Know You Client

8/10/2019 Know You Client

1/11

Know your client in Detail (understanding business and its activities)

I. Client Overview

(a) Client History and Background

Provide a description of relevant client background

Client Profile

Nature of client business

Number of Branches/offices (if any)

Directors

Major shareholders

Chief Executive Officer (Address and telephone number)

Chief Financial Officer (Address and telephone number)Head of internal audit (Address and telephone number)

Company Secretary (Address and telephone number)Legal Advisor(s)

List of related parties and their relationship

Tax Advisor

Major BanksOrganizational Charts, etc.

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________________________________________________________________

________________________________________________________

________________________________________________________


2/11

(b) Client Business Objectives and Related Business Strategies

Provide a summary of the objectives, strategies and method of implementing

the strategies.

Business Objectives Related Business Strategies

1.

2.

3.

(c) Client Business Components

(i) Major Markets

(ii) Major Products and Services

(iii) Major Customers

(iv) Major Competitors


3/11

(v) Alliances (including suppliers) and other relationships

(d) List of Authorized Signatories

Name Designation Monetary Limit Allowed Signature

__________ _________ ____________ ________

__________ _________ ____________ ________

__________ _________ ____________ ________

__________ _________ ____________ ________

__________ _________ ____________ ________

Note: Information shall be used in performing audit procedures (e.g. Testof Controls & Substantive Testing). If there are no significantchanges since previous audit, this may be transferred to thepermanent file.

(e) Notes of Meeting with Client

(for recurring audits)

CLIENT NAME

DATE

VENUE

TIME

FIRM

REPRESENTATIVES

Name Designation

CLIENT

REPRESENTATIVES

Name Designation


4/11

CONCLUDING

REMARKS

Sign off

Prepared by Reviewed by

Date Date

Agenda for Meeting

Latest audited accounts

Coordinating persons Name Designation

Information about Other Auditors/ Co-auditors(if any)

Availability of Accounting and/ or

Internal audit / Internal Control Systemmanuals and any changes

Areas Requiring special attention

Physical Existence Verification

A

p

pr

o

x

V

a

l

u

e

Date Location(s)

Coordi

nator(

s)

Stock

Cash

Investment

Others


5/11

Clients expectation of completion of test

of controls

Expected date of Client to prepare

financial statements

Clients expectation of completion of

audit

Clients expectation of receipt of audited

accounts

Any significant accounting and audit

issues identified during the last audit

which are brought forward

Involvement of internal audit

a. No. of staff

b. Name of department head

c. Reporting authority

d. Type of reports issued

e. Frequency of reports

Confirmation circularization dates

Banks

Debtors

Creditors

Legal Advisors

Tax Advisors

Other

Changes in economic conditions

Changes in industry and operations

Significant changes in business since

last year

Changes in key finance and operations

managers

Changes in management / stake

holders / owners

Business objectives and whether they

are being met


6/11

Changes in market strategies

Availability of latest cash flows /

budgets

Actual results to date (comment

generally)

Financial restriction placed by debt

covenants

Risk / Probability of breach of debt

covenants

Changes in credit terms for customers

since last year

Changes in information systems and

technology in use

Changes in significant accounting

processes

Effects of any recent or pending

government legislation / actions

Effects of outcomes of litigation since

last year

Effect of any new tax rules / legislation

New competitors in product lines of the

company

Changes in market share

Significant changes in major customers

/ suppliers

Acquisitions / disposals of associates/subsidiaries or any anticipation thereof

Changes in internal reporting formats

Changes in capital structure of the

entity

Names of key financiers and changes

thereto.

Significant changes in system of


7/11

internal controls since last year

Whether any instances of fraud or

material error during the year. Howmanagement / those charged with the

governance responded?

Significant changes in accounting

policies

Effect of new accounting

pronouncements

Clients international reporting

requirements and changes thereto

Miscellaneous

II. Business Control Environment

When analyzing the business control environment understand the clients:

business structure;

culture and ethics;

remuneration management;personnel profiles;

communication of information;

Business structure

Culture and ethics

Remuneration management


8/11

Personnel profiles

Communication of information

III. Computer Information Systems (CIS)

Business processes are often facilitated by computer information systems. Obtain anunderstanding of the:

level of dependence the client has on computer information systems (include

a list of the clients computer information systems);computer information systems personnel structure and skills;

security of computer information systems; Access Controls, Backups,

Disaster Recovery.

reliability of computer information systems; Data Integrity, Processing, and

Reporting Controls.

degree and rate of change in computer information systems;

dependence on external computer processing; Use of Service Organisation-

understanding and evaluation thereof.


9/11

IV. Financial Reporting Environment

Obtain an understanding of the:

financial reporting framework applicable to the entity;

accounting policies applied by the entity and applied within the industry;

potential impact of accounting policies upon specific aspects of the financial

statements.

Financial Reporting Issues

Consider the following for identification of financial reporting issues to be addressed

while analyzing or consulting with colleagues, experts:

client's accounting practices and policies;

new accounting pronouncements;

the going concern assumption;

legal and regulatory changes

Financial reporting issue Reason for identification


10/11

V. Critical Audit Areas / Significant Financial Statement Components

Critical audit areas are generally those where judgment is involved and significant

estimation is used. For example, making accounting estimates, fair value, selection and

application of accounting policies etc. The approach to those areas and resulting impact on

the financial statements relating to the audit is documented. It also includes

consideration of previous years brought forward issues.

Critical Audit Areas/

Objective

Management Response Proposed Audit

Approach

significant estimates

made

New borrowings with

extra-ordinary terms and

conditions

Acquisition of a

significant asset

Discontinuation of major

suppliers

Discontinuation of a

major customer

Loss of a significantmarket share

Related party

transactions

Impairment of assets

Examples of major critical areas may include:


11/11

VI. Reasons for use of Experts and other parties

Description includes a summary of the issue, why it is considered significant to engage or

use and its potential financial statement effects.

Involvement of: Computer Information System (CIS) Specialist

Description of basis, nature, extent and conclusions related to the

involvement of CIS Specialist:

[Description]

Involvement of: Other specialist or other party involved in the audit

e.g.Actuary, Valuers, Internal audit, taxation

Description of significant issue and decision related to the involvement

of others:

[Description]

Findings

Know You Client

Documents

Transcript of Know You Client