Page 192 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Inquiry
Management Intent:
1A. Evidence for management intent: Evidence obtained through inquiry is often the principal source of
evidence about management intent. However, information to support management’s intent may be limited.
1B. Corroborate evidence obtained: Understanding management’s past history, reasons for actions, and ability
to pursue actions may corroborate evidence obtained through inquiry.
1C. Professional Scepticism for evaluation: Application of professional scepticism in evaluating responses
from management is crucial to determine potential material misstatements in the financial statements.
2. Understanding the Entity and its environment: Performing inquiry procedures assists in obtaining or
updating the practitioner’s understanding of the entity and its environment, helping identify areas of potential
material misstatements in the financial statements.
Analytical Procedures
In a review of financial statements, performing analytical procedures assists the practitioner in:

(Shortcut: Potential of ICU)
1A. Potential Material Misstatements: Serving as additional procedures when the practitioner identifies
matters suggesting potential material misstatements in the financial statements.
1B. Identifying Inconsistencies: Identifying inconsistencies or variances from expected trends, values, or norms
in the financial statements, such as congruence with key data, including performance indicators.
1C. Corroborative Evidence: Providing corroborative evidence related to other inquiries or analytical
procedures already conducted.
1D. Understanding the Entity and its environment: In a review of financial statements, performing analytical
procedures assists in obtaining or updating the practitioner’s understanding of the entity and its environment,
especially to identify areas where material misstatements might arise.
2A. Methods for Analytical Procedures: Various methods range from simple comparisons to complex statistical
techniques. The practitioner might evaluate underlying financial information for consistency with expected
values. Expectations can be based on information from sources like industry insights where the entity operates.
2B. Example of Analytical Procedure: An example includes a comparative analysis of monthly revenue and
cost figures across various components of the entity to validate financial information in the financial statements.
(iv) Address Specific Circumstances
Shortcut: Related Party Uses FOG
Related parties:
1. Not previously identified or disclosed: During the review, the practitioner shall remain alert for
arrangements or information that may indicate the existence of related party relationships or transactions not
previously identified or disclosed by management.
2. Significant Transactions ONCB: If significant transactions outside the entity’s normal course of business
(ONCB) are identified, the practitioner shall inquire about their nature.

• Inquiry about Related Parties: The practitioner shall question management about possible involvement of
related parties in these transactions.
• Business Rationale: The practitioner shall seek to understand the business rationale (or lack thereof) behind
those transactions.
Fraud and non-compliance with laws or regulations:
(Shortcut: In Logical Sequence)
1. Indications: When there's an indication of fraud or non-compliance with laws or regulations, or suspected
instances, the practitioner shall communicate this to the appropriate authority within the entity.
2. Management’s Assessment: The practitioner shall request management’s assessment of the effects, if any,
such incidents might have on the financial statements.

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