Download
the pwc audit n.
Skip this Video
Loading SlideShow in 5 Seconds..
The PwC Audit PowerPoint Presentation
Download Presentation
The PwC Audit

The PwC Audit

882 Views Download Presentation
Download Presentation

The PwC Audit

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. The PwC Audit A Continuous Improvement Approach to Audit Methodology

  2. Agenda • Governance of PwC Audit • Overview of recent evolution of PwC Audit • Overview key elements of PwC Audit • Acceptance and Continuance • Audit Comfort Cycle • Substantive Procedures • Other Audit Procedures • Audit Committee Communications Plan

  3. PwC Audit Governance Global Audit Policy Board Establish global overarching policy principles & goals and ratify policy statements. Global R&Q Ensure methodology is consistently implemented by providing feedback on practice issues. Global Audit Methodology Steering Group Drive execution of policy in practice through processes, tools, guidance, training content, etc. Implementation Partner Network

  4. Towards Performance Audit: a continuous improvement program 2002: 2003: • Business analysis framework • Enhanced audit guides/ practices • Scaling up - different client situations • MyClient integration • Converged approach, enhanced testing guidance • Enhanced client communications, transparency focus • Application to small companies/ MNCs • Better use of specialists and knowledge sources 2001: • Audit Comfort Cycle • Management controls focus • Show me and Taking stock • Team re-deployment PwC Audit PwC Audit Time Historical Financial Statements Opinion Changes in Deliverables

  5. Changing the Focus of the Audit Model Key Risk Key Key Risk Risk Key Key Risk Risk Key Risk Audit Risks Business Risks Identified

  6. PwC Audit in 2004 • Acceptance and Continuance (FRISK) • Audit Comfort Cycle • Scoping • Understanding • Evaluating • Validating • Substantive Testing • Other Audit Procedures • Audit Committee Communications Plan

  7. PwC Audit Approach Scoping Validating Audit Comfort Cycle Understanding Evaluating Acceptance/Continuance Assessment No / Limited controls comfort Significant controls comfort Other audit evidence Mainly Mainly tests of details substantive analytical procedures • Other audit procedures • Financial statements • Completion

  8. PwC Audit Approach – With Attestation Scoping Validating Audit Comfort Cycle Understanding Evaluating Acceptance/Continuance Assessment Broader and deeper assessment of COSO controls over financial reporting, including management’s evaluation of those controls. e.g., estimates, fraud, tax accrual, more locations. Report on management’s assertions on internal controls over financial reporting No / Limited controls comfort Significant controls comfort Other audit evidence Mainly Mainly tests of details substantive analytical procedures Additional procedures deemed necessary to provide independent assurance on financial statements, taking into consideration the internal controls assessment. • Other audit procedures • Financial statements • Completion Report on Financial Statements

  9. Acceptance & Continuance Process • Governance and oversight of management • Past performance • Management’s expertise and skill • Adequacy of management resources • Audit relationship • Audit adjustments • Revenue recognition • Accounting control • Integrity and ethics • Management inclination for intentional misstatement in financial reporting • Reliability of estimates • Incentive for intentional misstatements in financial reporting • Risk of insolvency

  10. Acceptance & Continuance Process Engagement Leader and Team Manager apply professional judgment in describing specific Key Risk Conditions (13) MyClient Client File Risks that relate to the broader Risk Conditions (defined within Acceptance & Continuance module) 1 2 Risk andApproachSchedule Audit Comfort Matrix The Risk and Approach Schedule is populated by the Key Risks selected and completed by the Engagement Leader and Team Manager 3 Key Risks (user defined or selected from Master Data)

  11. Audit Comfort Cycle ACCEPTANCE/CONTINUANCE ASSESSMENT MarketOverview Strategy ValueCreatingActivities FinancialPerformance SUBSTANTIVE AUDIT EVIDENCE SIGNIFICANT CONTROLS COMFORT NO/LIMITED CONTROLS COMFORT MAINLY SUBSTANTIVE ANALYTICAL PROCEDURES MAINLY TESTSOF DETAILS OTHER AUDIT PROCEDURES FINANCIAL STATEMENTS COMPLETION • 4 Key Questions • What does management need to get comfort on? • How does management get comfort? • Are they entitled to that comfort? • Can we audit that comfort?

