KNOWLEDGE OF THE ENTITY AND ITS ENVIRONMENT (SIA-15)

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KNOWLEDGE OF THE ENTITY AND ITS ENVIRONMENT (SIA-15)
  • Object: The purpose of this Standard on Internal Audit is to establish standards and provide guidance on what constitutes the knowledge of an entity’s business, its importance to the various phases of an internal audit engagement and the techniques to be adopted by the internal auditor in acquiring such knowledge about the client entity and its environment, prior to commencing an internal audit engagement and subsequently thereafter, at all stages of the internal audit process.
  • Acquiring Knowledge of the Entity:
    • Relevant industry, regulatory, and other external factors.
    • Nature of the entity and its Business operations.
    • Investment, Financing activities and Financial reporting.
    • Accounting policies, Business risk, objectives and strategies of the entity.
  • Source of Information:
    • Previous engagement experience
    • Business plan/organisational structure and Internal documentation   produced   by   the
    • Incorporation documents and Visits to the entity premises.
    • Discussion with key management persons, statutory auditors, Suppliers, customers and third party agencies.
    • Publications related   to   the
  • Using the Knowledge:
    • Assessing risks and identifying key focus areas.
    • Planning and performing the internal audit effectively and efficiently.
    • Evaluating audit evidence.
    • Providing better quality of service to the client
    • The information obtained should be adequately documented.
  • Documentation
    • The information and knowledge obtained by the internal auditor on the entity and its environment should be adequately documented in the engagement working papers.

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