PAPER NO. 16 (S2) ADVANCED AUDITING AND ASSURANCE
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to undertake advanced audit and assurance engagements in compliance with regulatory frameworks and International Standards on Auditing.
A candidate who passes this paper should be able to:
- Recognise the regulatory, professional, and ethical issues relevant to those carrying out an assurance engagement
- Assess and recommend appropriate quality control policies and procedures in practice management
- Evaluate findings and results of work performed and draft suitable audit reports on assignments
- Draft different types of audit opinions based on audit evidence gathered during an audit.
- Draft engagement letters for audit and non-audit services that fall under International Standards on Auditing and ensure compliance with the relevant legal regulations
- Incorporate emerging developments in the conduct of an audit.
1. Assurance and non-assurance engagements
- The concept of assurance and non-assurance engagements
- Engagement letters for assurance and non-assurance engagements
- Agreed upon procedures
- Compilation engagements
- Types of assurance reports
- Key Audit Matters
- Different types of audit opinions based on audit evidence gathered – Entities/Companies that are exempt from audit in Kenya.
2. Audit framework and regulations
- 2.1 Objective and general principles of auditing
- 2.2 Legal framework
- 2.3 International, regulatory framework for audit and assurance services
- 2.4 Auditors’ professional liability and legal responsibilities
3.Professional and ethical considerations
- 3.1 Code of ethics for professional accountants in line with International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code)
- 3.2 Fundamental principles, threats and safeguards
- 3.3 Advertising, publicity, obtaining professional work and fees and money laundering
- 3.4 Professional skepticism (in the context of errors and fraud) – Professional Liability.
4. Management of audit practice
- 4.1 Client acceptance and retention
- 4.2 Tendering for audit services for public listed entities and nonpublic entities
- 4.3 Professional appointments for public listed entities and nonpublic entities
- 4.4 Planning and performing audits. The concept of materiality and assessing risk of misstatement. Identify significant risks as outlined in International Standards on Auditing
- 4.5 Methods and techniques of auditing high risk areas.
- 4.6 Use and evaluation of internal control system by auditors to address audit risks identified.
- 4.7 Use of technological tools (data analytics) to analyze and evaluate audit evidence gathered during the audit and how it addresses risk of misstatement.
- 4.8 Preparation and retention of audit working papers as required by the Companies Act
- Archiving of audit files.
5. Audit evaluation and reviews
- 5.1 Audit assertions and how to identify the relevant assertions during the audit process
- 5.2 Subsequent events. Audit work done between financial year end and date of signing the financial statements.
- 5.3 Going concern assumption as a financial statement risk
- 5.4 Related parties. Risks associated with related parties. Process of identifying related parties by management. Disclosure of related parties in the management representation letter and in the financial statements
- 5.5 Drafting management letter representation
- 5.6 Group audit/joint/component audit. Preparation of group reporting instructions to component auditors
- 5.7 Analytical review
- 5.8 Evidence and testing considerations
- 5.9 Using the work of others such as internal auditors, other experts (tax, actuaries, valuers, lawyers etc.) and another auditor
- The company audit
- Audit of consolidated financial statements
- Audit of banks and non-banking financial institutions
- Audit of general insurance companies
- Audit of cooperatives societies(SACCOs)
- Audit under taxation laws
- Other special audit assignments
- Role of Audit Committee in the audit process
6. Audit related assurance services
- 6.1 Prospective financial information, investigations and due diligence
- 6.2 Special audit assignments (social and environment audit)
- 6.3 Operations and internal audit management
- 6.4 Audit under computerised information systems. Identification and testing of relevant IT general controls (ITGC) during an audit- Audit of public sector undertakings – Integrated reporting
- 6.5 Audit of performance information (predetermined objectives) in the public sector
- 6.6 Special aspects of auditing in an automated environment.
7. Forensic accounting
- 7.1 Difference between a statutory audit and a forensic audit
- 7.2 Conduct of forensic investigations: accepting the investigation, planning, evidence gathering, reporting
- 7.3 Rules of evidence in court proceedings
- 7.4 Regulations and standards on forensic accounting
- 7.5 Applicable codes of ethics
- Concluding and reporting
- 8.1 Quality control and peer review
- 8.2 Reports to those charged with governance/Board of directors – Management letter- issues identified during the audit process
- 8.3 Reporting on compliance and other information (Chairman’s statement and directors report) and for listed entities, reporting on remuneration report for the directors – Auditors report on financial statements – Reporting on other assignments.
9. Regulatory Environment
- 9.1 International regulatory frameworks for audit and assurance services.
- 9.2 Money Laundering
- 9.3 Laws and regulations
- 9.4 Other Regulators with interest in the audit space in Kenya such as Central Bank of Kenya, Insurance Regulatory Authority, Capital Market Authority and Retirement Benefit Authority and their requirements
10.Contemporary issues and emerging trends
- 10.1 Professional and ethical developments
- 10.2 Other current issues
- 10.3 Effects of pandemics on audit processes. The concept of remote auditing and additional procedures put in place to obtain sufficient audit evidence.