1 / 42

Understanding Your Audit Process

So what is an audit?. An audit is defined as a systematic process of objectively obtaining and evaluating evidence regarding statements about economic events to determine agreement between the statements and established criteria and communicating those results to users.. Did that clarify it?. Simply put:.

Jims
Download Presentation

Understanding Your Audit Process

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


    1. Understanding Your Audit Process Presented by: Brian Callander, C.A. BDO Dunwoody LLP

    2. So what is an audit?

    3. An audit is defined as a systematic process of objectively obtaining and evaluating evidence regarding statements about economic events to determine agreement between the statements and established criteria and communicating those results to users.

    4. Did that clarify it?

    5. Simply put:

    6. Simply put: An audit is a process, of independently verifying the financial statements of an organization, in accordance with generally accepted accounting standards. The process is governed by professional standards called generally accepted auditing standards.

    7. Auditors Report To the Members of the First Nation We have audited the summary statement of financial position of the First Nation as at March 31, 2001 and the summary statements of operations and surplus and cash flows for the year then ended. These financial statements are the responsibility of the Band's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

    8. Auditors Report To the Members of the First Nation We have audited the summary statement of financial position of the First Nation as at March 31, 2004 and the summary statements of operations and surplus and cash flows for the year then ended. These financial statements are the responsibility of the Band's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

    9. Auditors Report To the Members of the First Nation We have audited the summary statement of financial position of the First Nation as at March 31, 2001 and the summary statements of operations and surplus and cash flows for the year then ended. These financial statements are the responsibility of the Band's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

    10. Audit report - cont’d In our opinion, these summary financial statements present fairly, in all material respects, the financial position of the Band as at March 31, 2004 and the results of its operations and cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. BDO DUNWOODY LLP Chartered Accountants

    11. What do we as auditors/accountants do:

    12. What do we as auditors/accountants do: test transactions

    13. What do we as auditors/accountants do: test transactions review disclosures

    14. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality

    15. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making

    16. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do:

    17. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do: provide assurance to future viability (going concern)

    18. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do: provide assurance to future viability (going concern) guarantee correctness (materiality)

    19. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do: provide assurance to future viability (going concern) guarantee correctness (materiality) provide an opinion as to management efficiency or effectiveness

    20. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do: provide assurance to future viability (going concern) guarantee correctness (materiality) provide an opinion as to management efficiency or effectiveness provide an opinion on management competence

    21. What do we as auditors/accountants do : test transactions review disclosures form an opinion as to the accuracy of the statements in relation to materiality Materiality is a degree of error which would mislead an individual in interpreting the statements in their decision making What do we not do: provide assurance to future viability (going concern) guarantee correctness (materiality) provide an opinion as to management efficiency or effectiveness provide an opinion on management competence search for fraud or error

    22. Auditor Reports There are 4 formats that our reports may take: Unqualified Opinion Qualified Opinion Adverse Opinion Denial of Opinion

    23. Types of Audits Financial Statement Audits Compliance Audits

    24. What is management role in this process? Statement of Management Responsibility The accompanying financial statements of the First Nation are the responsibility of management and have been approved by the Chief and another Band Councillor of the Band Council. The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Financial statements are not precise since they include certain amounts based on estimates and judgements. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances, in order to ensure that the financial statements are presented fairly, in all material respects. The First Nation maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and the Band's assets are appropriately accounted for and adequately safeguarded.

    25. What is management role in this process? Statement of Management Responsibility The accompanying financial statements of the First Nation are the responsibility of management and have been approved by the Chief and another Band Councillor of the Band Council. The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Financial statements are not precise since they include certain amounts based on estimates and judgements. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances, in order to ensure that the financial statements are presented fairly, in all material respects. The First Nation maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and the Band's assets are appropriately accounted for and adequately safeguarded.

    26. What is management role in this process? Statement of Management Responsibility The accompanying financial statements of the First Nation are the responsibility of management and have been approved by the Chief and another Band Councillor of the Band Council. The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Financial statements are not precise since they include certain amounts based on estimates and judgements. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances, in order to ensure that the financial statements are presented fairly, in all material respects. The First Nation maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and the Band's assets are appropriately accounted for and adequately safeguarded.

