The management team of PVSS is concerned that the team may be trying to audit too...
The management team of PVSS is concerned that the team may be trying to audit too many areas and that things may be missed. They are also concerned that PVSS will not be able to finish solving all of the issues in a timely manner. With this in mind, they have decided to focus on only a few key issues.
- What is your understanding of how a risk-based audit may address these concerns?
- Explain how you would describe to the management team the difference between a compliance and a substantive audit. Provide examples to help clarify your explanation.
- Which type of audit should be performed in this project and why?
Homework Answers
Answer)
Risk-based audits are mostly internal audit or a methodology that is mostly focused on the kind of risk associated and involved activities that grant an assurance of management to manage the risks level which is already defined.
For the above mentioned PVSS project, the audit is to be made for the areas which are defined to have the risk and should be checked. Meanwhile can have the project to go on with the other issues which need to be solved.
The substantive procedure is defined as the area for creating the evidence which would help the auditor to assemble as well as support the assertion which would need a material misstatement with respect to completeness, validity as well as accuracy.
It is the substantive approach which helps to make a situation where the weak of the financial reporting along with internal control.
It is the combined approach which helps to decide the relevant test controls and rely on the direct tests with respect to the accounts.
Example:
1) Combined approach: test cases and audit to be made on a particular module of an application
2) Substantive approach: The above-mentioned project has a substantive approach
The type of audit which the above project is assumed to have is the substantive approach which will help to make the project stable and allow the developers to address the issues in the timely manner.
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