  12. Audit Comfort Cycle ACCEPTANCE/CONTINUANCE ASSESSMENT MarketOverview Strategy ValueCreatingActivities FinancialPerformance SUBSTANTIVE AUDIT EVIDENCE SIGNIFICANT CONTROLS COMFORT NO/LIMITED CONTROLS COMFORT MAINLY SUBSTANTIVE ANALYTICAL PROCEDURES MAINLY TESTSOF DETAILS OTHER AUDIT PROCEDURES FINANCIAL STATEMENTS COMPLETION • What does management need to get comfort on?

  13. Scoping: Forming a Point of View • Perform company and industry analytical procedures • Research and analyze external communications • Partners connect with staff members • Document the team’s understanding of the business • Knowledge broker to capture and share industry information • Form a point of view on the risks that management should be concerned about

  14. Scoping: Business Analysis Framework

  15. Scoping:Risk Assessment – Key Risks Business Risks Key Risk We identify audit risk through understanding the entity’s business objectives and related risks. Key Risk Key Risk Key Risk Key Risk Audit Risks Key risks are those conditions or factors within an audit that, in the judgment of the auditor, give rise to a greater risk of material financial misstatement or other matters resulting in the issuance of an inappropriate audit report.

  16. Scoping: Analytical Procedures • High Level • Understand the business • Identify areas of risk • Disaggregated Account Level • Determine the nature, timing & extent of testing • External benchmarking to peers, market trends • Looking for anomalies, areas of risk • Use of extensive knowledge management tools available

  17. Scoping Translated into Audit Strategy Business Objectives Risks Controls Stakeholders Alignment Where controls over significant account balances or classes of transaction are not aligned, we will need to perform substantive tests of details.

  18. Scoping: Audit Team of Specialists Computer-Assisted Audit Techniques Energy Trading Risk Enterprise-wide Risk Business Objectives Financial Risk Business Resilience Project Management Business Process Risks Controls Stakeholders Performance Improvement Data Risk Fraud Regulatory/ Compliance Internal Audit Security Alignment Systems & Technology Treasury Our best teams use our specialist capabilities to help in forming a point of view.

  19. Scoping: Use of Specialists • Policies for the use of Systems and Process Assurance specialists and Fraud Risk & Controls specialists are based around risk attributes • Policies are for consultation with specialists – level of involvement remains a decision of engagement leader • At a minimum, Required to consider use of specialists at mobilization stage

  20. Audit Comfort Cycle ACCEPTANCE/CONTINUANCE ASSESSMENT MarketOverview Strategy ValueCreatingActivities FinancialPerformance SUBSTANTIVE AUDIT EVIDENCE SIGNIFICANT CONTROLS COMFORT NO/LIMITED CONTROLS COMFORT MAINLY SUBSTANTIVE ANALYTICAL PROCEDURES MAINLY TESTSOF DETAILS OTHER AUDIT PROCEDURES FINANCIAL STATEMENTS COMPLETION • 4 Key Questions • What does management need to get comfort on? • How does management get comfort? • Are they entitled to that comfort? • Can we audit that comfort?

  21. Applying Audit Comfort Cycle from the Top-Down • Organize audit team to align with how management runs the business. • Extend discussions about business objectives & risk to management controls. • Understand & evaluate how management controls risk. • Validate controls against engagement team’s point of view. Audit controls from the top down

  22. “Taking Stock”: Real-Time Linkage in the Iterative Process • Share team members’ cumulative knowledge • Update risk identification and assessment • Consider the audit comfort gained to date, by audit assertion • Answer: “Do we have enough comfort?” • Answer: “What do we do next?”

