ter t

he

audi

tor’

s jud

gmen

t abo

ut th

e ris

k as

sess

men

ts an

d m

ay in

dica

te a

mat

eria

l wea

knes

s in

inte

rnal

cont

rol.

In ad

ditio

n, an

alyt

ical

A49

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

896

Age

nda

Item

4-D

.1

Page

28

of 3

0

proc

edur

es p

erfo

rmed

at

the

over

all

revi

ew s

tage

of

the

audi

t m

ay i

ndic

ate

a pr

evio

usly

unr

ecog

nize

d ris

k of

mat

eria

l m

isst

atem

ent.

In su

ch c

ircum

stan

ces,

the

audi

tor m

ay n

eed

to re

eval

uate

the

plan

ned

audi

t pro

cedu

res,

base

d on

the

revi

sed

cons

ider

atio

n of

ass

esse

d ris

ks fo

r all

or s

ome

of th

e cl

asse

s of

tran

sact

ions

, acc

ount

bal

ance

s, or

dis

clos

ures

and

rela

ted

asse

rtion

s. Pa

ragr

aph

119

of IS

A 3

15 c

onta

ins f

urth

er g

uida

nce

on re

visi

ng th

e au

dito

r’s r

isk

asse

ssm

ent.

68.

The c

once

pt o

f eff

ectiv

enes

s of t

he o

pera

tion

of co

ntro

ls re

cogn

izes

that

som

e dev

iatio

ns in

the w

ay co

ntro

ls ar

e app

lied

by th

e en

tity

may

occ

ur. D

evia

tions

from

pre

scrib

ed co

ntro

ls m

ay b

e cau

sed

by su

ch fa

ctor

s as c

hang

es in

key

per

sonn

el, s

igni

fican

t se

ason

al fl

uctu

atio

ns in

vol

ume o

f tra

nsac

tions

and

hum

an er

ror.

Whe

n su

ch d

evia

tions

are d

etec

ted

durin

g th

e per

form

ance

of

test

s of c

ontro

ls, t

he au

dito

r mak

es sp

ecifi

c inq

uirie

s to

unde

rsta

nd th

ese m

atte

rs an

d th

eir p

oten

tial c

onse

quen

ces,

for e

xam

ple,

by

inqu

iring

abou

t the

tim

ing

of p

erso

nnel

chan

ges i

n ke

y in

tern

al co

ntro

l fun

ctio

ns. T

he au

dito

r det

erm

ines

whe

ther

the t

ests

of

con

trols

per

form

ed p

rovi

de a

n ap

prop

riate

bas

is f

or r

elia

nce

on th

e co

ntro

ls, w

heth

er a

dditi

onal

test

s of

con

trols

are

ne

cess

ary,

or w

heth

er th

e po

tent

ial r

isks

of m

isst

atem

ent n

eed

to b

e ad

dres

sed

usin

g su

bsta

ntiv

e pr

oced

ures

.

A38

17

17

Unn

eces

sary

exa

mpl

e

69.

The

audi

tor

cann

ot a

ssum

e th

at a

n in

stan

ce o

f fr

aud

or e

rror

is a

n is

olat

ed o

ccur

renc

e, a

nd th

eref

ore

cons

ider

s ho

w th

e de

tect

ion

of a

mis

stat

emen

t aff

ects

the a

sses

sed

risks

of m

ater

ial m

isst

atem

ent.

Bef

ore t

he co

nclu

sion

of t

he au

dit,

the a

udito

r ev

alua

tes w

heth

er au

dit r

isk

has b

een

redu

ced

to an

acce

ptab

ly lo

w le

vel a

nd w

heth

er th

e nat

ure,

tim

ing,

and

exte

nt o

f the

audi

t pr

oced

ures

may

nee

d to

be

reco

nsid

ered

. For

exa

mpl

e, th

e au

dito

r rec

onsi

ders

the

follo

win

g:

• Th

e na

ture

, tim

ing,

and

ext

ent o

f sub

stan

tive

proc

edur

es.

