Examination of 400 peer reviewed audits indicates that over 50% of firms do not comply with risk assessment standards. That’s a significant number of firms. Question is, how do you know if you are one of them? To help, a recent Wolters Kluwer whitepaper analyzes this situation.
The author, Melisa Galasso, is a member of the AICPA Technical Issues committee. So, when you read the paper, you will be learning from someone that is in-the-know. Melisa speaks to four common audit deficiencies, and the issues that arise because of them, including:
- One, failure to gain an understanding of internal control when identifying the client’s risks
- Two, incomplete or nonexistent risk assessment
- Three, not linking risk assessments to responses
- Four, assessing control risk as ‘less then high’ without appropriate test of controls
Common audit deficiencies create insufficient risk assessment and documentation
For example, Melisa shares that many auditors think completing all the substantive procedures listed in the audit programs is enough. That they think performing a risk assessment is not also needed. However, that line of thinking is incorrect. In fact, without understanding the entity and its environment, an auditor cannot identify, assess, and respond to risks effectively. Furthermore, even if 100% of all procedures in an audit program are performed, there is no guarantee that those procedures address the specific risks of the client.
That is just one example of many risk assessment and documentation mistakes outlined in this paper. Additionally, Melisa also provides insights to firms looking for ways to prevent themselves from becoming one of the statistics.
Wolters Kluwer’s audit strategy helps firms
Notably, Wolters Kluwer’s audit strategy focuses on risk assessment and documentation. For instance, the Knowledge‑Based Audit (KBA) methodology that drives the Knowledge Coach solutions is a risk‑based audit methodology that complies with AICPA risk assessment standards. Moreover, the strategy enables firms to elevate how to perform audits and transform client services. Melisa speaks to this in the whitepaper, as well. There’s no more risky business when you partner with Wolters Kluwer and use our audit solutions!
So, what are you waiting for? Take proactive steps now to ensure you are not one of the statistics. Get your complimentary version of Spotlight on Risk Assessment whitepaper today.
P.S. You might also like to read this associated blog, Overcome Risk Assessment Violations