  23. Connecting the Dots … • Financial Statement Assertions/Audit Objectives • Classes of Transactions • Occurrence • Completeness • Accuracy • Cutoff • Classification • Account Balances • Rights & Obligations • Existence • Completeness • Accuracy/Valuation • Presentation & Disclosure • Occurrence/R&O • Completeness • Understandability • Accuracy/Valuation • Business Process A • Completeness • Accuracy • Validity • Restricted Access Account Balances and Transactions Business Objectives • Business • Risks related to achieving Objectives • …… • …… • …… • Business Process B • Completeness • Accuracy • Validity • Restricted Access Account Balances and Transactions • Business Process C • Completeness • Accuracy • Validity • Restricted Access Account Balances and Transactions General Computer Controls

  24. Audit Comfort Matrix

  25. Summary of Comfort

  26. Substantive Audit Evidence ACCEPTANCE/CONTINUANCE ASSESSMENT MarketOverview Strategy ValueCreatingActivities FinancialPerformance SUBSTANTIVE AUDIT EVIDENCE SIGNIFICANT CONTROLS COMFORT NO/LIMITED CONTROLS COMFORT MAINLY SUBSTANTIVE ANALYTICAL PROCEDURES MAINLY TESTSOF DETAILS OTHER AUDIT PROCEDURES FINANCIAL STATEMENTS COMPLETION

  27. Achieving the Right Balance No/Limited Controls ComfortSignificant Controls Comfort

  28. Assurance Hierarchy Will we obtain audit assurance from tests of controls? Yes No Test controls. Can we obtain audit assurance from substantive analytical procedures? Yes Perform substantive analytical procedures. No Do we need additional audit assurance? Yes No Perform tests of details. No further testing required.

  29. Other Audit Procedures ACCEPTANCE/CONTINUANCE ASSESSMENT MarketOverview Strategy ValueCreatingActivities FinancialPerformance SUBSTANTIVE AUDIT EVIDENCE SIGNIFICANT CONTROLS COMFORT NO/LIMITED CONTROLS COMFORT MAINLY SUBSTANTIVE ANALYTICAL PROCEDURES MAINLY TESTSOF DETAILS OTHER AUDIT PROCEDURES FINANCIAL STATEMENTS COMPLETION

  30. Other Audit Procedures: More Connecting the Dots • Link management information to financial statements • Review adjustments necessary to reconcile management information to the financial statements • Review non-standard journal entries and other adjustments to ascertain whether entries may be indicative of fraud based upon the risk of management override on controls • Perform ongoing analytical procedures, including updating analytical procedures related to revenue

  31. Audit Committee Communications Framework: Objectives • Promote effective and candid communications • Enhance timely reporting, dialogue and sharing views • Service approach • Risk and Control • Financial Reporting • Governance • Provide consistency in our deliverables through recommended templates and practice aids

  32. [Indicate timing] • [Indicate timing] • [Indicate timing] Audit Committee Communications Plan Getting started Understanding the audit Staying informed Resolution and completion • [Indicate timing] Our audit plan PwC principles and practices • Reporting timetable • Business unit scope • Engagement team • Other deliverables • Service approach Communications plan Engagement letter and independence confirmation Internal control and business issues report Risk analysis Update on accounting/audit issues and risk analysis Perspectives on fraud risk • Risk and control Risk condition alert Other regulatory requirements – plan • Reporting • requirements • Internal control deficiencies • Accounting policies • Management judgments • Quality of earnings • Independence • Transparency Quarterly review Quarterly review Quarterly review • Financial reporting Audit opinion Best practices in corporate reporting Transparency of corporate reporting • Governance Corporate governance: roles and practices Assessing our performance and yours Ongoing assessment of needs & expectations

  33. The PwC Audit • Global approach adaptable to all clients • Designed for continuous improvement • Performance metrics will play a larger role in future audits • Audit quality is at the core of our long term business objectives.

  34. pwc