Category: News

25 July 2022

Does your firm administer any family trusts? Then you will no doubt be aware of the increased requirements under the Trusts Act 2019 for ensuring all the data about the Trust is up to date.

To help achieve this, we have, in collaboration with a large local Accountancy firm, developed a simple questionnaire to be shared annually with the trustee contact, that asks all the relevant questions to make sure that the accountant’s records are correct.

There are four actions required:

STEP 1: Set up the Trust using the Annual Trust Review Questionnaire template. Add the name of the trust, appointment date and save (the questionnaire itself is undated – the important date is when it is signed off).

STEP 2: Add the current trustees and beneficiaries as contacts. These can be imported using a special .CSV template that we have attached to the A1 page, from data obtained from your records (or the details may be added one at a time if there are only a few).

Note that the Role column should specify whether the person or entity is a Trustee, Beneficiary or both  – note format for both uses the vertical line or “pipe” character (|).

The contacts will then be added to the file so that they will appear on the questionnaire.

STEP 3: Then share the questionnaire page with the relevant contact. Select the name from the dropdown and click add – this will generate a link to be emailed to the client. Alternatively use the tick-box “Automatically send link to user” to generate an email directly off the system.

They receive an email from your firms asking them to follow the link and complete the details. Following the link they are asked to confirm their identity:

Then they see the existing trustee and beneficiary contact details and are asked if any changes have been made.

If so a dialogue box asks them to type in the new details. There are also questions for all the other information that needs to be asked under the Act. Once complete the accountant is notified.

STEP 4: The accountant then updates the records held by their firm, and takes any further actions required. 

Once complete the jobs may be saved to PDF then deleted off the system, or rolled over and reused in the subsequent year.

Note: We can assist with bulk client creation, contact data import, and even bulk sharing if required, as we do for normal client annual data collection questionnaires. 

This content is accessible in our Tools for Accountants packages, along with financial reporting checklists and other compilation tools. Contact us for more details.

5 November 2020

Following on from the IAASB discussion paper on the audit of Less Complex Entities (that we have previously discussed), the IAASB recently released some good news – a new single standard is being developed for these entities.

The IAASB Glossary defines these as entities which typically possesses qualitative characteristics such as:

a. Concentration of ownership and management in a small number of individuals (often a single individual – either a natural person or another enterprise that owns the entity provided the owner exhibits the relevant qualitative characteristics); and

b. One or more of the following:

i. Straightforward or uncomplicated transactions;
ii. Simple record-keeping;
iii. Few lines of business and few products within business lines;
iv. Few internal controls;
v. Few levels of management with responsibility for a broad range of controls; or
vi. Few personnel, many having a wide range of duties.

In other words, this encompasses the majority of work carried out by our Charity and SME auditors. We made a submission to that discussion, back in August 2019 (remember 2019?)

In that submission I made the point that:

“…in New Zealand, we have had many provincial firms that carried out perfectly adequate audit work at a scale appropriate to LCEs drop out of auditing because they do not have the time, staff, or resources to carry out compliant ISA audits. In turn, the entities they previously audited have had to either pay much higher fees to large city firms, stop being audited voluntarily (if under the threshold for compulsory audit), or potentially close because they are already financially pressed and dependant on overstressed volunteers. So the social cost of inappropriate audit standards may well be an overlooked factor in this discussion. At a social level, it is critical that small charities and clubs and not-for-profits remain viable and accountable, as these entities create a disproportionate amount of social cohesion which flows down into all sorts of positive social outcomes.”

In the wake of the COVID-19 experience, it becomes even more important to find ways to help smaller businesses, charities, and other not for profits remain viable, and to address the growing time/cost of auditing using unnecessarily complex standards.

The IAASB approach

The approach that the IAASB is taking seems a sensible one. In fact, it is a two-pronged approach. On one hand, they are producing a more accessible and appropriate audit standard for LCEs. On the other hand, they are undertaking a review of the ISAs addressing Complexity, Understandability, Scalability, and Proportionality (CUSP for short).

The work on the ISAs themselves is welcome and sensible, and addresses issues around plain language, avoiding duplication, and so on. But the real good news to me is the development of a separate standard for LCEs. What might this standard be like?

