4032 Summary of comfort

Jun-2021

OAG Guidance

The Audit Planning Template has three components: In Scope FSLIs, Inherent Risk Assessment (IRA), and Summary of Comfort (SoC). We must first complete the “In Scope FSLIs” (see OAG Audit 4031) and “Inherent Risk Assessment (IRA)” (see OAG Audit 5042) sheets before completing the SoC. This section of the manual relates to the SoC, which is the last step of this template.

The following flowchart explains the purpose of the Audit Planning Template, the three components, and which manual sections to go to for guidance on each of those components.

OAG Guidance

A SoC can be used at either an account balance or business process level. Many financial statement balances are derived from transactions in a process and the linkage between the transactions and balances is important. Therefore, use judgment to determine whether it makes more sense on the engagement to use SoC sheets on a business process or balance basis, or even a combination of both. For example, a SoC could be prepared for the Revenue, receipts and receivables business process. Alternatively, a team may decide to perform a SoC for the receivables balance and another for the overall profit and loss review. Refer to OAG Audit 4031 for guidance on grouping FSLIs.

OAG Guidance

SoCs are created in the Audit Planning Template once we click the “Create and Delete Summaries of Comfort as required” button located in the “Instructions” sheet. They are based on the information entered in the “In Scope FSLIs” sheet and the “Inherent Risk Assessment (IRA)” sheet. A SoC sheet will be created for each In Scope FSLI unless FSLIs have been grouped together, in which case a SoC sheet will be created for each FSLIs grouping.

In rare circumstances, engagement teams may need to create SoC sheets for FSLIs not In Scope (e.g., for FSLIs containing particular items with specific materiality levels for which a SoC will not be automatically created). As a result, a SoC can be created once we select the box found under the Additional Summary of Comfort Required column in the “In Scope FSLIs” sheet. The SoC sheet can be used to document FSLIs that are not In Scope, including those that are insignificant and do not have related significant risks.

For both automatic significant risks, management override of controls and significant related party transactions outside the normal course of business, separate SoCs sheets are already included in the Audit Planning Template. Proper responses to these risks must be documented. For the automatic significant risks for revenues as it relates to fraud, unless that presumption is rebutted, a separate SoC will be created and proper responses to this risk must also be documented (See OAG Audit 5042).

OAG Guidance

The table below explains the elements of the SoC in further detail:

Financial Statement Assertions—A summary of how evidence was obtained in relation to each relevant financial statement assertion provides a clear indication of whether we have sufficient appropriate audit evidence and whether additional procedures may be necessary to address a particular assertion.

Audit Procedures—The audit procedures are performed in three distinct categories: Controls, Substantive Analytics and Substantive Tests of Details. While the audit procedures will be documented within the steps, a summary of the three primary testing approaches clearly identifies if sufficient evidence has been achieved and if not, what additional category of procedures might be performed. For example, where testing of controls does not result in significant evidence obtained from controls, it would be expected that the SoC would contain more extensive substantive analytics, if practicable, and/or substantive tests of details.