Audit procedures when non-compliance is discovered

In this lesson

1. 0:00 Understanding non-compliance discovery and documentation
2. 0:56 Key audit procedures for non-compliance
3. 2:47 Legal correspondence and fine assessment

About this lesson

You'll understand how to document the nature and extent of non-compliance, assess its potential impact on the financial statements, and determine whether adjustments are needed. This is a critical skill for the Audit and Assurance paper, where examiners expect you to demonstrate a structured, methodical approach to handling compliance issues. The core procedures centre on four key actions: inquire of management about the timing and likelihood of any penalties; inspect correspondence from regulatory bodies to understand what non-compliance has occurred and what action is being taken; review board minutes to identify material non-compliance issues and management's response; and inquire of or inspect correspondence from the client's legal department regarding the financial consequences and probability of fines. Each procedure must be documented using action verbs—inquire, inspect, review—to demonstrate a rigorous, professional audit approach. You'll also learn why identifying non-compliance in one area signals the need to search for similar issues elsewhere, and how to evaluate whether the financial statements require amendment. Understanding these procedures will help you answer audit case study questions with confidence and precision, showing examiners you can handle real-world compliance challenges systematically.

Duration: 3m