Continuing our three-part series on Audit Hot Topics for 2026, last week we looked at some of the main areas that are topical at the moment. This week we look at some more to act as a reminder to auditors as the audit season for SME entities commences.
Revenue
Revenue is always one of the most significant items in any set of financial statements and is often a significant risk area. Weaknesses in testing are common in the testing of revenue, especially in the areas of:
- completeness and
- cut-off
and it’s important for audit teams to commence the testing from outside the client accounting system i.e. from the sales order (external), not from the sales invoice (internal).
Journals testing (ISA 315)
Journals entries processed at the client entity must always be tested, but many files are lacking evidence that this work is done.
Some audit firms are making good use of technology to test journals, like data analytics within Excel or specialised data analytics tools but it’s important to define the outliers you are looking for in the software so that they are appropriately tailored to the audit entity.
Accounting Estimates ISA 540
Everyone acknowledges that the audit of accounting estimates is a difficult area. Auditors need to appropriately challenge the method, assumptions and data used in the determination of the estimate. Sometimes this may involve having discussions with experts, like quantity surveyors, pensions actuaries and property valuation experts.
This communication should document an assessment and evaluation of the expert’s qualifications, experience and independence, but also challenge the expert’s approach to calculate the estimate.
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit each firm’s unique requirements.
Publications and AML webinar:
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- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