• Th

e au

dit e

vide

nce

of th

e op

erat

ing

effe

ctiv

enes

s of r

elev

ant c

ontro

ls, i

nclu

ding

the

entit

y’s r

isk

asse

ssm

ent p

roce

ss.

26/A

50

Not

e: R

ewor

ded

Rep

eats

(old

) par

a 70

Pa

rt of

old

) par

a 67

Unn

eces

sary

exa

mpl

es

70.

The

aud

itor

shou

ld c

oncl

ude

whe

ther

suf

ficie

nt a

ppro

pria

te a

udit

evid

ence

has

bee

n ob

tain

ed t

o re

duce

to

an

acce

ptab

ly lo

w le

vel t

he r

isk

of m

ater

ial m

isst

atem

ent i

n th

e fin

anci

al st

atem

ents

. In

deve

lopi

ng a

n op

inio

n, th

e au

dito

r co

nsid

ers

all r

elev

ant a

udit

evid

ence

, reg

ardl

ess

of w

heth

er it

app

ears

to c

orro

bora

te o

r to

cont

radi

ct th

e as

serti

ons

in th

e fin

anci

al st

atem

ents

.

27

Mov

ed to

ISA

500

71.

The s

uffic

ienc

y an

d ap

prop

riate

ness

of a

udit

evid

ence

to su

ppor

t the

audi

tor’

s con

clus

ions

thro

ugho

ut th

e aud

it ar

e a m

atte

r of

prof

essi

onal

judg

men

t. Th

e au

dito

r’s j

udgm

ent a

s to

wha

t con

stitu

tes s

uffic

ient

app

ropr

iate

aud

it ev

iden

ce is

influ

ence

d by

su

ch fa

ctor

s as t

he fo

llow

ing:

• Si

gnifi

canc

e of

the

pote

ntia

l mis

stat

emen

t in

the

asse

rtion

and

the

likel

ihoo

d of

its h

avin

g a

mat

eria

l eff

ect,

indi

vidu

ally

or

aggr

egat

ed w

ith o

ther

pot

entia

l mis

stat

emen

ts, o

n th

e fin

anci

al st

atem

ents

.

• Ef

fect

iven

ess o

f man

agem

ent’s

resp

onse

s and

con

trols

to a

ddre

ss th

e ris

ks.

M

oved

to IS

A 5

00

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

897

Age

nda

Item

4-D

.1

Page

29

of 3

0

• Ex

perie

nce

gain

ed d

urin

g pr

evio

us a

udits

with

resp

ect t

o si

mila

r pot

entia

l mis

stat

emen

ts

• R

esul

ts o

f aud

it pr

oced

ures

per

form

ed, i

nclu

ding

whe

ther

such

audi

t pro

cedu

res i

dent

ified

spec

ific i

nsta

nces

of f

raud

or e

rror

.

• So

urce

and

relia

bilit

y of

the

avai

labl

e in

form

atio

n.

• Pe

rsua

sive

ness

of t

he a

udit

evid

ence

• U

nder

stan

ding

of t

he e

ntity

and

its e

nviro

nmen

t, in

clud

ing

its in

tern

al c

ontro

l.

72.

If th

e aud

itor h

as n

ot o

btai

ned

suff

icie

nt a

ppro

pria

te a

udit

evid

ence

as t

o a

mat

eria

l fin

anci

al st

atem

ent a

sser

tion,

the

audi

tor s

houl

d at

tem

pt to

obt

ain

furt

her a

udit

evid

ence

. If t

he a

udito

r is u

nabl

e to

obta

in su

ffic

ient

app

ropr

iate

aud

it ev

iden

ce, t

he a

udito

r sho

uld

expr

ess a

qua

lifie

d op

inio

n or

a d

iscl

aim

er o

f opi

nion

. See

ISA

700

, “Th

e Aud

itor’

s Rep

ort

on F

inan

cial

Sta

tem

ents

”2 for

furth

er g

uida

nce.

28

Unn

eces

sary

refe

renc

e

Doc

umen

tatio

n

73.

