ICPAK-INTERPRETATION-OF-AUDIT-OPINION-AUDIT-MASTER-CLASS-by-FCPA-Georgina-Malombe.pdf

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1. Value Based Preparation and Review of Reports
from Internal & External Audits:
Presented By:
FCPA Georgina Malombe
Managing Partner, Gemal& Company

2. Vision:A world class Professional Accountancy Institute.
OUTLINE
Introduction : What to Audit
Audit Process
Audit Reporting
Understanding Audit Opinions
Understanding Management Letter: Audit Committee Considerations
Role of Audit Committees-Enhancing Value Across Organizations
What could go wrong?
1
2
3
4
5
6

3. Vision:A world class Professional Accountancy Institute.
Introduction : The Shift

4. Vision:A world class Professional Accountancy Institute.
Introduction : What to Audit
Products
People
Process
It is no
longer…
what
increased
this to that?

5. Vision:A world class Professional Accountancy Institute.
Introduction : What to Audit
Process
-Frameworkse.g
Policies,guidelines
-Authorisation
-Internalcontrols
-Systemreliability

6. Vision:A world class Professional Accountancy Institute.
Introduction : What to Audit
People
‘’MostDifficultto
Audit’’
-Toneatthetop
-Culture
-Competency
-Optimalresourcing

7. Vision:A world class Professional Accountancy Institute.
Introduction : What to Audit
Products
-Cost
-Pricing
-Suppliers
-Distribution

8. Vision:A world class Professional Accountancy Institute.
Audit Process
✓Financial Statements
✓AuditorsOpinion
✓Management Letter

9. Vision:A world class Professional Accountancy Institute.
Lets Reflect-3Minutes Clip
•Can things go
wrong when you
are
on the steering
wheel?

10. Vision:A world class Professional Accountancy Institute.
Key Audit Matters (KAM)
•“Thosemattersthat,intheauditor’s
professionaljudgment,wereofmost
significanceintheauditofthefinancial
statementsofthecurrentperiod.Keyaudit
mattersareselectedfrommatters
communicatedwiththosechargedwith
governance.”

11. Vision:A world class Professional Accountancy Institute.
Key Audit Matters: Considerations
1.Areasofhigherassessedriskofmaterialmisstatement,orsignificantrisks
identifiedinaccordancewithISA315(Revised),IdentifyingandAssessing
theRisksofMaterialMisstatementthroughUnderstandingtheEntityandIts
Environment;
2.Significantauditorjudgmentsrelatingtoareasinthefinancialstatements
thatinvolvedsignificantmanagementjudgment,includingaccounting
estimatesthathavebeenidentifiedashavinghighestimationuncertainty;
and
3.Theeffectontheauditofsignificanteventsortransactionsthatoccurred
duringtheperiod.
AuditorShouldIndicate:
1.
Why the matter was considered to be one of most significance in the audit
and, therefore, determined to be a key audit matter; and
2.How the matter was addressed in the audit.

12. Vision:A world class Professional Accountancy Institute.
Understanding Audit Opinions

13. Vision:A world class Professional Accountancy Institute.
Nature of
Opinion

14. Vision:A world class Professional Accountancy Institute.
Review of Management Letters
GoodPractice
❑Giveanoverviewofthe
auditprocess
❑Giveanoverviewofareas
covered
❑Basisofsampling
❑Materialitythresholds
❑FraudIndicationsifany
❑Statusofinternalcontrol
system

15. Vision:A world class Professional Accountancy Institute.
Management Letter…
GradingDescription…..JoiningDotswiththeOpinionIssued
Grade1Observationsarethosewheretheriskofsignificant
financialimpactonthebusinessmustbeaddressed
immediately
Grade2Observationsarethosewherethereismoderateriskof
financialimpactonthebusinesse.gcontrolfailureor
theabsenceofacontrolinareaofmoderaterisk
Grade3Observationsarethosethatrelatetominorcontrol
deficienciesorenhancementsincontrolefficiency.
Theycanalsobegoodtohaveadjustments

16. Vision:A world class Professional Accountancy Institute.
Management Letter…
Sections Description…..JoiningDotswiththeOpinionIssued
Observation▪Briefdescriptionofthepointwithanynecessarybackgroundand
information.
▪Shouldhighlightspecificrisksassociatedwiththeobservation.
▪Risksgivenshouldberelevantandrealistic
Recommendati
on
▪Clearlystatedrecommendations
▪Viableinabusinesscontext
▪Statethebenefitsofimplementingthem
Managements
Response
▪Mustbeagreeduponwiththeauditor
▪Bywho,bywhenandresourcesrequiredifany.
Actions ▪Bywhen,Bywho,

17. Vision:A world class Professional Accountancy Institute.
Important considerations for Audit
Committee Members
❑ModernAuditsisaboutcollaborationsandnot
directives.
❑InreviewingauditfindingsitiscriticalforAC
toalsohaveaselfreflectionsonthefollowing
Resourcing
& Operating
environmen
t
Expertise
Repeat
issues
Comparative
info with
peers
AC Role in
closure of
ML findings

18. Vision:A world class Professional Accountancy Institute.
Role of Audit Committees in Implementation
Audit Findings .
❑Theroleofauditistoenhancevalueacrosstheorganization.
❑ACRole:
❖Oversight:Reporttotheboardkeyissues
❖Resourcing:EnsureIAiswellresourcedincludingcapacity
buildingandengagingexperts
❖Recastandre-approvetheannualauditplan
❖Reviewitseffectiveness
❖Driveculturechangeintheentireorganizations-callfor
collaborativemeetingswithothercommitteesand
management

19. Vision:A world class Professional Accountancy Institute.
Audit Planning and Risk-based Audits
Agenda Considerations
Audit
Planning
❑Internal Audit: Annual Plans broken into quarters and audit areas
❑External Audit timetable
❑Continuous oversight and feedback mechanism to the board.
Risk Strategy❑What is the organizations strategic objectives and principle
business
Risk structure ❑How do you embed support risk strategy and accountability
Measuring &
Monitoring
❑Establish KPIs embed a culture of continuous performance
improvement
Portfolio Identify and categorize risk across the organization
OptimizationBalance potential risks and opportunities based on the risk appetite

20. Vision:A world class Professional Accountancy Institute.
Conclusion
In Audit, Trust is Good.
However, Trust with Verification is
Better!


21. PLENARY