In a worthwhile interview by Tom Ravlic, (the first 18 minutes) Professor Roger Simnett, the chairman of the Auditing and Assurance Standards Board, (as well as Chair and CEO Australian Auditing and Assurance Standards Board and Scientia Professor, UNSW Sydney) explains the key features:

• This will be a new separate ISA for Less Complex Audits
• It will maintain a “reasonable assurance” level (i.e. not be regarded as inferior quality to a full ISA audit)
• There will be a draft of the new standard presented at the December 2020 meeting of the IAASB
• It will contain chapters or sections that follow the process of the audit (acceptance, understanding the entity, gaining evidence, risk, reporting, etc.)
• It acknowledges that the audit process is iterative and interrelated
• The definition of LCE will be clarified, as it is essential that the reduced standard is only applied in appropriate cases
• There will be little application material in the standard
• This is not a “checklist” approach (shudder), but real auditing that requires professional judgement to be exercised
• The standard will be framework-neutral and apply worldwide
• It also must be broad enough to encompass changing technologies and innovative audit approaches
• And of course, for us in NZ and Australia, adoption will require approval by the appropriate bodies.

Is this good for the profession?

The interviewer infers that this new standard could be a good “entry-level” teaching tool for those new to auditing. And this is a good point.

The bar is set so high academically in teaching auditing (even back in my experience at the University of Auckland in the late 1970s) that most graduates theoretical understanding of auditing standards and processes (or lack thereof) does not translate well into the actual auditing understanding needed in our average CA firms.

Maybe this standard will not only help LCE audits be more efficient but will actually help make the audit process more accessible and practical to new entrants into the world of audit?

Maybe they learn the basic patterns here then layer the deeper understanding that the ISAs require on top of these basics as their experience and exposure to more complex entities grows?

Finally, the issue is raised in the interview as to whether this could lead to another designation of audit practitioner? A two-tier profession.

This is open for discussion. I would argue that at least in NZ this is de facto what has emerged. We see quite a clear split in our Audit Assistant clientele between firms that carry out the full suite of work from large listed companies all the way down, and firms that just carry out work for charities and not-for-profits exclusively.

Effectively many of our user firms could probably carry out all their work under the new LCE standard. And in my opinion that specialisation is probably a good thing.

21 October 2020

Our current Australia-specific content includes:

• AULCEA Special Purpose – Charity: For audits of Smaller Charities (Less Complex Entities), referencing ASAs – for Australian entities preparing financial statements in terms of the Australian Charities and Not-for-Profits Commission Act 2012.
• AULCEA Special Purpose – Company: For audits of Smaller Companies (Less Complex Entities), referencing ASAs – for Australian entities preparing financial statements in terms of the Corporations Act 2001.
• AUS Agreed-Upon Procedures: For use in engagements that involve the performance of procedures of an assurance nature from which no conclusion or opinion is expressed, and no assurance is provided to intended users – based on ASRS 4400.
• AUS IFRS Requirements Checklist: For use in AUS IFRS reporting – Incorporating disclosures required under Australian equivalents to International Financial Reporting Standards.
• AUS IFRS Audits – Not-For-Profit Entities: For audits of GPFS Not-For-Profit entities – including the 2019 AASB checklists – referencing ASAs.
• AUS Review Engagement: For general review engagements in Australia – based on ASRE 2400

More content is being released.

We provide help for onboarding, client migration and setup, training modules, and ongoing review to ensure firms are using the templates well.

We also specialise in working with our clients to make custom content specifically for their firm approach, and even reseller accounts for similar applications based on our platform.

Contact Us for a free trial or to find out more.

3 September 2020

With remote and paperless auditing becoming much more common, a number of threats and opportunities arise.

This article considers the use of Adobe DC Pro as both a great tool for authenticating and securing documents for signing, and also how it can be used maliciously to tamper with PDFs.

How safe are PDFs?

Many auditors would consider a PDF document to be less prone to tampering than say, a Word document. People tend to convert Word or Excel to PDF to try to preserve the integrity of the document. And this works to some degree.

