Auditors play a crucial role in identifying and assessing the risks of material misstatement by thoroughly understanding the entity and its environment. Privately-owned companies present distinct challenges that require careful consideration. This examination will address key issues such as whether identifiable controls are in place, if owners and managers actively promote compliance with company policies, and whether they have documented these controls and effectively communicated them to staff. Additionally, it will consider whether these controls are observable and can be tested for operational effectiveness, as well as whether owners and managers monitor employee performance and evaluate the effectiveness of the controls implemented.
Learning Objectives
- Recognize high-risk areas applicable to private companies
- Determine the best approach to deal with private company shortcomings in control activities
- Identify the appropriate risk assessment procedures in the circumstances
Major Topics
- Review of applicable auditing standards for risk assessment
- Identification and discussion of high-risk audit areas
- Discussion and analysis of control risk vs. inherent risk
- Practical approach to auditing companies where controls are minimal or not adequately documented
- Detailed discussion and examples of risk assessment procedures and alternative approaches
