Audit and Assurance

Audit and Assurance

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
(a).................................................................................................................................................3
(b).................................................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Auditor should follow auditing standard while conducting audit as to detect fraud or risk of
material misstatement in accounts. Primary responsibility of detection of risk and fraud in
financial statement is of management but auditor should apply all the possible measures to obtain
reasonable assurance that accounts of company is free from risk of material-misstatement (Quick
and Henrizi, 2019). The study consists of definition of Tests of controls and Substantive
procedures as per ISA 330. Further it evaluates the major deficiencies in sales system and
recommendation to resolve these deficiencies based on case study of Clean-vegan Co (CV). It
also discusses about key substantive procedures to be adopted by auditor in relation revenue of
respective company.
MAIN BODY
(a).
The central aim of ISA 330, through adequate approaches to these risks, is to provide
guidance for how auditing staff should collect ample evidence of risk measured by material
errors. In this regard following are two main approaches described under this ISA, as follows:
Test of control: An audit process to examine the quality of established controls in order to
avoid, or identify and address material defects at statement level. Though, definitive proof of its
operating efficacy must be collected over the entire or at minimum the bulk of audit duration in
order to consider these measures as the basis over minimizing the monitoring risk evaluated.
Substantive Procedure: An audit technique to find material defects at the point of claim.
Empirical approaches include extensive research and empirical analysis. Substantive procedures
include tests intended to provide evidence that data generated by an accounting system is
complete, reliable and appropriate. This is mainly classified as: Test of Details and Analytical
Procedure (Anderson, Hobson and Peecher, 2019).
Deficiencies in the sales system:
Lack of separation of duties: Companies are prone to fraud from their own staff, because they
may have few employees with multiple roles. As in case of Clean-vegan Co (CV), In hotel
business, company has sales clerk named Linda, who keeps all elements of such revenue stream
running. Linda collects orders from its clients, raises selling invoices and handles payments.