If we request soft-copies of Minutes say from a client and they are sent in Word, there is no guarantee that the version we have is the latest, has been approved correctly, or is actually authentic. But a PDF, even if it includes a signature, while looking more convincing, may still have been tampered with.

Consider the example below:

• Here is a Xero invoice, opened using Adobe DC Pro.
• Edit is selected, and characters and numbers may be changed, and the document then saved.
• Bank accounts, amounts, and other details on the invoice are easily updated.

How might we detect this?

One way of finding clues is to look at the PDF description and comparing the created and modified date/time. This does not guarantee with 100% accuracy that it wasn’t modified but if it was edited as above and the changes saved you will normally see a difference in the date.

If these are different then it was definitely edited. However, a really more sophisticated tamperer could work around this and modify the metadata.

What about items scanned to PDF?

It is common for clients to send us scanned documents, say signed minutes. How safe are these? Adobe DC Pro edit function can also be used to change these, (although changes may be more obvious as the updated font may look sharper or out of line).

The easiest way to detect if a file has been modified is to digitally sign the document. Reader and Acrobat will report if the document has been changed since it was signed. So if say we have an important document on file and we wish to have a client or third party confirm authenticity, we can use the digital signing feature to do this.

Secure digital signing of documents

However, there is the more obvious use for this tool – to create a document such as an engagement letter as a PDF, and add your own digital signature.

In the old context, we would print and sign a hard copy letter, mail it (or scan and email it) to the client, they would sign and mail it back (or print, scan, sign and email it back).

With digital signing tools, So we create the letter from Audit Assistant (for instance), and save as a PDF with the letterhead already inserted.

We then open the document in Adobe DC Pro, and select “Fill and Sign”. This allows us to add a facsimile of our own signature to the letter. Then we select “request signatures”. Then we add the email address of the client, a message, and to select the space where we want the client to sign.

Finally, we select “send” and the client receives an email with a link to sign digitally. They do not need to have any software installed to do this, as they complete in a web form. You will be advised automatically by email when the document has been signed by the client.

The beauty of this is not that you or they can add a facsimile of their signature without printing (signatures are becoming a quaint formality), but that the document has been controlled within a secure environment controlled by Adobe. They even append a certification as to the authenticity of the process.

Use this tool to certify other documents

There are other uses for this over and above signing letters and reports. How about we have an invoice or a contract on file, and we suspect it may have been tampered with?

We can use the “Fill and Sign” tool to securely send the document to the client or a third party to get them to approve and sign the document as authentic, thus adding another layer of assurance to our work.

Use this alongside Audit Assistant

Some audit evidence is gathered by sharing pages with clients, and they can add their comments and attachments. This is handled securely within Audit Assistant. Some parts of the audit however require documents to be passed and signed securely. Adobe DC Pro provides this with much the same feel as sharing pages within Audit Assistant. We recommend it.

The cost of an individual licence is $A22.99/month, or a team subscription is $A26.13/person/month.

20 August 2020

Larger charities are becoming seriously focused on preparing service information in a way that is meaningful, compliant with the standards, and able to be audited without too much drama.

It is important that charities see this task, not as an onerous burden but as a positive experience that enables them to tell their wider story. In most cases, charities are contributing primarily in ways that cannot be measured in financial terms, so we could say that service performance is their real reporting.

Charities aren’t about making money, but about achieving ends, so to just report finances is missing the point. The financial information is just the engine room out the back – necessary but not actually the purpose of the entity.

This article uses a Q&A format to address some of the issues facing preparers of performance report information in New Zealand. It will also be relevant however to preparers in other jurisdictions and to auditors of performance information.

Q. Who are the key players?

The Government, via the Charities Act 2005 determines who is required to report (i.e. registered charities). The XRB (NZ External Reporting Board) is responsible for what these entities are required to report, (XRB standards). And Charities Services monitors and enforces compliance with XRB standards by registered charities.

Q. What are the audit requirements for charities?

Registered charities with operating expenses of over $1.1 m per annum in the prior two financial years must be audited, but charities with expenses between $550,000 and $ 1.1 m in the prior two financial years may opt for a Review Engagement rather than an Audit (see Charities Act 2005 Sections 42C & 42D).

