ACHIEVING EFFICIENCY WITH SMALLER CLIENT

AGARWAL & ITALIACHARTERED ACCOUNTANTS

SECUNDRABAD

PRESENTATION OUTLINE

•Introduction•Preliminary Approach•Audit Approach•Concluding the Audit•Conclusion

INTRODUCTION QUALITATIVE CHARACTERSTICS OF A SMALL

ENTITY

• Concentration of Ownership & Management• Few Sources of Income and Operations • Unsophisticated Record keeping• Limited Internal controls – Management

Override

PRELIMINARY APPROACH

•Knowledge of Clients Business•Engagement Letter•Quality Control•Planning•Assessment of Risk•Materiality

KNOWLEDGE OF CLIENTS BUSINESS

Understand the transactions that:• Significantly effect the financial statements• Enable the auditor in assessing inherent and

control risks

PRELIMINARY APPROACH

•Knowledge of Clients Business•ENGAGEMENT LETTER•Quality Control•Planning•Assessment of Risk•Materiality

QUALITY CONTROL

PLANNING

FIELD WORK

TESTING

Assignment of the team

Informing the team

Supervision

Consultation

Review

PLANNING THE AUDIT

•Consider clients expectations and requests•Review the available information or obtain information through discussion with the client•Designing Audit Procedures•Review of Planning document•Timing of Audit and Job Scheduling

RISK ASSESSMENT

Control RiskInherent Risk

•Attitude of the owner manager

•Going Concern Status of the entity

•Significant third party reliance

•Risk of less sophisticated internal controls

•Risk of fraud

ASSESSING MATERIALITY

•At planning stage

•When Evaluating the results of Audit Procedures

AUDIT APPROACH

•Test Checking•Analytical Procedures•Audit Sampling•Audit Evidence•Documentation•Related Party Transactions

AUDIT APPROACHTEST CHECKING

•100% of the population

•100% of the part of the population

applying analytical procedures

to the other part

• Sampling

OBTAINING

OTHER AUDIT EVIDENCE

•External Confirmation

• Review of Post Balance Sheet Events

DOCUMENTATION

• Audit Plan• Audit Programme• Results of Audit Procedures• Conclusions drawn from Audit Evidence• Working Papers• Update Permanent file• Partner’s Review points

CONCLUDING THE AUDIT

•SUBSEQUENT EVENTS•Test of Going Concern•Forming an Audit Opinion•Management Representation Letter

SUBSEQUENT EVENTS

Are Accounting

Records updated

NOReview Bank Statements/

other evidence

Is the Amount Material

YES

Seek Explanation and

document the same

YES

CONCLUDING THE AUDIT

•Subsequent Events•TEST OF GOING CONCERN•Forming an Audit Opinion•Management Representation Letter

CONCLUDING THE AUDIT

•Subsequent Events•Test of going concern•FORMING AN AUDIT OPINION•Management Representation Letter

CONCLUDING THE AUDIT

•Subsequent Events•Test of going concern•Forming an Audit Opinion•MANAGEMENT REPRESENTATION LETTER

CONCLUSION

THANK YOU

AGARWAL & ITALIAChartered Accountants

Surya towers, V floor,Sardar Patel Road

Secunderabad – 500 003INDIA

Contact : Percy Italia Mobile : +91 98480 31086Telephone : +91 40 2781 8165, 2784 8700Fax : +91 40 2781 8165.e-mail : percy@agarwalanditalia.com