Page 231 - Auditing Standards

As of December 15, 2017
[.46-.50] [Paragraphs deleted.]

Responses Involving the Nature, Timing, and Extent of Procedures to Be
Performed

[.51] [Paragraph deleted.]

.52 AS 2301.08 states that "[t]he auditor should design and perform audit procedures in a manner that
addresses the assessed risks of material misstatement due to error or fraud for each relevant assertion of

each significant account and disclosure." AS 2301.12 states that "the audit procedures that are necessary to
address the assessed fraud risks depend upon the types of risks and the relevant assertions that might be
affected."

Note: AS 2110.71b states that a fraud risk is a significant risk. Accordingly, the requirement for responding

to significant risks also applies to fraud risks.

.53 The following are examples of responses to assessed fraud risks involving the nature, timing, and
extent of audit procedures:

Performing procedures at locations on a surprise or unannounced basis, for example, observing
inventory on unexpected dates or at unexpected locations or counting cash on a surprise basis.

Requesting that inventories be counted at the end of the reporting period or on a date closer to

period end to minimize the risk of manipulation of balances in the period between the date of
completion of the count and the end of the reporting period.

Making oral inquiries of major customers and suppliers in addition to sending written confirmations,
or sending confirmation requests to a specific party within an organization.

Performing substantive analytical procedures using disaggregated data, for example, comparing

gross profit or operating margins by location, line of business, or month to auditor-developed
expectations. 20

Interviewing personnel involved in activities in areas in which a fraud risk has been identified to

obtain their insights about the risk and how controls address the risk. (See AS 2110.54)

If other independent auditors are auditing the financial statements of one or more subsidiaries,
divisions, or branches, discussing with them the extent of work that needs to be performed to

address the fraud risk resulting from transactions and activities among these components.

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