Analysis of Audit and Assurance Systems for Bank of Montreal

This report presents an analysis of the audit and assurance systems implemented by the Bank of Montreal (BMO). It begins with a business information and risk assessment, evaluating various risk types like audit risk, business risk, and engagement risk. The report then delves into the internal controls established by BMO and their relationship to risk, highlighting the enterprise risk and portfolio management framework. Key areas of financial risk, including accounts payable, revenue, and payroll, are examined, with detailed procedures suggested for each. These procedures include inspecting records, comparing financial figures, and conducting substantive testing. The report concludes with an assessment of the overall risk level and emphasizes the importance of the suggested plans for effective risk assessment and auditing, referencing BMO's 2019 Annual Report to Shareholders.

Audit and Assurance
systems

TABLE OF CONTENTS
REFERENCES...........................................................................................................................7

To,
Bank of Montreal
Business information and risk assessment
Business information
Bank of Montreal is the North America’s 8th largest bank by assets serves the
customers over 12 million through its integrating operating groups. It’s revenue for the year
ended 2019 is US $22774 and the net income is US $5758. The company has not missed
paying dividend since 1829 even in the global crisis it has paid its dividend. It has three client
groups, which are, personal and commercial Client group, investment banking group and the
private client group.
Risk assessment
There are four types of risk for risk assessment which are stated below.
Audit risk: The company has made an assumption in respect to the inherent risk (IR) in
respect to recording of transaction, forecasting etc. and has a Risk Taxonomy is maintained
for identifying the risks and inherent risk of BMO is stable or low. Also, the control risk of
BMO is lower as the accounts are handled by the highly experienced people. The detection
risk of the BMO is little high as because of using the sampling approach for the audit of large
data.
AR = IR × CR × DR
Business risk: Under this, the environment in which BMO is operating will be evaluated
along eth factors affecting it.
Engagement risk: It accounts for the overall risk in relation to the risk assessment. The
auditor works on preventing, detecting or correcting the material misstatements in the client’s
financial statements.
Analysis of internal controls and relationship to risk
The internal control is put in place by the BMO along with the significant amount of
risk issues can also be reviewed Enterprise risk and portfolio management. The company has
established the internal control as per the risk management framework. In terms of business

risk, BMO also faces such risk like tough competition, adverse business developments, client
retention and so forth and therefore, each operating group in BMO is responsible for
exercising control over these risks which is its internal control system which also includes
overcoming the engagement risk.
Conclusion: The BMO has implemented the internal control system in each aspect to reduce
the chances of material risk affecting the business. The overall risk level is moderate.
Areas of risks
Accounts payable: Identifying the policies being followed and collecting all the relevant
bills. Determining the information which is material for the company in respect to accounts
payable. Sources of evidence will be purchase bills and the date of recording of the
transaction. The company’s past years account payable figures to be evaluated and compared
with the industry trends for assessing the material risk. Procedures to be followed is
inspecting the records and classifying them on other sub-classes.
Revenue: The substantive based approach will be used. Material compliance with the tax
regulations. Application of relevant accounting principles and practices. Sources of evidence
will be sales vouchers for that period and verifying the same with the reported total revenue.
For preliminary analytics, the revenue trend for the past years along with the rate of growth
would be analysed and the factors affecting the revenue of the organization. Conducting
substantive testing internally for determining the potential risks and implementation of
procedures for mitigating risk.
Payroll: The physical verification of the payslips and random sampling approach will be used
verify the samples. All the payslip in respect to salary paid in that period will be gathered
and focused on the amount with huge impact. Sources of evidence will be pay checks issued
and the number of employees in the company. For preliminary analytics, comparing the gross
payroll, taxes and the net amount with the general ledger to know whether payroll processing
is correct or not. Suggested procedure Reviewing the bank reconciliation to check that all the
issued amount is cleared.
Risk assessment relates to risk areas
Revenue, payroll and accounts payable is related to the business risk which is prone to
the uncertain business environment affecting the earnings of the business and its ability to
generate enough revenue and make payment for it.

Therefore, the above stated plan in the three risks areas is very essential to be carried
out as there has been little increase in the revenue of the company but the salary payment has
increased much. Also, the payables have increased which are to be paid after notice or at
fixed date.
Conclusion
Based on above, the team needs to carry out all the things which are stated in the
plans which will be useful for the company in risk assessment and in auditing.

REFERENCES
Books and Journals
2019 Annual Report to Shareholders. 2019. [Online]. Available Through:<
https://www.bmo.com/ir/archive/en/bmo_ar2019.pdf>.