Registered charities with total operating expenditure of less than $550,000 are not required by law to have an audit or a review.

Of course, any charity not required to have an audit or a review may opt to do so if they wish or if it is required by funders or by their founding document. Some charities that are under the limit for statutory audit, but opt to have an audit anyway, may limit the scope of the audit to exclude service performance information. Audits and Reviews of charities are required to be carried out by a qualified auditor.

Q. What are the reporting requirements for charities?

In New Zealand, there are four reporting tiers, relating to entity size and level of public accountability.

Note that entities are not obliged to report in the Tier that they fit into. They may opt for more complex reporting if they wish (but not for less complex of course).

If the governing body has opted to adopt Tier 3 or 4 (special purpose reporting) over the default General Purpose reporting (compliance with PBE IFRS standards that apply to both Tier 1 and 2) they should document this decision. Under both Tier 3 and 4 reporting a note must be added specifying that the entity is permitted to apply the standard and has elected to do so.

Q. How are Tier 1 and 2 entities required to report?

For Tier 1 and 2 PBE entities, the applicable reporting standard is PBE FRS 48. This is effective for reporting periods beginning on or after 1 Jan 2023, with early adoption permitted.

Q. What are the main principles of PBE FRS 48?

Paragraph 15 says:

An entity’s service performance information shall:

(a) Provide users with sufficient contextual information to understand why the entity exists, what it intends to achieve in broad terms over the medium to long term, and how it goes about this; and

(b) Provide users with information about what the entity has done during the reporting period in working towards its broader aims and objectives, as described in (a) above. (15)

It is important to note that PBE FRS 48 does not follow the standard terminology of “outcomes” and “outputs” as per the Tier 3 and 4 standards. The descriptions above however cover these and equate to the entity information (“sufficient contextual information to understand why the entity exists,“) outcomes (“what it intends to achieve in broad terms over the medium to long term, and how it goes about this“), and outputs (“what the entity has done during the reporting period in working towards its broader aims and objectives“) of Tier 3 and 4 standards. Nor is the term “impacts” used.

This leaves quite a bit of flexibility in how the service performance information may be reported.

Addressing this in a slightly different way, paragraph 19 says that the reporting entity should consider:

• What it is accountable/responsible for.
• What it intended to achieve during the reporting period.
• How it went about achieving its service performance objectives.

Q. What are the qualitative characteristics and how do they relate together?

Paragraph 7 states that preparers must “…apply the qualitative characteristics of information and the pervasive constraints on information identified in the Public Benefit Entities’ Conceptual Framework (PBE Conceptual Framework)”.

This means “…balancing of the constraints on information results in service performance information that is appropriate and meaningful to the users of general purpose financial reports.”

The qualitative characteristics identified in the PBE Conceptual Framework are relevance, faithful representation, understandability, timeliness, comparability, and verifiability (para 8). Paragraph 9 elaborates on these. Some of these are obvious, some are less so.

The standard acknowledges that “… in practice, all qualitative characteristics may not be fully achieved, and a balance or trade-off between certain of them may be necessary” (para 8).

The pervasive constraints on information materiality, cost-benefit and balance between qualitative characteristics are identified in the PBE Conceptual Framework (3.32–3.42). This acknowledges that preparers cannot be expected to compile all possible service performance information. And doing so would actually be counterproductive. No one would bother to read it all.

Even if they were to include every possible item, this would create issues such as the inclusion of immaterial information, high compliance costs, and it would be more difficult for users to discern what is essential due to each qualitative characteristic given equal value of importance.

The selection process is as important as the reporting itself. Paragraph 44 states that the entity must: “…disclose those judgements that have the most significant effect on the selection, measurement, aggregation and presentation of service performance information reported …”

As we shall see, the auditor will be looking carefully at the selection criteria to ensure that it results in unbiased and relevant information being presented.

