Audit Execution Top Tips – Management Override of Controls
Performing appropriate audit work to address the risk of management override of control and fraud has become increasingly complex. The expectations of regulators and external stakeholders has greatly increased as auditors are expected to perform robust procedures to address the risk of fraud.
Journal entry testing forms a core part of any audit approach. With the risk present in all organisations, and with fraudsters becoming more sophisticated, rarely is it acceptable to focus solely on financial statement journal entries. An effective audit approach must appropriately address the risk of fraud occurring throughout the year.
Management Override of Controls: Our recommended steps for designing an effective and robust testing strategy:
1) Obtaining appropriate data – complete extracts of 100% of transactional data from client accounting systems for analysis,
2) Data transformation, validation, and completeness verification – reformatting the raw data extracts into a reviewable format and verifying all transactions have been obtained, typically via a full trial balance reconstruction,
3) Defining the population – determining the transactions which should be exposed to testing procedures and if any should be excluded,
4) Identifying high-risk transactions – selecting the transactions from the population requiring investigation and testing,
5) Investigating and testing – obtaining and reviewing appropriate supporting evidence for the transactions selected for testing,
6) Documentation – recording all stages of the process, including detailed evidence supporting the appropriateness of transactions selected for
These steps implement a robust testing approach to address the risk of management override of control via entries to the accounting system.
Giving you more time to think about the broader risk.
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