For example, changes in the control environment may affect the relevance of information obtained in the prior year. 10 requires the auditor to determine whether information obtained in prior periods remains relevant if the auditor intends to use that information for the purposes of the current audit. Here’s what AU-C 315.A20 says about prior year audit information used in the current year: In those situations, the auditor is required to perform audit procedures to establish the continued relevance of the audit evidence obtained in prior periods (for example, by performing a walkthrough). In some situations, AU-C section 315 allows the auditor to rely on audit evidence obtained in prior periods. Internal Controls Documented in Prior Audits Lastly, asking a client, “Is everything the same as last year?” is not a walkthrough. In other words, they don’t answer the implementation question. While manuals tell you what the client intends to do, they don’t tell you what is occurring. Placing a copy of the operating and accounting system manual in the audit file is not a walkthrough. We must examine controls to see if they have been implemented and to see if they are properly designed. What is not an Audit Walkthrough?įollowing a transaction through the accounting system–without reviewing controls–is not an audit walkthrough. In other words, the auditor can’t default to high. While the auditor can assess control risk at high, she must first gain an understanding of the cycle and the related controls. Some auditors believe that audit walkthroughs (or documentation of controls for significant transaction cycles) are not necessary if the auditor is assessing control risk at high. Observations and inspections must also occur. Audit standards do not permit the use of inquiries alone. The auditor is gaining an understanding of how a transaction makes its way through the accounting system and about related internal controls.īy asking questions, inspecting documents, and making observations, we are evaluating internal controls to see if there are weaknesses that would allow errors or fraud to occur. You start at the beginning of a transaction cycle (usually a source document) and walk the transaction to the end (usually posting to the general ledger). Walkthroughs are cradle-to-grave reviews of transaction cycles. They work for me, and they will work for you. I share techniques I’ve used for over five years. In this post, I answer these questions about one of the most important risk assessment procedures: walkthroughs. What is the purpose of audit walkthroughs? How do you document walkthroughs? Is it better to use checklists, flowcharts or summarize narratively? How often should walkthroughs be performed? Are they required? Will a walkthrough allow me to assess control risk at less than high?
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