Walk-through methods 2460

  • Hello from France .
    Inside my company walk-through have begun few days ago. Internal auditors absolutely want support evidences for each step of the flow chart… while from our point of view only controls should be documented : we argue that the other point of the flow chart illustrate our everyday work, but has no impact on financial datas, whereas controls are linked to financial risks. What is your point of view ?

  • Bonjour,
    PCAOB Auditing Standard No. 5 only requires the auditor to provide an opinion directly on the effectiveness of internal control over financial reporting. The auditor no longer nees to provide an opinion on management’s assessment of the effectiveness of internal control over financial reporting (that used to be the case until and including the financial year 2006 under PCAOB Auditing Standard No. 2).
    As a consequence, from his audit standards the auditor is not required to audit the documentation that the company made for its walk-throughs or its processes in general.
    The auditor is required to perform walkthroughs of major processes in order to understand the process and to determine possible risks that there are errors or fraud in the process and which key controls are necessary to prevent and detect those errors or fraud. So if the auditors wants to know every little step of the process he can interview the employees who do the process and document it himself if he wants to.
    It would make sense if the company documents its assessment of risks of material misstatement related to this process and any key controls related to those risks. Also if the company itself assesses the effectiveness of the controls, the sample that was checked and the results of the assessment and the person who did the assessment should be documented. If you want the auditor to rely on your assessment of the effectiveness, he can look at the documentation of your assessment and see if he is happy or if he wants to reperform a part of your assessment.
    If hope this helps to put your question into perspective.
    Salutations cordiales de la Suisse

  • Agreed. We came up with an amicable solution with our auditors where we undertook walk throughs which they attended in person. They then left us to document our evidence/results and they relied on that (they phtocopied our work and put it on their files.). We had to work closely at first to make sure our walkthroughs were at the required standard but once sorted, everyone was happy. They got what they needed and we saved money (when an auditor costs more than 6 times that of a member of staff it is always cheaper doing it yourself…).

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