Major Assignment

Auditing and Assurance

Submitted to,
Mr. Muin Uddin Ahmed
Senior Lecturer of Auditing and Assurance
Department of Accounting and Finance
School of Business and Economics
North South University
Submission Date: 3 June, 2020
Prepared by,
Md. Shamim Hasan
ID 1221180030
Spring 2020
Word Count: 3113 words ACT380.1

PAGE NO. 1
Table of Contents
Answer No. 1 Auditing and Assurance Course Overview 1
What have we learnt so far?

Answer No. 2 Application of Auditing Knowledge in real-world scenarios 2

How can we help to accustom ourselves in the audit firm?

Answer No. 3 Auditing Sustainable Development Goals 3

How can we help audit firms on SDGs?

Answer No. 4 The Confirmation Process 4

PCAOB, AU Section 330
Addressing issue about appropriate use of negative confirmation

Answer No. 5 Auditing Derivative Instruments, Hedging Activities 5

and Investments in Securities
PCAOB, AU Section 332
Addressing issue and appropriate audit procedures

Answer No. 6 Supplementary Information in Relation to the 6

Financial Statements as a Whole
AICPA, AU Section 551
Addressing issue and further procedural opportunities

References 7

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 Auditing and Assurance
Course Overview
What have we learnt so far?

The fundamental motivation behind Auditing is to affirm the authenticity of Books of Accounts arranged
by an accountant. Along these lines, the auditing starts, where the capacity of a accountant becomes
obsolete. Auditing is done to decide the valid and reasonable image of records looking at the books of
records with supporting archives. Inspecting gives heaps of advantages like Verification of Books of
Accounts, Independent Opinion, Moral Check, Protection of the Rights and interests of shareholders,
reliance by outsiders, guarantees consistence with level necessities and strengthens internal control.
Hence, by taking this course, we have learnt the following: Basic auditing concepts, Risk Assessment,
Materiality and Evidence; Internal Control in a Financial Statement Audit; Auditing Internal Control over
Financial Reporting, Statistical and Nonstatistical sampling tools for auditing, and auditing business
processes
After completion of the chapter: Basic auditing concepts, Risk Assessment, Materiality and Evidence, we
have learnt the concept of audit risk, the form and components of the audit risk model and understood
how to use the audit risk model and limitations to assess the auditor’s risk. We have also learnt to Identify
the auditor’s assessment of the risk of material misstatement and strategies to respond. We have also
learnt to evaluate the results of the audit tests and the documentation requirements for risk assessments
and responses.
In the following part: Internal Control in a Financial Statement Audit, we found out about the connection
between audit evidence and the evaluator's report, declarations about record adjustments at the period
end, and affirmations about presentation and revelation, auditing procedures. We have additionally learnt
about the essential ideas of audit evidence and procedures used to review audit evidence. Most
importantly, our faculty helped us to develop understanding of the content, types, organization, and
ownership of audit documentation.
In the chapter: Internal Control in a Financial Statement Audit, we studied about the importance of internal
control to management and auditors and know what controls are relevant to the audit. We have been
made capable to identify the components of internal control and the effects of information technology on
internal control. We can now plan an audit strategy on our own. An understanding of an entity’s internal
control and the tools available for documenting the understanding of internal control was also reviewed
by our honorable, ever knowledgeable faculty in the world. He has also reviewed the level of control risk.
Statistical and Non-statistical sampling tools for auditing is one of the parts of auditing which was heavily
emphasized by our faculty. We learnt basic sampling terminology and the types of audit procedures, types
of audit sampling. We have also learnt about the sampling requirements in auditing standards, and finally
applying them in real world context. We now understand the similarities and differences between audit
sampling for tests of controls and substantive tests of details of account balances. We have worked through
an extended example of monetary-unit sampling and application nonstatistical sampling techniques. It is
necessary to know why knowledge of an entity’s revenue recognition policies is important to the audit and
our faculty surprisingly covered it as well in our course. Now, we understand revenue processes and easily
identify the types of transactions in the revenue process and the financial statement accounts affected.
Finally, in the last chapter we have been educated to do substantive testing and identify substantive
analytical procedures used to audit accounts receivable and revenue-related accounts. Our faculty has
taught us many more topics that cannot be described in words or be written within this constricted piece
of writing with certain weightage of marks in each answer. He more likely led us from learning Auditing to
writing this fine writing of literature. His contribution is unforgettable.

