Descartes audit methodology and software Den norske Revisorforening/ The Norwegian Institute of Public Accountants Den norske Revisorforening
Introduction The Norwegian Institute of Public Accountants (DnR) is the professional body for public accountants in Norway Approximately 5000 members side 2
Background Until 2011 Statutory audits for all limited liability companies ISAs implemented in 1998 More than 50 % of the statutory audits performed by SMPs Public oversight in Norway for decades Few regulative amendments to national law (implemented the Audit directive) Systematic quality assurance reviews since 1991 side 3
Why develop Descartes? Only Big Firms had sophisticated audit methodologies and tools Institute s goal was to give all members access to a high quality methodology supported by an IT-application for planning, performing and documenting the audit side 4
About Descartes Descartes is owned by The Norwegian Institute of Public Accountants Bouvet ASA (listed company) is our IT partner side 5
Why Descartes? French philosopher and mathematician René Descartes (1596 1650), known for statements like: Always go forward carefully and systematically Do not think that something is true until you are sure of it Dissolve any problem as far as possible Increasing enumeration and control is the only path to full answers side 6
About Descartes Launched in 1998 The risk based standards implemented in 2006 Clarified ISAs implemented in 2010 Additional engagement types in 2011: ISA 805, ISRE 2400 and ISRS 4410 New major version in June 2014 (same methodology) side 7
About Descartes Number of licenses 2568 Norway 110 Slovenia 43 - Iceland In addition to auditors of financial statements Descartes is used by: Municipality auditors The internal audit department in Norway's largest bank (DNB Nor) Business schools and universities in Norway and Iceland (educational purposes) The public oversight body in Norway The National Audit Office in Iceland side 8
About Descartes ISA compliant Using the same expressions and wording as the ISAs White fields/textboxes = ISA requirement Support the audit work flow (phases and audit steps) side 9
Phases in Descartes A. Preliminary engagement activities B. Understanding the entity & identifying Risks C. Assessment of controls by audit area D. Further audit procedures by area E. Finalizing audit procedures side 10
The risk model Preliminary engagement activities DOCUMENTATION Risk assessment procedures Understanding the entity Risk factors/classes of transactions assertions Evaluating internal controls Auditor s risk assessment assessed risks Further audit procedures Completion activities/conclusions Reporting/Communication
Prelimenary procedures Audit procedures Conclusion Financial Statement Reasonable assurance Auditors report IC IR A B C D E side 12
Assessed risks INHERENT RISK X CONTROL RISK X DETECTION RISK Phase A Risk assessment procedures Phases B and C Further audit procedures, Phase D Phase E Identification Classes of transactions risks fraud factors Identification and testing of controls Substantive analytical procedures Tests of details ISA 315 ISA 240 ISA 315 ISA 240 ISA 330 ISA 330 ISA 240 side 13
About Descartes Help the auditors comply and document their audit in compliance with ISAs Flexible regarding the extent of documentation: Directly in the tool Attachments side 14
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About Descartes Integration with the ISAs. Sophisticated help function : o purpose of the phase and subphase o relevant ISAs o relevant national regulation side 16
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About Descartes Scalable and flexible fits all engagements, small large What makes it scalable? The numbers of audit areas The type and extent of procedures to perform Extent of documentation side 20
About Descartes Follow-up for each engagement: Engagement status Follow-up Significant matters Open issues Summary of assertions side 21
Skjermdump Engagement status side 22
About Descartes Portfolio overview - a list of all clients: Important dates within each engagement Date of audit report and responsible auditor Team members, review partner and experts Hours spent on planning, interim audit and year end audit Can be exported to excel for additional analysing side 23
About Descartes - Technology Windows client using.net Minimal requirements for each computer Simple internet based installation Automatic distribution of program updates on a continuous basis side 24
About Descartes - Technology Online and offline/synchronising: Saves all data in a buffer memory locally Synchronised when the database is accessible Data is stored in one or several databases: Clients are shared by the users All file types can be stored in the database as attachments side 25
About Descartes - Technology Minimum requirements for server/database: Operating system: MS Windows Database: MS SQL Server or SQL Express (free versions) Memory: 1024 MB side 27
Impacts experienced with Descartes Efficiency 20 % time saved (BDO) Reduction of paper files (80 90 %) Recruitment motivates young people Access and security of client files side 28
Descartes ensures: relevant information is obtained and assessed that required procedures are performed (risk assessment) important assessments are made (risk, materiality and audit evidence) sufficient documentation => effective ISA compliant SME audits side 29
About Descartes abroad Iceland and Slovenia: Iceland English Slovenia - Slovenian Co-operation with the national institutes: National laws and regulations Translation Training Technical support side 30
About Descartes abroad Training: Assist the institutes with training courses Recommend a one day course for beginners Support: Web-based IT-support Web-page Newsletters side 31
Pricing The yearly license fee (subscription) is currently NOK 7700 (approx. EUR 1000) for the application (incl. database). The price for an additional user is NOK 2400 (approx. EUR 315). Minimum +/- 100 users. side 32
Descartes A high quality audit methodology operationalizing the ISAs supported by a modern IT application is the only way to an effective quality audit fully in compliance with the ISAs. side 33
For more information about Descartes Descartes web-page: http://descartes.bouvet.no/en Download the demo version side 34