Q. What kinds of measures of information may be reported?

Paragraph 20 states that preparers must use:”…an appropriate and meaningful mix of performance measures and/or descriptions for the reporting period. The performance measures and/or descriptions used by an entity to communicate its service performance may be:

(a) Quantitative measures: Examples of quantitative measures are the quantity of goods and services, the cost of goods and services, the time taken to provide goods and services, levels of satisfaction using a rating scale on a questionnaire or survey, and numerical measures for service performance objectives or goals;

(b) Qualitative measures: Examples of qualitative measures are descriptors such as compliance or non-compliance with a quality standard, ratings such as high, medium or low, or ratings assigned by experts; or

(c) Qualitative descriptions: Examples of qualitative descriptions are those based on participant observations, open-ended questions on interviews and surveys and case studies. For example, how did an entity’s service performance activities change the well-being and circumstances of a client group?

Some service performance reports tend to be just a restating of financial results. This is not the point, although in some cases it may be appropriate. A good report will choose a mix of appropriate measures that flow down from the purpose of the organisation, what it set out to achieve and how, and what it did achieve. The measures used will reflect the result being measured.

NOTE: This article is designed to give accurate but general information, however, Audit Assistant Ltd accepts no liability in any way to any person arising out of reliance on the contents for any purpose. Talk to your auditor or accountant for more information.

3 June 2020

When help or support is needed first use the “help” icon from within Audit Assistant (bottom right of the screen):

If browsing for more information go directly to the support hub.

This provides information on:

The site has been separated into five main categories of which category has its sub-categories. For example, the category Articles has sub-categories for current issues and technical articles for areas of focus such as:

The Q&A section has answers to questions that other users have asked and we feel are beneficial to users especially frequently asked questions.

We recommend looking at all categories especially the Q&A section before contacting us directly as this will speed up the process of obtaining an answer, however, we are always just a click away if needed.

Contacting us directly

• If you have a specific question not covered above then click contact us or email us at: support@auditassistant.com.

While the help-desk or email is the most reliable way to contact us in the first instance, if a really urgent issue has arisen and we haven’t responded on the help-desk, try calling us (in business hours) on:

• 021 169 4097 (Clive – content, and admin); or
• 022 199 6830 (Swikrit – technical issues).

31 March 2020

We want to proactively assist our users to become more equipped, skilled, efficient and profitable. Here are some ideas:

Have us assess your practice

We often find that firms that are struggling with their documentation and staying current benefit hugely by having us look through the kind of work they do, having a conversation around problems and challenges and having us make some recommendations about what they could be doing (which may include some or all of the following). This discussion often takes place informally in the context of training, however, we are happy to do this at a basic level as a free service on request.

Think outside your location

In the current audit environment, where many smaller part-time audit firms are opting out of auditing,  there is a great need for other firms to take up the slack, especially in the more remote regions. By embracing paperless, cloud-based technology like Audit Assistant there is no real disadvantage to auditing small entities remotely. Have you thought about following your networks and your specialisations to regions where there are few or no auditors?

Use all our online connection tools

Sharing pages to gather data, complete checklists and otherwise interact with clients is a no-brainer when it comes to efficiencies, yet many firms still don’t use these to their fullest. The ability to customise pages prior to sharing, hiding sections, and getting prompts when clients complete their work have made this even better. Plus use our requests feature to gather data directly from the client into anywhere in the audit file.

Upload your testing data and trial balance

Much efficiency is gained by using our sampling tool yet this is not used nearly as much as it could be. Once the data is loaded tests are run against the sample, scans may be attached and errors noted – all within the software. Similarly, trial balance data is now easier to upload and manipulate. Xero Trial Balances are now a one-click upload. 

Embrace paperless – attach and link

Having everything in the digital file means it is secure, backed up, and accessible from anywhere. Apps like Microsoft Office Lens make scanning from your device while on fieldwork far easier. Remember that in most cases attachments may be added by simply dragging and dropping onto the appropriate work item. Remember too that links to external sites and repositories may be added using the attachments tool.

Review concurrently and use our review tools

A huge advantage of cloud-based real-time audit software is the ability to review jobs in smaller, more timely chunks. A reviewer can jump into a job when they have a spare ten minutes, add review notes if required on pages in progress and head off any potential rabbit trails that staff may be on. No need to wait until the file arrives just hours before sign-off is required, and finding that there are plot holes in the story. If a firm is not using the review tools they are missing out on huge efficiencies.

