Question

Question 3:

Assume that you have been assigned to audit Wasan Food Company. You have completed the procedures of gathering information about the company and its environment, including internal control.

1. Describe the next stage of the audit process.
2. Explain how the auditors may respond to high-risk audit engagements and high-risk audit assertions.

Describe the nature of further audit procedures, including when the procedures should include tests of control.

Answer 1

a. After the procedure of gathering information about company and various internal controls, the auditor will review those internal controls by using different methods and tools which is helpful in understanding the areas containing high risk and accordingly the tests for those risks are being designed.

A fieldwork is being run to check if the controls are working properly or not so that desired and correct results and finding can be brought. After this auditor will make findings and reports would be made according to it.

b. The areas that have high risks are to be assessed properly. Audit processes here include more number of samples so that test conducted can be more accurate in areas of high risk so as to bring accurate findings and hence the reports prepared would be accurate.

The audit procedure of testing the controls is of nature of investing the effectiveness of the controls used for detecting the material misstatements in the process of auditing. These controls are assigned by the client itself. The auditors test the effectiveness of these controls and on being find useful auditors decide to depend onon those controls.

And if not they run their tests to check the risk involved in a particular area and accordingly use proier tools and techniques to assign various internal controls.