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 Application of Auditing Knowledge
in real-world scenarios
How can we help to accustom ourselves in the audit firm?

Auditors and accountants follow organizations' cash, guaranteeing a business precisely and honest records
and reports its financial activities. Accountants handle the everyday chronicle, examination and revealing
of an association's financial exchanges. Those exchanges incorporate the account of salary, installments,
finance and assessment conclusions just as the yearly reconciliation of the organization's books. Auditors
are exceptionally prepared bookkeepers who cautiously look at an organization's records for exactness and
audit an organization's financial strategies and methods to guarantee that the organization stays away from
misrepresentation and robbery. Auditors require preparing in a wide range of accounting practices, yet
additionally in different tax laws and financial guidelines.
Auditing methods normally require the reviewer to gain information on the substance being evaluated and
to set up a risky audit plan. The review group needs to gather information on business with an attention
on dangers to the accomplishment of effectiveness and the recognizable proof of significant areas that
would profit by an assessment of efficiency. In all performance (esteem for-cash) audits, the auditor's
knowledge of noteworthiness and risks will be utilized to recognize specific projects or areas to remember
for the audit and to create audit objectives.
Auditors work for the organizations they review. In every enterprise, auditors work in accounting divisions,
where they twofold check accountants' work. The essential obligations of an inside auditor are to audit
and survey an organization's arrangements, methodology and records and to audit and evaluate an
organization's exhibition dependent on its arrangements, strategies and systems. The obligations of an
auditor incorporate auditing budgetary records and accounting frameworks, auditing consistence with
organization strategies, and assessing the effectiveness of organization tasks. Their obligations may
likewise incorporate evaluating representative execution and surveying progress toward organization
objectives. Auditors normally report to the audit committee council.
Auditors audit an organization's fiscal financial statements and illuminate the executives, the board,
speculators and specialists whether the statements precisely mirror the current financial circumstance of
the organization, and they decide whether those statements have been effectively arranged and detailed.
Auditors also maintain and research the records and practices of government agencies and review private
organizations and people whose exchanges are dependent upon government guideline or tax collection.
They look at and assess firms' or people's financial records for use as proof in legal disputes including
misrepresentation, misappropriation or other monetary cases. Forensic auditors regularly give expert
advice during preliminary procedures.
Auditors analyze an organization's buying practices, procedures and frameworks, deciding if the
organization actually needs the products and enterprises they acquire. They can enable a business to set
aside cash and run much more proficiently.
Jobs for auditors and accountants are anticipated to grow 11 percent by 2024, which is higher than the
normal for all occupations, as indicated by the BLS. Auditors and accountants who have earned CPA degree
and have an MBA alongside are highly hoped with the best occupation possibilities, as indicated by the BLS.
Considering all these explanations it is understandable that there is huge job opportunity in the near
future. After achieving knowledge and expertise in this field of accounting, we can accustom ourselves in
an audit firm.

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 Sustainable Development Goals
How can we help audit firms on SDGs?

We can help build the business case for making a move on the SDGs by distinguishing SDG-related dangers
and open doors for business and assisting with drawing in senior leaders at your association in choices on
SDG-related techniques. Firms can specialize with SDGs can develop fitting informing for your senior
administration that associates the SDGs seriously to your center business. Then it is possible to assess and
convey the effects your business has on the SDGs and find fitting and useful approaches to give your
partners a reasonable perspective on both the positive and the negative.
To prioritize the SDGs that are generally important for your business, it is necessary to identify and
actualize the most fitting prioritization techniques including materiality examination and interview with
inward and outside partners and analyze the UN's 169 SDG targets and choose which of those an
organization should address and report on.
Development and execution privileges SDG execution targets and detailing pointers for a business. It is
necessary to ensure that SDG execution targets are smart and the correct frameworks and procedures are
set up to catch SDG-related execution information. SDG execution into organization's working targets and
individual execution objectives and benchmarking SDG exercises and detailing against companions and
rivals is utmost help that can be helped with audit firms. Ultimately, audit firms should communicate SDG
action in a manner that draws in financial specialists and different partners.
Successfully estimating progress by locales and urban areas in actualizing the SDGs is central, given that
accomplishing these objectives will require contribution by all partners – no matter what. While privately
owned businesses progressively remember sustainability for their financial reports, neighborhood
specialists ought to likewise have the aspiration and the way to be straightforward and responsible to
citizens for their pledge to maintainability. Making a certifiable observing framework at EU level would
help furnish partners and residents not just with data all in all execution procedure, yet in addition with
instruments for better administration and accountability.

