Because there may be some deliberately concealed fraud, which cannot be detected according to formal procedures, it is considered an inherent risk.

0.5% revenue, 1% total assets, 5% profit before tax

The focus is on familiarity with IFRS

Matter to consider

Evidence

audit risk = RoMM x detection risk Detection risk includes new guests, DDL is too tight control risk includes IT system, management override

operating margin, ROCE, interest cover, effective tax rate, current ratio, gearing ratio

interest

tax

目标包括：财报、经营、合规

revenue↓ cost↑ profit↓ reputation↓ cashflow↓ going concern×

ratio

cash flow

overtrading

Financing analysis

agreement/contract

authorized? ——board minutes

cash book and bank statement

Contact the specific situation in the case

disclose / confirm / professionally, verify the data one by one according to the calculation order in IFRS. For example, for IAS 36, check carrying amount, recoverable amount, FV, PV

p47

p53

p62

material uncertainty is adequately disclosed

material uncertainty is not adequately disclosed

adverse, material and pervasive

qualified / disclaimer, due to insufficient appropriate evidence

Just know it, it’s usually the main content of the question

not be treated correctly in accordance with IFRS, 4 kinds of misstatement

the auditor shall accumulate misstatement identified during the audit, rather than those that are clearly trivial. Obvious trivial misstatements do not need to be accumulated. Misstatements greater than the trivial threshold must be accumulated.

Misstatement type

It is necessary to communicate with the TCWG. If it does not change, then change the audit report. At the same time, it is necessary to obtain a written representation that does not change. If it does not change, F.S. is still free from material misstatement.

Provides necessary audit evidence, but is not sufficient

Preparing report FS preparing

information providing

For virtual management judgment, intentions, future plans → WP is necessary For those with real evidence that can be verified → WP is formal

IFRS 5 held-for-sale has the intention to sell assets in the future. If there is no other evidence, the management can be asked to write a WP guarantee.

When management does not want to correct misstatements, they should be asked to write a WP saying that they believe that if these misstatements are not corrected, it will not cause material misstatements.

qualified 'except for' basis for xxx paragraph

Material uncertainty related to going concern paragraph

Emphasis of matter paragraph

Other matter paragraph

definition: in the auditor's professional judgment, the most significant in the audit of the FS of the current period

3 types of KAM

phrasing

Basically it’s the application of accounting standards

Generally, 30% are minor problems such as heading, and 70% are statement errors and opinion errors.

Only the person with veto power has control. If it is joint control, it is the JV.

Find out the consideration, NCI, net identifiable asset, and goodwill in the calculation process in order.

significant 1: A single component is significant to the group

significant 2: A single nature or circumstance may lead to a material misstatement in the group

Regarding the ethical level of auditors, are the ethical standards the same overseas? Is sufficient involvement sufficient to obtain evidence? Are local regulations strict?

If there is no significant 1 2, then there is no need to worry about the local audit. Anyway, the impact on the group will be very small, and the responsibility will be shouldered by the component auditor.

But if something goes wrong, the group audit will be fully responsible

The importance of the group audit part, the RoMM of the component, and the relationship with the component auditor

Difficulties of component abroad: different accounting policies, culture, language

The component materiality group is 5 million, so the component cannot be greater than 5 million, but it doesn’t matter if the sum of them is greater than 5 million.

eg. The subsidiary is pervasive but the group is not extensive, so the subsidiary is adverse but the group is qualified.

Reason: It is more convenient for the newly acquired subsidiary to use the original auditor, the area is too large, and the laws of the country where the subsidiary is located require that only local auditors can audit

Remember to check the qualifications of the local firm

The two firms are jointly responsible for the

Deliberately doing something wrong, there are two kinds, it’s wrong on the surface; it’s gone in reality.

