Acca aa s21 Notes

Management override ('bypass').
Say someone has forgotten to order a vital piece of 
equipment. To speed matters up, instead of going 
through the formal procedure (say getting a quote from 
an approved supplier before placing the order), a 
manager orders it from a supplier who can deliver it 
tomorrow, but is not on the approved suppliers list.
Such 'management override' or bypass of controls may 
be with the best possible intentions but, if it is a 
common occurrence, essentially the controls are not 
operating (increasing the risk of error and fraud).
๏
Non-routine transactions.
These relatively rare transactions fall outside routine 
transactions (which may be highly automated). An 
example can be the disposal of non-current assets. 
Many of these assets are scrapped when they are 
disposed of, and to establish a system of internal control 
might not have been thought worthwhile. However, 
occasionally an asset with a substantial value might be 
disposed of, and if there is no system for getting the 
right price and for ensuring that the proceeds come to 
the business, there is a possibility that those 
transactions are not properly recorded.
September 2021 to June 2022 exams
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5. A reminder of the audit approach
Let’s just review again how audits are carried out.
First of all, evaluate the design of the system. If suitable controls appear to exist, the audit will tend to 
proceed by testing those controls to evaluate whether the controls are indeed operating effectively.
If however, internal controls are absent or not operating effectively, evidence must be obtained from 
substantive procedures alone. This means examining transactions for direct verification rather than 
relying on the operation of controls.
When controls operate effectively, the audit will usually be more efficient and cost effective if the 
auditor tests the operation of controls and reduces the extent of substantive procedures. However, 
some substantive procedures will always be required (for each material class of transactions, account 
balance and disclosure) due to inherent limitations of internal control. 
In some audit areas it may actually be more efficient to perform only substantive procedures to a 
relatively small number of actual transactions (e.g. additions to/disposals of non-current assets).