Our list of internal controls that we believe should be applied corresponds well with the conclusion from FSR in 1989, where an auditor gave an opinion to a bank on a use of factoring. company’s The conclusion included a set of minimum audit activities when giving an audit opinion on factoring to a bank, however it is our opinion that these minimum requirement cannot be limited to an opinion for a bank only, but should be applied on a full scope audit as well. Incorporated in some factoring arrangements is also outsourcing of a accounts company’s receivable handling, including the dunning procedure. When auditors face this type of outsourcing it is essential that the auditor obtains an ISAE 3402 type 2 opinion from the service provider’s auditor. This opinion states that the service provider has a well functional internal control system and can therefore be used as audit evidence by the auditor. company’s Also analyzed were reporting to management according to ISA 265. The analyzed focused auditors’ on a comparison to local Danish standards for reporting to management. Danish standards are mainly corresponding to ISA 265, however due to rules of local reporting format in a protocol we did see some differences. Where these differences were found, Danish rules were more defined than those of ISA 265, especially as ISA 265 allows more informal formats, where Danish standard define that lacking internal controls must be reported in the audit protocol. The conclusion of the main question used for this thesis is that sufficient and appropriate audit evidence is obtained through effective audit planning, risk assessment and test of controls. Due to the complexity of accounts receivables and especially contractual sales and sale and secured borrowings, audit evidence will best be obtained through test of controls combined with substantive audit procedures. Also auditors must be aware of underlying risks in factoring contracts as some contract obligate the company to non-financial criteria. Not complying with these non-financial criteria can along with incorrect derecognition of financial assets and fraud lead to material misstatement of the financial statement and thereby that the auditor has issued an incorrect audit opinion on a previous financial statement. KAPITEL 1 PROBLEMFORMULERING –
Our list of internal controls that we believe should be applied corresponds well with the conclusion from FSR in 1989, where an auditor gave an opinion to a bank on a company’s use of factoring. The conclusion included a set of minimum audit activities when giving an audit opinion on factoring to a bank, however it is our opinion that these minimum requirement cannot be limited to an opinion for a bank only, but should be applied on a full scope audit as well. Incorporated in some factoring arrangements is also outsourcing of a company’s accounts receivable handling, including the dunning procedure. When auditors face this type of outsourcing it is essential that the auditor obtains an ISAE 3402 type 2 opinion from the service provider’s auditor. This opinion states that the service provider has a well functional internal control system and can therefore be used as audit evidence by the company’s auditor. Also analyzed were auditors’ reporting to management according to ISA 265. The analyzed focused on a comparison to local Danish standards for reporting to management. Danish standards are mainly corresponding to ISA 265, however due to rules of local reporting format in a protocol we did see some differences. Where these differences were found, Danish rules were more defined than those of ISA 265, especially as ISA 265 allows more informal formats, where Danish standard define that lacking internal controls must be reported in the audit protocol. The conclusion of the main question used for this thesis is that sufficient and appropriate audit evidence is obtained through effective audit planning, risk assessment and test of controls. Due to the complexity of accounts receivables and especially contractual sales and sale and secured borrowings, audit evidence will best be obtained through test of controls combined with substantive audit procedures. Also auditors must be aware of underlying risks in factoring contracts as some contract obligate the company to non-financial criteria. Not complying with these non-financial criteria can along with incorrect derecognition of financial assets and fraud lead to material misstatement of the financial statement and thereby that the auditor has issued an incorrect audit opinion on a previous financial statement. KAPITEL 1 – PROBLEMFORMULERING