Audit Procedures for SBL: Inherent and Control Risk

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
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AUDITING THEORY AND PRACTICE
Date:12.09.2018
To: All Personnel
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Subject: Re- Audit procedures which are to be implemented by SBL
The major risk areas pertaining to SBL were seen with inherent risks such as nature of
business, changes in industry increasing inflation and sustainability initiatives such as water
conservation. In addition to this, control risk needs to be identified information from different
locations, changes in staff, changes in work environment, media reports and risks relating to
fraud. The measures relating to audit procedure for the inherent and control risk of SBL have
been discussed with classification testing, completeness testing, cut off testing, occurrence
testing, existence testing, valuation testing, rights and obligations testing (Yoon, Hoogduin and
Zhang 2015).
Audit procedures for SBL have considered the adherence of quality of financial
information with number of perspectives. The exact procedures will be associated to the use of
procedures which are dependent on nature of business along with audit assertions to improve the
present concerns associated to audit assertions (Cohen et al. 2017). The six procedures followed
for evaluation of audit risk in SBL are enumerated below as follows:
i. Classification testing- SBL needs to consider classification testing for the transactions to
know whether they are correctly recorded in the accounting records. It needs to be
ensured that the auditors comply with “ASA 315-Understanding the Entity and Its
Environment and Assessing the Risks of Material Misstatement”. For instance, SBL
faces considerable amount of risk associated to its operating environment which includes
lending of money. However, the bank faces several environmental concerns which are

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AUDITING THEORY AND PRACTICE
associated to risk off defaults. The implementation of classification testing as per ASA
315 will require the auditor to perform assessment of risk based on understanding the
entity is environment including the internal control (Auasb.gov.au. 2018).
ii. Completeness testing- The various types of audit procedures such as testing of whether
there is any missing entry in the accounting record will be conducive for maintaining
fairness and accuracy of the financial reports. The implementation of ASA 500 will be
appropriate in gaining better approach towards audit evidence. In addition to this,
“Auditing Standard ASA 330 The Auditor's Responses to Assessed Risks” will
contribute to the completeness testing by data mining the risk of material misstatement,
financial closing process and identifying other significant risks (Chan and Vasarhelyi
2018). The changes associated to the work environment of SBL needs to be understood
by the control risks which are associated to different types of ramifications in corporate
policies. The main features as per ASA 330 will be beneficial in designing and
performing audit procedures in responding to the assessed risk of material statement and
also responding to the same. The auditor’s assessment of risk pertaining to ASA 330 will
also include the expectations of operating efficiency along with substance of procedures
which cannot be provided with appropriate audit evidence. Lastly, such a measure will
document specific matters associated to the audit procedures which will be based in
response to the assessed risks. The completeness testing will further ensure that enquiry is
made to the clients have included the additional obligations which were not recognized in
the financial statements. Therefore, completeness testing will ensure a holistic approach
towards issues such as changes in industry and introduction of new services such as EFT
based transactions (Auasb.gov.au. 2018).