Use the right templates

Follow the prompt which tells users that there is a better/newer version of a job type that they could/should be using. In some cases, this is critical where a standard has been updated. We don’t force these changes as in some cases there may be a good reason to stay on an older version (say doing a job that relates to an earlier period) but this is rare. In general, if there is a new version flagged this should be adopted as a matter of course – especially after roll-over. Most of your data will be retained (that which relates to the old job type will be dropped) and you will be assured you are using current content. In the worst case, you can always roll back the job using duplicate/restore.

List on our website

We have provided a service for some time of listing firms who wish to do so on our website and this free service will continue.

Use us to assist with your quality control

We offer a file review service whereby firms submit names of jobs for us to review and provide a written report including recommendations on how to use Audit Assistant better. This can be part of a practice assessment, lead to training in identified areas, and/or form part of your formal quality control process. Our report also contains feedback on how the file holds together and how it has addressed the auditing standards and best practices. This service is charged on an hourly basis.

Book a training session

There’s nothing like taking time to sharpen your tools. This is what training does – gives firms a chance to pause, take a breath and look at alternative ways to do better work. Bad habits can be left behind and better ways learned. We carry out training in-house if required, combined by area for new users and smaller firms, and also from time to time carry out workshops around issues of special interest. There is a fee charged for training sessions. 

Let us help with data migration or fee purchase

Sometimes firms hesitate to add all their work onto Audit Assistant because the time required for set up with many jobs can be unappealing. We can help with data migration and job setup – either just creating a bulk lot of clients with contact details, or by adding trial balance data. This is a custom service that depends on the specific need so contact us to discuss. We can also transfer jobs from another user in the case of sale and purchase of a block of fees. We can also connect firms either selling or wanting to buy a block of fees.

Tell us what you need from us

We’re here to help! Any requests, ideas, or suggestions are appreciated. If you can see an opportunity for us to develop some new content that may have wider commercial value please get in touch. Or if you want a new feature or service just ask. If we have enough requests we will find a way.

Note that most of these ideas can also apply to your compilation work as well. 

Please contact us to discuss further these ways we can partner with you to enhance your business and lifestyle

To help our users prepare for their next review – to get the proverbial ducks in a row – I requested the CAANZ NZ auditor oversight team to provide a list of the main issues encountered in their review work with audit firms. 

They were kind enough to send me notes from a recent presentation which included these very topics (for all audit firms – not just our users).So here are the main points, along with my commentary and suggestions about how to best use Audit Assistant to address these common problem areas:

1.  Audit / review report not compliant with standards

Our standard audit reports are designed for all types of jobs, and different permutations and outcomes, however they are not foolproof. Common mistakes include:

• Using an out of date audit template which includes an out-of-date audit report: With help from Bill Heritage we updated all our reports in 2016 when the reporting standards changed. If users are using an old template our system now prompts for an update with a red flag-box at the top of the page. Updating is easy and users are then assured of the correct audit report.
• Incomplete or incorrect reports: Using the correct report still may not produce a complete report if the wrong boxes have been ticked, or not ticked at all earlier in the job. Read the produced report carefully to make sure it makes sense and all essential parts are included. Use the Customise/Edit button to open up the detail on the page to see if something is missing or wrong and follow the hyper-links back to correct.
• When the standard reports don’t fit: Occasionally there will be some odd situation that we haven’t covered. In these cases use the Customise/Edit button to open and create the custom changes needed. Or use Copy to Clipboard and carry out a final edit in Word.
• Using your own out-of-date reports: To check if your reports are up to date we suggest checking your reports against ours, and use our checklists to find out where your reports are lacking.

And please if you do find an error or omission in our reports – or have a suggestion for improvements – let us know.

