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ey are not a substitute for the entity’s accounting records. It may be helpful for the engagement letter to set out these requirements regarding the accounting records.
AUS 210: The Auditor’s Responsibility to Consider Fraud and Error in an Audit of a Financial Report
5. The auditor may have obtained knowledge of the owner-manager’s personal financial position and lifestyle through the provision of other services to the entity or the owner manager. This knowledge may enhance the quality of the auditor’s assessment of the inherent risk of fraud. Unexplained demands to prepare the financial report and complete the audit in an unreasonably short period of time may also indicate that there is an increased risk of fraud or error occurring.
AUS 218: Consideration of Laws and Regulations in an Audit of a Financial Report
6. Most entities are subject to requirements relating directly to the preparation of financial report, including the relevant companies legislation. The accounting expertise of the auditor as regards the legislation relating to the preparation of the financial report helps the owner-manager ensure that the relevant statutory obligations have been complied with.
AUS 302: Planning
7. When the auditor prepares the accounting records or financial report, sufficient flexibility is required in the overall audit plan to take account of any areas of audit risk identified, and evidence obtained in performing those services. The auditor of a small entity therefore plans to take into consideration knowledge obtained from the preparation of the accounting records or financial report so that the approach to obtaining evidence is properly co-ordinated and that efficiency of work and cost can be secured.AUS 402: Risk Assessments and Internal Controls
8. In preparing the accounting records or financial report, the auditor may obtain an understanding of the accounting and internal control system. Consideration is given to whether there are certain internal controls the auditor may wish to assess and test, which may affect the nature, timing and extent of substantive procedures required for the audit.
AUS 502: Audit Evidence
9. The auditor of a small entity when preparing the accounting records or financial report, applies professional judgement in considering whether those services result in a reduction in the audit work necessary to support the auditor’s opinion. The preparation of accounting records or financial report will seldom provide all, and may not even provide any, of the audit evidence required by the auditor. In particular, those services will ordinarily do no more than provide some of the necessary evidence regarding the completeness of a population, or the value at which items are stated in the financial report. However, audit evidence can often be obtained at the same time that the accounting records or financial report are being prepared. Specific audit work will ordinarily be required, for example, on the recoverability of debtors, the valuation and ownership of inventories, the carrying value of fixed assets and investments and the completeness of creditors.
AUS 512: Analytical Procedures
10. In small entities where the auditor has been engaged to prepare accounting records or a financial report, analytical procedures carried out at the planning stage of the audit will be more effective if those services have been completed before the audit planning is finalised.
AUS 516: Audit of Accountin