(Auditing) CE 2016

Question No.2

Internal Control and its Objectives

As we know Internal control means policies and procedures designed, implemented and operated by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

a. Effectiveness and efficiency of operations.
b. Reliability of financial reporting.
c. Compliance with applicable laws and regulations.
The first category addresses an entity's basic business objectives, including performance and profitability goals and safeguarding of resources.

The second relates to the preparation of reliable published financial statements, including interim and condensed financial statements and selected financial data derived from such statements, such as earnings releases, reported publicly.
The third deals with complying with those laws and regulations to which the entity is subject. These distinct but overlapping categories address different needs and allow a directed focus to meet the separate needs.
As internal controls are not in use, therefore, we will perform other audit procedures to address the above mentioned control objectives.


Question No.3 Materiality
Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Determining Planning Materiality and Performance Materiality
When establishing the overall audit strategy, the auditor shall determine materiality for the financial statements as a whole. If, in the specific circumstances of the entity, there is one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements, the auditor shall also determine the materiality level or levels to be applied to those particular classes of transactions, account balances or disclosures. The auditor shall determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures

Question No.4 Considerations with regard to IFRS while planning and performing audit
The auditor shall obtain understanding of the entity’s selection and application of accounting policies, including the reasons for changes thereto. The auditor shall evaluate whether the entity’s accounting policies are appropriate for its business and consistent with the applicable financial reporting framework and accounting policies used in the relevant industry. The Entity’s Selection and Application of Accounting Policies
An understanding of the entity’s selection and application of accounting policies may encompass such matters as:
a.The methods the entity uses to account for significant and unusual transactions.
b.The effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
c.Changes in the entity’s accounting policies.
d.Financial reporting standards and laws and regulations that are new to the entity and when and how the entity will adopt such requirements.
The auditor shall select samples and perform substantive procedures to ensure the compliance with applicable financial reporting framework.