Scribd
Upload
424 views19 pages

Audit of Companies Under Specialized Industries

This document discusses considerations for auditing companies in specialized industries. It defines specialized industries as those with specific financial reporting standards or accounting policies for specialized transactions. Examples include agriculture, mining, banking, and insurance. Key audit considerations for specialized industries include ensuring competence in the industry, carefully planning the audit while considering both normal and industry-specific risks, and using experts while still maintaining responsibility over the audit. Reliance on experts requires fully evaluating their findings.

Uploaded by

Marj Manlagnit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
424 views19 pages

Audit of Companies Under Specialized Industries

This document discusses considerations for auditing companies in specialized industries. It defines specialized industries as those with specific financial reporting standards or accounting policies for specialized transactions. Examples include agriculture, mining, banking, and insurance. Key audit considerations for specialized industries include ensuring competence in the industry, carefully planning the audit while considering both normal and industry-specific risks, and using experts while still maintaining responsibility over the audit. Reliance on experts requires fully evaluating their findings.

Uploaded by

Marj Manlagnit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 19

AUDIT OF COMPANIES

UNDER SPECIALIZED
INDUSTRIES
SPECIALIZED INDUSTRIES

 Specialized industry is not necessarily rare or even


unusual.
 what makes these industries specialized is that:
a. They are likely to have either specific financial
reporting standards applicable to them; or
b. Have distinct accounting polices which have been
developed to account for specialized transactions and
balances which are based on he normally- applied
financial reporting standards.
SPECIALIZED INDUSTRIES

 Examples of financial reporting standards:


 IAS/PAS 41 – Agriculture (for agricultural sector)
 IFRS 6/PFRS 6 – Exploration or Evaluation of Mineral
Resources (for mining sector)
 IFRS 9/PFRS 9 and IFRS 7 – Financial Instruments
and Financial Instruments Disclosure (for banking and
other financial institutions)
 IFRS 17/PFRS 17 – Insurance Contracts (for
insurance companies
EXAMPLES OF SPECIALIZED INDUSTRIES

 Airline Companies
 Educational Institutions
 Banking, Insurance and other Financial Institutions
 Petroleum Companies
 Mining
 Agriculture
 Power Distributor/Power Generating Co.
 Manufacturing (Aircraft, Medicine and the likes)
 Telecommunications
 Nonprofit or Not-for-Profit Organizations (such as Civic Organizations)
CHARACTERISTICS OF SPECIALIZED
INDUSTRIES

 High risk (Publicly-listed or with public


accountability)

 Strict compliance to several laws and regulations


enforced by government agencies

 Complex accounting (revenue recognition)


AUDIT CONSIDERATIONS

 Competence

 Audit Planning Considerations

 Reliance on Experts
AUDIT CONSIDERATIONS

1. Competence
• Audit firm
• Audit partner and audit team to handle the engagement
• Independent audit partner
AUDIT CONSIDERATIONS

Competence required of Audit Firm Personnel


• Knowledge of relevant industries, and
• Has experience with relevant regulatory or reporting requirements, or
• The ability to gain the necessary skills and knowledge effectively

ISQC 1/PSQC 1. Quality Control for Firms that Perform Audits and Reviews of
Financial Statements, and other Assurance and Related Services Engagements
- requires the audit form to consider whether the firm is competent to perform the
engagement and has the capabilities, including time and resources, to do so.
AUDIT CONSIDERATIONS

1. Competence

The audit firm should also ensure that there is adequate


documentation to demonstrate that competence has been
considered, and the steps that have been taken to improve
competence where necessary. For example, through
appropriate staff training
AUDIT CONSIDERATIONS

2. Audit Planning Considerations

• Identification of the risk of material misstatement in a


specialized industry should be approached in the same way
as in any other audit – by obtaining appropriate
understanding of the business and its environment.
AUDIT CONSIDERATIONS

2. Audit Planning Considerations

• To assist audit team members assigned to a specialized industry


client, the audit firm is likely to have additional resources
available. There may be:
- briefing notes; or
- internal technical guidance on how financial reporting
standards should be applied within the sector.
AUDIT CONSIDERATIONS

2. Audit Planning Considerations

• For example, in the audit of banking sector clients, an audit


firm may produce guidance on the specific application of IFRS
relating to the range of financial instruments typically held by
banks. Audit staff can then refer to this guidance when
performing the audit, particularly when identifying risks of
material misstatements
AUDIT CONSIDERATIONS

2. Audit Planning Considerations

• It is also important to remember that while there may be


specific risks of material misstatement relating to the
industry-specific balances and transactions, there must
also be appropriate consideration of the “normal” balances
and transactions.
AUDIT CONSIDERATIONS

2. Audit Planning Considerations

• For instance, in the audit of a bank, there will be plenty of risks to


consider other than those relating to bank-specific transactions and
balances, for example, the depreciation of properties,
recognition of provisions and impairment of goodwill would
still be relevant. These “normal’ types of risks must not be
forgotten, just because the client operates in a specialized industry.
AUDIT CONSIDERATIONS

3. RELIANCE ON EXPERTS

• The auditor may plan to use an auditor’s expert to obtain audit


evidence.

• This is likely in an audit of specialized industry since despite being


competent to perform the engagement, the audit firm may not
have the necessary specific expertise in some areas.
AUDIT CONSIDERATIONS

IMPORTANT NOTE!

 It is particularly important that the auditor evaluates the relevance


and adequacy of the expert’s findings or conclusions.

 There is a danger of over-reliance on the expert’s work; the fact


that the audit is of a specialized nature does not mean that the auditor
can pass all responsibility over to an expert.
AUDIT CONSIDERATIONS

IMPORTANT NOTE!

 For instance, the auditor must consider whether the expert’s


findings are consistent with the auditor’s understanding of the
client and with the conclusions of other audit procedures. Any
inconsistencies must be investigated.

 The audit of a client in a specialized industry can pose some


challenges to the audit firm.
AUDIT CONSIDERATIONS

IMPORTANT NOTE!

 Using experts can provide high quality audit evidence in special


situations, but the auditor must be careful to fully evaluate the
findings of the auditor’s expert and not to over-rely on their work

 For audit staff, working on this type of engagement can be very


rewarding, providing exposure to sometimes unusual
businesses.
Sources: https://www.youtube.com/watch?v=b5BU8UiDZ8M
https://www.accaglobal.com

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy