Introduction to the Six Zones

Begin by identifying and creating the six zones using examples of different line items that could potentially fall within each zone.

Apply the principles of ISA 330 to each zone.

Controls Understanding and Testing

Explain the process of understanding, evaluating, and testing the implementation of controls applicable to each zone.

Substantive Procedures

Discuss the substantive procedures and detailed testing that must or may be performed on each zone.

Evaluate whether the zone can be tested using standard audit procedures or whether custom-designed procedures are required.

10-Sheet Document Exercise

Use one balance sheet line item and one income statement item (preferably revenue) to prepare the 10-sheet document.

Sheet 1: Compulsory Audit Procedures

Discuss the mandatory procedures and how they should be applied.

Sheet 2: Material Items

Discuss selection criteria, appropriate procedures, and required audit evidence.

Sheet 3: Unusual Items

Cover selection of unusual items, relevant audit procedures, and required evidence.

Sheet 4: Journals

Apply the elimination method to select journals for testing and discuss relevant procedures.

Sheet 5: Significant Risk Testing

Focus on when this sheet must be used, especially for Zone 5 items and revenue fraud risk testing.

Sheet 6: Estimates

This sheet will not be covered in this section

Sheet 7: Related Parties & Non-Routine Transactions

This sheet will not be covered in this session.

Sheet 8: Remaining Items

Discuss these items in detail, including various selection methods.

Address how ROMM is determined and the corresponding sample sizes per zone.

Sampling and Evaluation of Misstatements

A detailed discussion on sampling techniques will be included.

Cover the evaluation of misstatements, with a focus on extrapolating errors or differences identified during the audit.

Sheet 9: Accounting Policies vs Framework

As this is a new sheet I have developed, I would also like to discuss its role in identifying risks arising from accounting policies.

This has a direct impact on the zones and the assessed ROMM.

Methodology Development

During the session, we will also discuss the design of your sampling methodology as well as your materiality methodology, ensuring alignment with audit risks and overall audit strategy.