2. Not identifying that the financial statements do not comply with the reporting framework

At the beginning of each audit template we ask which reporting framework is being adopted and whether this is appropriate. There is also a testing tool included to make sure the framework actually fits the job. We also provide financial reporting checklists that allow the auditor check the disclosure and presentation in detail for compliance with the chosen framework. If an issue of non-compliance is found we suggest users:

• Note the problem and flag the issue – either as a risk, an adjustment, a management letter point, for follow up, or a key issue for partner attention or combination of the above depending on the kind of non-compliance.
• This will ensure that the point is not overlooked, and an adequate response is made, either by the client rectifying the issue or the appropriate note included and modification added to the audit report.

3.  Independence threats (self-review / long association)

Practice review seems to be requesting firms to have peer reviews carried out for jobs where there is a long association. The risk is that familiarity can bring a certain blindness that another auditor may easily spot. This is a particular issue for smaller firms where internal review or rotation of staff and partners is not possible. We suggest:

• Find another local firm of similar size and style and create reciprocal review agreement.
• We have acted as “matchmaker” in one case so far. We are happy to offer this as a free service to our users.
• Use our review service – this also serves as a training exercise in the use of Audit Assistant. While we are not “qualified auditors”, we find that so far our review has fulfilled quality control requirements.
  

4. Lack of clarity about opinion modifications (e.g. which revenue streams are affected)

When a modification is made to an audit report, there is a prompt to make a paragraph describing the basis of the modification.

• We do not provide any standard wording for this as every situation is likely to be unique so it is up to the auditor to provide a sufficiently precise statement.
• In these cases it may be a good idea to involve a peer reviewer (as above) to ensure that this essential wording is clear.

5. Going concern requirements not met (audit report and financial statements)

Again this is an issue of using the correct audit report, and considering the requirements of the standards.

• Auditors are required to ask whether a preliminary assessment of the entity’s ability to continue as a going concern has been carried out by the client, evaluate that assessment, and if not to discuss with client and record the discussion and evaluate (ISA(NZ)570,10).
• The financial reporting checklists will assist in checking the disclosure requirements of the relevant reporting standards.

6. Staff members completing Audit Assistant with little apparent understanding / No evidence that the engagement partner has taken responsibility for the direction, supervision and performance of the audit

These were two separate items in the notes, but they seem to relate closely. Within Audit Assistant:

• The partner is required to sign off the A1 control page which concludes the whole job. This implies that they have taken responsibility for approval and supervision of the work.
• There are a number of other pages that the partner should either be concluding or reviewing, such as the risk assessment page, the audit summary page, and the quality control page.
• We provide full training for users, so if this is you please contact us and book a training session.
• Download the latest user handbook.

7. Insufficient (or non-existent) audit documentation

Obviously not talking about Audit Assistant users 🙂

8. Has not demonstrated professional scepticism

The notes point out that there may be no single way in which the auditor’s professional scepticism is documented. It is more an attitude of having a questioning mind, being alert to anything that may indicate misstatement due to error or fraud and critically assessing audit evidence. Nevertheless the audit documentation should provide evidence of the auditor’s exercise of professional scepticism in accordance with the ISAs (NZ), addressing questions such as:

• Has the auditor responded appropriately in circumstances when inconsistent or contradictory audit evidence was obtained?
• Does the documentation indicate alertness to anything that may indicate misstatement due to error or fraud?
• Has the auditor sought evidence to challenge rather than just corroborate management’s assertions?
• If information is inconsistent with the auditor’s final conclusion regarding a significant matter, have they documented how the inconsistency was addressed?

9. Inappropriate sample sizes

As part of the audit documentation, there must be a logical connection made between sample size for test of details with factors such as:

• Assessment of risk.
• Use of other substantive procedures directed at the same assertion.
• Ability to stratify the population.

Thought must be applied to reducing sampling risk to an acceptable level, and the logic of the decision must be documented.

The notes point out that two types of conclusion can result if this connection is not made:

• That a material misstatement does not exist when in fact it does.
• That a material misstatement does exist when in fact it does not.

Within Audit Assistant we prompt for these kinds of discussions as part of our planning and tests of details areas.

We hope this tips give some direction as to where you might consider some internal training or updates to procedures. Please contact us if you have any questions or comments about any of these issues or would like any assistance.