AMP Training

Module Ten Part Two

Audit of predetermined objectives :
Usefulness
Module outline
1. Usefulness assertions
2. Basic risk response rules usefulness
3. Accumulating + evaluating misstatements for
usefulness
 AoPO Reasonable assurance: Execution per subject matter (SM)

ToC
Materiality
Risk assessment and Accept-reject
response sampling
U
n
d
e Risk Register
r
Lead schedule
s SToD: Testing
SToD: Approach &
t single/once off
accumulation per target
a achievements
n
SToD: Testing
d
C,M,R,P&D
i
n SToD: Testing per
SToD: Testing per
popultation
g
population

Adjustments

Overall
Conclusion Evaluation of uncorrected misstatements and concluding
summary

For SM per indicator For SM per target Per target Per population per assertion
 ①
Usefulness assertions
 Usefulness assertions
Usefulness

Assertions Predetermined misstatement

• Consistency conditions
• Measurability
• Relevance
• Presentation and disclosure
Pertaining to planned and reported Predetermined substantive
performance information procedures

One working paper per

scoped-in subject
matter
 ②
Basic risk response rules
Usefulness
Basic risk response rules
Usefulness
Rule to perform specified SP’s

Consistency

Measurability

Relevance

Presentation PFMA

Presentation MFMA
Rule to perform specified SP’s
• Must perform specified SP to test for specific
predetermined misstatement conditions
pertaining to consistency, measurability,
relevance and presentation of the reported
information on planned performance by
scoped in programme.

CMRP
 Rule - Consistency

Annual performance Annual performance plan

report and strategic plan
(or other like documents) (or other like documents)
- • strategic objectives VS - strategic objectives
- performance - performance measures/indicators
measures/indicators - performance targets
- performance targets
- Reported achievement not
consistent to planned target
Phased in
Rule - Measurability

Measurability is assessed based on

the two misstatement conditions

Well defined Verifiable

Must be predetermined and consistently

applied by auditee throughout the year
Rule - Measurability
Core components:
1. Source/collection of data
Well defined 2. Method of calculation 3.Type of output

Sub-conditions: Indicator as a whole

Verifiable • Clear unambiguous definition
• Defined for consistent data collection

Sub-conditions: each target related to an

indicator
• SPECIFIC
• MEASURABLE
• TIMEBOUND

Must be predetermined and consistently

applied by auditee throughout the year
Rule - Measurability
Core components:
1. Source/collection of data
Well defined 2. Method of calculation 3.Type of output

For discussion:
Verifiable 1. Are TIDs required for an
indicator to be well-defined?
2. What does specific imply?
3. Is time-bound implied due to
inclusion in an ANNUAL
performance plan
4. What if no documented
processes and policies?
Must be predetermined and consistently
applied by auditee throughout the year
Rule - Measurability
Well defined For indicator (and its targets):
• Possible to verify the
Verifiable processes and systems that
produce the indicator

For discussion:
• What is the link with
existence of systems, if any?

Must be predetermined and consistently

applied by auditee throughout the year
Rule - Relevance

Test whether indicators/measures and targets

Relate logically and directly to an aspect of

the entity’s mandate, and the realisation of
strategic goals and objectives

From the entity’s mandate, applicable

legislation and strategic goals and objectives,
are included in the approved plan Phased in
 Rule -
Presentation and disclosure

• Test whether the reasons for variances between

planned and actual performance have been disclosed
in the annual performance report
• The reliability of the reasons for variances is also
tested to corroborating source documentation
• Changes to objectives, performance
measures/indicators and performance targets not
disclosed is a presentation and disclosure Phased in
misstatement
 Rule -
Presentation and disclosure

Test whether
• a comparison between planned and actual or
current and prior year performance have been
disclosed in the annual performance report
• measures taken to improve performance have
been disclosed in the annual performance report
• the reliability of the measures taken to improve
performance tested to corroborating source
documentation
 Rule -
Presentation and disclosure