Auditors do not check for fraud, only management does. Auditor is required to obtain reasonable assurance that the FS is free from MM whether caused by fraud or error. As long as there is reasonable assurance, it will be unreasonable if the fraud reaches a very high level. Auditing The teacher has no responsibility

keep professional skepticism, difficult to detect, deliberate hidden, appropriate procedure could not detect fraud

questioning mind, alert, critical assessment, related party, management bias

Ask management about their risk assessment, fraud triangle (motivation opportunity dishonesty), and assume there is a fraud risk.

change the nature of audit procedure(more physical observation and inspection) timing assault Do more work All three are designed to increase unpredictability

Fraud is not an isolated incident. If one amount is changed, there may be many others that need to be changed. The appropriateness of the process that has been done needs to be re-evaluated, taking into account the nature of fraud.

For example, if a manager commits fraud, he must report it to the general manager.

Management has full responsibility, auditors are only responsible for statements

Understand the regulations of the client's industry, how to comply with regulations, laws that have a significant impact on statements, laws that have an impact on business activities (environmental protection), if any violation is found, ask the lawyer, management, etc., and the impact of the law involves estimation , if you have an estimate, you can use WP

understand the nature of act and circumstances further evidence

evaluate the impact, if management does not take remedial action, can withdraw from the engagement, the impact refers to the impact on the report

discuss with TCWG as soon as possible, because it may deliberate and potential seriousness

report to third party if necessary

duty of care, breached, cause loss

If an executive commits fraud and neither the BOD nor the auditor finds it, they can sue any one of them, and the one who is sued will find others to share the burden.

disclaimer of liability, liability limitation agreement, limited compensation agreement, common in practice, used to avoid some risks

process by which criminal attempt to conceal the true origin and ownership of the proceeds of their criminal activity

Placement is placed in an industry suitable for money laundering, and layering makes people unclear about the source. For example, if it is remitted overseas, integration and move back

report to MLRO, training, tipping off offence, due diligence, maintain records

Understand the standards, understand which transactions require accounting estimates, and understand how management makes estimates.

Auditors assess the degree of uncertainty to see whether accounting estimates with a high degree of uncertainty result in special risks

Is there any relevant evidence?

sensitivity analysis

Concealed, beyond the normal scope of business

Must check bank receipts, confirmation letters, shareholder and governance meeting minutes

Check the contract, evaluate the business rationale of the contract, transaction terms and management's explanation, and see if there is proper disclosure. The three brothers' authorization learned before does not apply here, because authorization does not mean that there is no fraud.

Many questions say it is new client You can use these at this time

This will involve detection risk At the same time, there is also DDL tight

1 information gathering: ensure that the acquirer has full knowledge of the financial and non-financial of the target company

2 verification of management representation: Confirm the information provided by the vendor (the merged party)

3 identification of asset and liability pricing

4 operational issues depends on operational capabilities

5. Acquisition planning favors investment banks, synergy, and post-investment management.

Providing DD externally can make executives more efficient, reduce deviations, improve credibility, and be used for loans

1range of sources used: DD has a wide range but not so deep. DD also does non-financial

2 level of assurance: DD generally does not express opinions unless requested by the customer. Any opinions are also limited guarantees.

3 types of procedure performed: DD only does inquiry and AP same as review

4 forward looking vs mainly historical: DD predicts the future, audit confirms history

5 no controls testing: DD does not need to check internal controls unless required

Ideas and vocabulary accumulation areas to focus on and additional information Acquisition feasibility equity owners, whether they have VC or not. If they have VC, they are more likely to sell in the future. Reason for acquisition motivation of acquisition for synergy Acquisition valuation FV of net asset, internally generated intangible asset, tangible asset, contingent liability

In terms of ethics: If there is financing, there will be threats of advocacy. If you do good things directly for the enterprise, there will be threats of advocacy.

competence and time frame Does the firm have the talent and time to do this? What is the subject of identification? Do you need to issue a report? Is the intended user for the bank? general use or limited use Assumptions used in predictions will not be accepted if they are too radical.

Limited warranty

Audit of performance information to see if the information provided is correct to increase credibility Performance auditing is a bit like 3E VFM to see if the target has been achieved←This is what the AAA exam takes