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Assertion / Objective Likely to Be Back on Final, Legal Less Likely

Autor:   •  March 7, 2019  •  Course Note  •  584 Words (3 Pages)  •  31 Views

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Assertion / objective likely to be back on final, legal less likely

Feb 28, 2018

7 stages of an audit

  • Client acceptance, audit planning, assess RMM, develop risk response, perform risk responses, conclusion, reporting

 Audit planning

  • How to conduct an effective audit
  • Help keep cost reasonable
  • 100% accurate audit would be too costly
  • Avoid misunderstandings
  • What access is needed, what you are auditing for
  • Collecting sufficient appropriate audit evidence

Before client acceptance

  • Risk of material misstatement
  • Help reduce risk to below acceptable audit risk
  • Depends on company, year condition, and client’s business
  • Acceptable audit risk
  • Amount of risk that can be accepted from the audit
  • Set by the auditor can change based on the industry
  • Who the users are going to be (large amount or importation users would want to lower risk)?

Acceptance of new clients

  • Client investigation
  • Look at client F/S and previous F/S, environment
  • What new standards that should be apply to this
  • New auditor needs to communicate with old auditor for reason why not to accept
  • Need permission form clients

Continuance with a client

  • Client should be review annually
  • Possible reason to discontinue
  • Lots of disagreement
  • Client lack of integrity
  • Not able to reach acceptable risk with the fees that the clients are willing to pay
  • Change of independence (family member now works for the client)
  • Clients expansion into new industry

Engagment letter

  • Contract, outlines the terms of agreement
  • Scope of the audit
  • Tell client what you’re looking for (purpose that your there and what your trying to accomplish)
  • F/S are not misstated and represented fairly
  • Similar to a course outline (tell material of course but not the questions)
  • Fees
  • Try to avoid setting flat free (avoid money motivated)
  • In human nature to minimize work to optimize profit

Understanding client’s business

  • Understand all the business risk as well as their operating environment
  • Each company has different risk involve in their industries
  • Tech industry greater risk of patent and trademarks
  • Law and compliance, you will need to follow

Business operations and processes

  • Understanding client revenue and collection system
  • Technology infrastructure
  • Test if systems are reliable

Management and governance

  • How much management cares
  • Identify how well management is at identifying and responding to risk
  • Governance actives (Internal control), are people following through with these procedures or understand them
  • What is going on not what is on paper

Client objectives        

  • How much management put in into compliance of F/S
  • Is reliable of F/S being sacrifice for profit efficiency
  • Help auditor determine what they need to focus on depending on what clients putting focus on

Performance measurement and client environment

  • Leadership good predictor of what employee are going to perform like
  • Unachievable goal could lead employees to think manipulating data is alright

Preliminary analytical review

  • Before doing inspection check to see if any area looks out of place
  • Compare to auditor forecast/expectations, industry standard, or prior years
  • based on situation


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