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 The Confirmation Process
PCAOB, AU Section 330
Addressing issue about appropriate use of negative confirmation

The Confirmation Process of Public Company Accounting Oversight Board (PCAOB) addresses this issue &
will be helpful in understanding the appropriate use of negative confirmations.
Since there is a hazard that beneficiaries of a positive type of confirmation demand with the data to be
confirmed contained on it might sign and return the confirmation without checking that the data is right,
blank forms might be utilized as one approach to alleviate this risk. In this way, the utilization of blank
confirmation solicitations may give a more prominent level of confirmation about the data affirmed. In
any case, blank forms may bring about lower reaction rates on the grounds that extra exertion might be
expected of the beneficiaries; thus, the reviewer may need to perform progressively elective methodology.
(AU Section 330.19)
The negative form demands the beneficiary to react just in the event that the person in question can't
help contradicting the data expressed on the solicitation. Negative affirmation solicitations might be
utilized to diminish audit risk to an adequate level when (a) the joined evaluated level of characteristic
and control risk is low, (b) an enormous number of little adjustments is included, and (c) the inspector has
no motivation to accept that the beneficiaries of the solicitations are probably not going to give them
thought. For instance, in the assessment of demand deposit accounts in a money related establishment, it
might be fitting for an auditor to incorporate negative confirmation demands with the clients' customary
statements when the joined evaluated level of characteristic and control risk is low and the inspector has
no motivation to accept that the beneficiaries won't think about the solicitations. The auditor ought to
think about performing other considerable methodology to enhance the utilization of negative
confirmations. (AU Section 330.20)
Negative confirmation solicitations may create reactions showing misquotes, and are bound to do as such
if the auditor sends countless negative confirmation demands and such errors are across the board. The
auditor ought to research applicable data given on negative confirmations that have come back to the
auditor to decide the impact of such data may have on the audit. On the off chance that the auditor's
examination of reactions to negative confirmation demands demonstrates an example of misquotes, the
auditor ought to rethink their joined surveyed level of inherent and control risk and consider the impact
on strategic audit procedures. (AU Section 330.21)

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 Auditing Derivative Instruments, Hedging
Activities and Investments in Securities
PCAOB, AU Section 332
Addressing issue and appropriate audit procedures

Auditing Derivative Instruments, Hedging Activities, and Investments in Securities of Public Company
Accounting Oversight Board (PCAOB) addresses the issue and will be helpful in understanding what audit
procedures should be applied to estimate of fair value received from broker-dealers.
An auditor may require special expertise or information to design and perform auditing procedures for
specific attestations about subordinates and securities. Instances of such auditing methodology and the
unique expertise or information required include:
Acquiring a comprehension of an element's data framework for subsidiaries and protections, including
administrations gave by an assistance association, which may necessitate that the evaluator have special
ability or information regarding computer applications when noteworthy data about subordinates and
protections is transmitted, handled, kept up, or opened electronically.
Distinguishing controls put in activity by a service association that offers types of services to an entity that
are a piece of the substance's data framework for subsidiaries and securities, which may necessitate that
the auditor have an idea of the working features of elements in a specific industry.
Understanding the utilization of proper accounting rules for statements about subordinates, which may
necessitate that the auditor has unique information in view of the multifaceted nature of those standards.
Also, a subordinate may have complex features that require the reviewer to have exceptional information
to assess the estimation and exposure of the subsidiary in congruity with sound accounting guidelines. For
instance, features implanted in agreements or understandings may require separate accounting as a
derivative, and complex evaluating structures may build the intricacy of the presumptions utilized in
assessing the reasonable estimation of a derivative.
Understanding the assurance of the reasonable estimations of derivatives and securities, including the
propriety of different kinds of valuation models and the sensibility of key elements and suppositions, which
may require information on valuation concepts.
Surveying inherent risk and control risk for statements about derivatives utilized in hedging exercises,
which may require a comprehension of general risk managing notions and distinctive asset/liability
management techniques. (AU Section 332.05)

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 Supplementary Information in Relation to
the Financial Statements as a Whole
AICPA, AU Section 551
Addressing issue and further procedural opportunities

Supplementary Information in Relation to the Financial Statements as a Whole of American Institute of