• Perform a final evaluation of the overall presentation

of the performance information to confirm if it is
relevant, comparable and understandable
Transitional arrangements for
new misstatement conditions
New consistency and P&D conditions

• 2016/17: Include in engagement letter and report in

Annexure to MR
• 2017/18: full implementation

Relevance: Completeness of indicators

• Report in Annexure to MR until further notice

 ③
Accumulating + evaluating
misstatements for usefulness
Accumulating usefulness misstatements

• A misstatement is identified when the

misstatement condition is not met i.e. 0% or
100%
• Misstatements accumulated for each
individual performance target tested
• Misstatements identified per criteria should
not be considered in isolation (C,M,R and P)
 Correction of misstatement

Uncorrected
Communicate Adjustments misstatements
Audit
all by per target –
adjustments
misstatements management? transfer to
Evaluation WP
Evaluating usefulness misstatements
NB

Final uncorrected misstatements are

evaluated to determine whether or
not the misstatements are material

Any misstatement for

Any misstatement for non-
material performance
material indicators/measures
indicators/measures
= NOT MATERIAL
= MATERIAL MISSTATEMENT
Risks relating to reliability

Risks identified when testing

usefulness assertions

Transfer to risk register & RAR

Assess risk and determine

appropriate response when
testing reliability
Impact of measurability misstatements
on testing of reliability
If an indicator is not measurable (i.e. not well-defined
and verifiable) the results may be so severe it prevents
the auditor to perform further work on reliability
• Apply the assessment criteria
• If the criteria 1 or 2 applicable = 100% limitation
misstatement
Other
Criterion 1 Criterion 2
situations
If all conditions If all conditions Perform
are met – No are met – No reliability
further work further work testing
Impact of measurability Criterion 1
misstatements If all conditions are
met - No further work

No documentation and information available on:

i. the performance measurement processes
and systems, including TIDs/data definitions;
and
ii. documented policies and SOPs; and
iii. management is unable to explain any of the
core components to understand how the
indicator is measured and explanations can’t
be corroborated.
Impact of measurability Criterion 1
misstatements If all conditions are
met – No further
work
No documentation and information available on the
following:
i. the Core components
performance measurement processes and
systems,
• Source including technicalofindicator
or collection data (including
descriptions (TIDs) or data definitions; and
source documentation required)
ii. documented policies and standard operating
• Method
procedures of calculation,
(SOPs); and or
iii. in• theType of output
absence of documented processes,
management is unable to explain any of the
core elements that are necessary to understand
how the indicator is measured.
Impact of measurability Criterion 2
misstatements If all conditions
are met – No
No/limited indication of any of the
further work
core components in the available
documentation and information:

(i) No/limited indication of any of the core components

in the performance measurement processes and
systems, including TIDs/data definitions; and
(ii) No/limited indication in any documented policies
and SOPs; and
(iii) Management unable to explain how the indicator is
measured and explanations can’t be corroborated
Impact on testing of
reliability
If criteria 1 or 2 applicable –

• Auditor is unable to test reliability = 100%

limitation misstatement

• Guidance on limitations imposed by

management is applicable

Refer limitation scenario 3

Respond accordingly
 AoPO Reasonable assurance: Execution per subject matter (SM)

ToC
Materiality
Risk assessment and Accept-reject
response sampling
U
n
d
e Risk Register
r
Lead schedule
s SToD: Testing
SToD: Approach &
t single/once off
accumulation per target
a achievements
n
SToD: Testing
d
C,M,R,P&D
i
n SToD: Testing per
SToD: Testing per
popultation
g
population

Adjustments

Overall
Conclusion Evaluation of uncorrected misstatements and concluding
summary

For SM per indicator For SM per target Per target Per population per assertion
Exercise
Go to the folder: Course material/Module 10 AOPO
Open the working paper:
“SToD - AoPO - CMRPD DFF”

a) Familiarise yourself with the layout of the working paper

b) Complete row 17 of worksheet “Part 1 & 3”
c) Complete row 17 & 18 of worksheet “part 2”