The

aud

itor

shou

ld d

ocum

ent

the

over

all r

espo

nses

to

addr

ess

the

asse

ssed

ris

ks o

f m

ater

ial m

isst

atem

ent

at t

he

finan

cial

sta

tem

ent

leve

l and

the

nat

ure,

tim

ing,

and

ext

ent

of t

he f

urth

er a

udit

proc

edur

es, t

he li

nkag

e of

tho

se

proc

edur

es w

ith th

e as

sess

ed r

isks

at t

he a

sser

tion

leve

l, an

d th

e re

sults

of t

he a

udit

proc

edur

es. I

n ad

ditio

n, if

the

audi

tor

plan

s to

use

audi

t evi

denc

e ab

out t

he o

pera

ting

effe

ctiv

enes

s of c

ontr

ols o

btai

ned

in p

rior

aud

its, t

he a

udito

r sh

ould

doc

umen

t the

conc

lusi

ons r

each

ed w

ith re

gard

to re

lyin

g on

such

cont

rols

that

wer

e tes

ted

in a

pri

or a

udit.

The

m

anne

r in

whi

ch th

ese

mat

ters

are

doc

umen

ted

is b

ased

on

the

audi

tor’

s pro

fess

iona

l jud

gmen

t. IS

A 2

30, “

Doc

umen

tatio

n”

esta

blis

hes s

tand

ards

and

pro

vide

s gui

danc

e re

gard

ing

docu

men

tatio

n in

the

cont

ext o

f the

aud

it of

fina

ncia

l sta

tem

ents

.

29

30

Unn

eces

sary

re

fere

nce

to

ISA

230

Eff

ectiv

e D

ate

74.

This

ISA

is e

ffec

tive

for a

udits

of f

inan

cial

stat

emen

ts fo

r per

iods

beg

inni

ng o

n or

afte

r Dec

embe

r 15,

200

4.

2

Publ

ic S

ecto

r Pe

rspe

ctiv

e

1.

Whe

n ca

rryi

ng o

ut a

udits

of p

ublic

sec

tor

entit

ies,

the

audi

tor

take

s in

to a

ccou

nt th

e le

gisl

ativ

e fr

amew

ork

and

any

othe

r re

leva

nt r

egul

atio

ns, o

rdin

ance

s or

min

iste

rial

dir

ectiv

es t

hat

affe

ct t

he a

udit

man

date

and

any

oth

er s

peci

al a

uditi

ng

St

atem

ent

is

gene

ral

in

natu

re. P

ropo

sed

to a

ddre

ss

the

first

sen

tenc

e, w

hich

is

2 IS

A 7

00, “

The A

udito

r’s R

epor

t on

Fina

ncia

l Sta

tem

ents

” will

be w

ithdr

awn

whe

n IS

A 7

00 (R

evis

ed),

“The

Inde

pend

ent A

udito

r’s R

epor

t on

a Com

plet

e Set

of G

ener

al P

urpo

se F

inan

cial

Sta

tem

ents

” and

IS

A 7

01, “

Mod

ifica

tions

to th

e In

depe

nden

t Aud

itor’s

Rep

ort”

bec

ome

effe

ctiv

e. IS

A 7

00 (R

evis

ed) a

nd IS

A 7

01 a

re e

ffec

tive

for a

udito

r’s re

ports

dat

ed o

n or

afte

r Dec

embe

r 31,

200

6.

Cla

rity

– IS

A 3

30 M

appi

ng D

ocum

ents

IA

ASB

Mai

n Ag

enda

(Sep

tem

ber 2

005)

Pag

e 20

05·1

898

Age

nda

Item

4-D

.1

Page

30

of 3

0

requ

irem

ents

. Suc

h fa

ctor

s m

ight

affe

ct, f

or e

xam

ple,

the

exte

nt o

f the

aud

itor’

s di

scre

tion

in e

stab

lishi

ng m

ater

ialit

y an

d ju

dgm

ents

on

the n

atur

e and

scop

e of a

udit

proc

edur

es to

be a

pplie

d. P

arag

raph

3 o

f thi

s ISA

may

hav

e to

be a

pplie

d on

ly a

fter

givi

ng c

onsi

dera

tion

to su

ch re

stri

ctio

ns.

appl

icab

le to

all o

f the

ISA

s, in

redr

afte

d IS

A 2

00