Auditing Notes
Autor: AndySun2 • October 23, 2017 • Coursework • 1,667 Words (7 Pages) • 554 Views
Important Concepts
Audit Materiality:
-Tolerable Errors
Who/how is it determined?
Auditor determines
Professional Judgment
What is set HIGH?
Lawsuits
What if set LOW?
Over audit
Audit Risk
Accept giving a clean opinion on misstated financial statments
Who/how is it determined?
Auditor determines
Professional Judgment
What is set HIGH?
Sued
Attract bad clients
What is set LOW?
Lose clients, over audit
Misstatement
Irregularities
Financial Statements Actually: Reliable | Financial Statements Actually: Not Reliable | |
Auditor states: F/S Reliable | OK | sued |
Auditor States: F/S Not reliable | Over audit | OK |
Audit Evidence (the auditor’s tool bag):
Observation (eyes): Inventory (small #, large $)
Confirmation(letter): Cash
Documentation (examine paper): Revenue (invoices, PO, Receiving report, Contacts)
Client Inquiry (talk): ALL
Analytical Review (ratios): ALL
Recompute (math): Accumulated Depreciation/ Depreciation Expense
Audit Smapling Examples:
-Kroger has 2,324 stores in 34 states
-Chase has 5,400+ branches and 15,500+ ATMs
-Delta has 809 aircraft in 326 cities
Scenario: you’re on the audit staff of EY-Columbus assigned to L BRANDS
Assignment: verify their 1,140 stores worldwide to determine they exist:
B/S accounts: Inventory & PPE
Results: Complete the audit and note no exceptions
Expectations GAP | Mother (aka Investor) | Manager |
Accuracy Rate | 100% | 95% |
Number of Stores Visited | 1,140 | 10 |
Conclusion | Damn Sure | Reasonable Basis |
Audit FEE | $1 million | $4million |
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