Annals of the University of Oradea: Economic Science (Jul 2017)
USING AUDIT METHODS IN THE AUDITING OF NON-CURRENT ASSETS OF THE MUNICIPALITY
Abstract
The paper deals with using audit methods in the audit of non-current assets of the municipality. Due the fact that surveyed area is audit of the municipal assets, we made a literature review in this area. Each municipality in Slovakia has legal obligation of audit of its financial statements. Audit in the municipality contains a high detection risk because the independent auditor cannot reveal always so-called hidden ownership or family ties. High detection risk may lead to failure of the auditor. Due to avoid of possible auditor’s failure, he or she needs to know the pitfalls accompanying audit engagement. The main objective of this paper is setting methods for the audit of non-current assets in respect of which audit risk is reducing. In the first part we have introduced a brief development of audit in Slovakia from 1989 to the present days. This part of the paper is devoted to the history of the audit and its current legislative framework. In Slovakia, international standards on auditing are applying for over ten years, and the Code of Ethics for auditors as well. Three components of audit risk affecting the overall audit risk are presented in the second part. This section lists the pitfalls in the audit of non-current assets of the municipality and suggested audit procedures, how to avoid them. Examined issue was applied on the example of the audit of non-current assets in municipality of Slovakia. Recognizing the potential audit pitfalls leads the auditor to reduce the overall audit risk. The auditor must follow the objectivity and independence from the audited entity, to recognize transactions with related parties especially in the municipality, and avoid failures in the design and the performance of appropriate audit procedures. Proper setup of the audit methods leads auditor to minimize audit risks to an acceptable rate and to formulate audit opinion. Conclusion of the article contains a risk assessment, audit planning and solving of audit pitfalls in the area of non-current assets.