    27. Statement of Management Responsibility - cont’d The First Nation Council is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. Council carries out this responsibility principally through its Finance committee. The Chief and Council review the Band's financial statements and recommend their approval. The Chief and Council meet periodically with management, as well as the external auditors, to discuss internal controls over the financial reporting issues, to satisfy themselves that each party is properly discharging their responsibilities, and to review the financial statements and the external auditors' report. The Chief and Council takes this information into consideration when approving the financial statements for issuance to the Members. The Chief and Council also appoint the engagement of the external auditors. The financial statements have been audited by BDO Dunwoody LLP in accordance with Canadian generally accepted auditing standards on behalf of the members. BDO Dunwoody LLP has full access to the Band Council.

    28. Statement of Management Responsibility - cont’d The First Nation Council is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. Council carries out this responsibility principally through its Finance committee. The Chief and Council review the Band's financial statements and recommend their approval. The Chief and Council meet periodically with management, as well as the external auditors, to discuss internal controls over the financial reporting issues, to satisfy themselves that each party is properly discharging their responsibilities, and to review the financial statements and the external auditors' report. The Chief and Council takes this information into consideration when approving the financial statements for issuance to the Members. The Chief and Council also appoint the engagement of the external auditors. The financial statements have been audited by BDO Dunwoody LLP in accordance with Canadian generally accepted auditing standards on behalf of the members. BDO Dunwoody LLP has full access to the Band Council.

    29. Preparing for your audit

    30. Preparing for your audit The statement of management responsibility states that the financial statements are management’s responsibility, and that management prepares these statements in accordance with GAAP.

    31. Preparing for your audit The statement of management responsibility states that the financial statements are management’s responsibility, and that management prepares these statements in accordance with GAAP. This is very complex with the requirements of PSAS

    32. Preparing for your audit The statement of management responsibility states that the financial statements are management’s responsibility, and that management prepares these statements in accordance with GAAP. This is very complex with the requirements of PSAS Professional accountants are still debating the application of these standards to FN organizations, and interpreting the required disclosures

    33. Preparing for your audit The statement of management responsibility states that the financial statements are management’s responsibility, and that management prepares these statements in accordance with GAAP. This is very complex with the requirements of PSAS Professional accountants continue debating the application of these standards to FN organizations, and interpreting the required disclosures As a result, many First Nations do not have the internal resources to ensure GAAP adherence, and auditors prepare all note disclosures.

    34. Minimum Preparation Standards

    35. Minimum Preparation Standards All general ledger accounts (banks, A/R & A/P subledgers) should be reconciled

    36. Minimum Preparation Standards All general ledger accounts (banks, A/R & A/P subledgers) should be reconciled Contracts should be reconciled and adjusted for in the revenues of the organization

    37. Minimum Preparation Standards All general ledger accounts (banks, A/R & A/P subledgers) should be reconciled Contracts should be reconciled and adjusted for in the revenues of the organization All minutes and Band Council Resolutions should be up to date, and copies available

    38. Minimum Preparation Standards All general ledger accounts (banks, A/R & A/P subledgers) should be reconciled Contracts should be reconciled and adjusted for in the revenues of the organization All minutes and Band Council Resolutions should be up to date, and copies available Internal financial statements should be reviewed and approved by management and Chief and Council

    39. Minimum Preparation Standards All general ledger accounts (banks, A/R & A/P ) should be reconciled Contracts should be reconciled and adjusted for in the revenues of the organization All minutes and Band Council Resolutions should be up to date, and copies available Internal financial statements should be reviewed and approved by management and Chief and Council All requested documentation from the auditor should be prepared (SA Reports etc.)

    40. Preparation equals Efficiency The more prepared that you or your staff are the quicker the audit process will be.

    41. Preparation equals Efficiency The more prepared that you or your staff are the quicker the audit process will be. Time = Money

    42. Preparation equals Efficiency The more prepared that you or your staff are the quicker the audit process will be. Time = Money The longer the auditor spends preparing your audit, and the information required the larger your audit fee will likely be.

    43. Understanding the Financial Statements Financial statements are becoming more and more complex. Due to PSAAS Due to the diversity of First Nations operations As a result the users of financial information are finding the statements less and less understandable. New methods of communicating the financial information is being sought.

More Related