Professional Documents
Culture Documents
OBJECTIVES
To review the client's business in order to reach preliminary conclusions on the degree of risk associated with the
respective audit areas and to determine the risk reduction factors and sampling intervals that can be applied when
determining the sample sizes.
PROCEDURE:
For each audit area, assess and record the risk (high, medium or low), and determine the factor to be applied using
statistical sampling:
1.Inherent risk: The susceptibility of an assertion to a misstatement, that could be material, individually or when
aggregated with other misstatements assuming that there were no related internal controls.
2.Analytical risk (component of detection risk): That the analytical procedures adopted as substantive
procedures will fail to detect a material misstatement (Refer to Form 5.06 - Analytical Review Conclusion on
documentation of areas where analytical procedures will be used as substantive procedures).
3.Control risk: The risk that a material misstatement could occur in an assertion and that could be material,
individually or when aggregated with other misstatements, will not be prevented or detected and corrected on a
timely basis by the entity’s internal controls (Refer to Form 5.09 on recording the assessment of control risk).
4.W/P Ref: Reference to working paper, where used, to support the assessment of the risk.
3. Cost of sales The cost of sales is not correctly Test check controls over recording and
stated due to the decrease in the completeness of purchases including
gross profit margin, from the year-end accruals (for goods / services
expected. received but for which invoices are
pending).
Verify if purchase returns have been
correctly accounted.
Client: Prepared by: Date:
Period ended: Reviewed by: Date:
Planning stage: We have considered the assessment of risk at the planning stage and any specific issues arising
have been covered in the Audit Plan - Form 5.02.
Completion: Based on the audit procedures performed and the audit evidence obtained, the preliminary
assessment of the risks of material misstatements at the assertion level remains appropriate and further audit
Client: Prepared by: Date:
Period ended: Reviewed by: Date: