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The approach used in the provision of the audit services.
At Malcolm V. Leeke & Co we all take great pride in the provision of our audit and assurance services. All of our audits are conducted in accordance with the Australian Auditing Standards, the Association Incorporations Act 1981 and the Corporations Act 2001.
We maintain high quality assurance standards and our quality assurance standards are reviewed by the Institute of Chartered Accountants on a regular basis as a requirement of their code of professional conduct and their constitution. We undertake all of our audits electronically with CCH Audit Software with laptop computers and scanners and, employ a statistical methodology of substantive base testing as employed by other large accounting firms.
The use of a statistical methodology allows us to identify;
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The total number of transactions in the population;
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The maximum and minimum values and number of transactions;
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The mean and standard deviation of the population for receipts and payments; and
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The sample size required to achieve a 95% confidence.
The use of a statistical methodology provides us with the following benefits;
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Reduced testing time by at least 60% - based on other methods; and
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Eliminates the risk of material errors in the financial statements by testing all aggregate and material transactions.
The statistical methodology is based on the assumption that the lowest dollar range has the most transactions and with the internal controls working satisfactory the risk of an aggregate material error occurring is low. Another way of looking at it is that the risk of two signatures writing out a thousand cheques to steal $10,000 is low compared to them writing out one cheque for $10,000.
Statistical if we were to test every tenth transaction as our methodology, we would probably be testing transactions in the first range only and then reviewing the population sample to identify and test material transactions.
Regardless of the statistical methodology we still undertake a detail review of the internal controls, report any deficiencies and suggested improvements to the board and, conduct detail analytical reviews to ensure that there are no unusual transactions.