CPAs (AICPA) addresses the issue and will be helpful in understanding what procedures should be
performed, in addition to procedures performed during the audit, for an auditor to express an opinion on
supplementary information.
This section addresses to the auditor's duty when drawn in to provide details regarding whether beneficial
data is genuinely expressed, in every single material regard, according to the financial statements all as
whole. This section additionally might be applied, with the report wording adjusted as necessary, when
an examiner has been locked in to write about whether required data is genuinely expressed, in every
material regard, corresponding to the financial statement as whole. (AU Section 551.01)
The auditor's duty regarding data that an assigned accounting standard setter requires to go with an entity's
fundamental financial statements is addressed to in section 558, Required Supplementary Information. (AU
Section 551.01.A1)The auditor's obligation regarding budgetary and non-financial data (other than the
fiscal reports and the auditor's report subsequently) that is remembered for an archive containing
inspected fiscal reports and the inspector's report consequently, excluding required beneficial data, is
addressed to in section 550, Other Information in Documents Containing Audited Financial Statements. (AU
Section 551.01.A2)
The supplementary data need not be given the audited reports all together for the auditor to communicate
a supposition on whether such supplementary data is genuinely expressed, in every single material regard,
corresponding to the fiscal reports in general. Be that as it may, as per passage .10, if the supplementary
data is not presented with the audited financial statements, the auditor's report on the beneficial data
needs to be referred to the auditor's report on the financial statements. (AU Section 551.01.A3) The auditor
might be engaged to express an opinion on indicated elements, records, or things of financial statements
with the purpose of a different introduction, as per passages .11–.18 of section 623, Special Reports. In
such a commitment, the auditor's methodology is intended to furnish the auditor with sensible confirmation
that the valuable data isn't misquoted by an amount that would be material to the data itself. A
commitment to analyze the valuable data or an attestation identified with the supplementary data likewise
might be acted as per AT Section 101, Attest Engagements. (AU Section 551.01.A4)
Albeit an auditor has no commitment to apply auditing methods outside the basic financial statements,
the auditor may decide to adjust or deter certain techniques to be applied in the audit of the basic financial
statements with the goal that the auditor may communicate a conclusion on the supplementary data
comparable to the fiscal reports overall. (AU Section 551.01.A5) Management may incorporate non-
financial data and accounting data that isn't straightforwardly identified with the fundamental financial
reports in a record containing the basic financial statements. Conventionally, such data would not have
been exposed to the auditing procedures applied in the review of the essential fiscal reports, and
appropriately, the auditor would be not able to opine on the data comparable to the financial statements
in general. In certain conditions, such data may have been acquired or gotten from accounting records
that have been tried by the auditor (for instance, number of units created identified with sovereignty
under a license agreement or number of representatives identified with a given payroll period). In like
manner, the auditor might be in a situation to communicate an opinion on such data comparable to the
financial statement as whole. (AU Section 551.01.A6)

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References
Abramavičius, A. (2019). How to ensure SDGs are implemented in an accountable way at regional and
local level. Auditing Sustainable Development Goals, 19-22. Retrieved June 03, 2020, from
https://www.eca.europa.eu/lists/ecadocuments/journal19_03/journal19_03.pdf.
AICPA. (n.d.). AU Section 551 Supplementary Information in Relation to the Financial Statements as a
Whole. Retrieved June 03, 2020, from
https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-
00551.pdf
Basco, J. L., King, A., & Jayaram, S. (2018). How to Report on the SDGs, 1-33. Retrieved June 03,
2020, from https://assets.kpmg/content/dam/kpmg/xx/pdf/2018/02/how-to- report-on-
sdgs.pdf.
CAAF. (n.d.). Acquiring Knowledge of Business and Assessing Risk. Retrieved June 03, 2020, from
https://www.caaf-fcar.ca/en/efficiency-audit-methodology/planning-an-audit-of-
efficiency/acquiring-knowledge-of-business-and-assessing-risk
PCAOB. (n.d.). AU 330 The Confirmation Process. Retrieved June 03, 2020, from
https://pcaobus.org/Standards/Archived/PreReorgStandards/Pages/AU330.aspx
PCAOB. (n.d.). AU 332 Auditing Derivative Instruments, Hedging Activities, and Investments in
Securities. Retrieved June 03, 2020, from
https://pcaobus.org/Standards/Archived/PreReorgStandards/Pages/AU332.aspx
UWF. (2016, July 08). The Importance of Auditors: UWF Online. Retrieved June 03, 2020, from
https://getonline.uwf.edu/articles/business/importance-of-auditors.aspx

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