1. 2. 3. 4. 5. 6. 7.
II.
Understand the Client’s Business and Industry Why is it important? General Standard: “The auditor must obtain a sufficient understanding of the entity and its environment, including its
The auditor’s responsibility is not to evaluate a client’s business model but to have a sufficient understanding of the entity. An auditor needs a sound and comprehensive understanding of the client’s business and industry to develop valid expectations about financial-statement assertions.…
The acceptable audit risks, inherent risk, the preliminary judgment about materiality and performance materiality have significant impact on the whole process of the audit and therefore they should be made in the planning phase. The acceptable audit risk helps the auditor to determine the scope and how much evidence to gather during the audit. Inherent risk is the risk of material misstatement in an account before considering the effectiveness of internal control. The assessment of inherent risk in the planning phase is to help the auditor plan the audit by deciding which parts of the audit to emphasize and the extent of testing. The performance materiality and preliminary judgment about materiality determine the nature, timing and extent of further audit procedures. Therefore, to better perform further audit procedures, these should be made in the early phase of the audit.…
The Auditor by James K. Loebbecke tells a story about the life and career of an auditor named Jack Butler. The book shows Jack’s career from his education all the way to his promotion to partner. Loebbecke designed this story about Jack as a teaching tool to give students an understanding about the life of an auditor.…
The consulting firm of Deloitee and Touche is the auditing firm for the DirecTV Group. The consulting firms committee is responsible for auditing the:…
Q1. What is the link between audit risk and engagement risk? How does the audit risk model allow the auditor to deal with these risks in the most cost effective manner?…
This report is for Wendig Ltd for the year ended July 2010. The report is focused on highlighting significant audit risks, Key assertions and relevant internal controls concerning various segments of the business namely Inventory balances and purchases transactions, Trade Receivables and Credit Sale System, Property Plant and equipment, Trade payables transactions and balances. The report in the end suggests relevant recommendations for each of the following.…
The purpose of this part of the audit process for Apollo Shoes is to design tests of controls, substantive tests of transactions, and analytical procedures for the sales, collection, payroll, personnel, acquisition, and payment cycles. These test and procedures are with intent to attest operating effectiveness of internal controls of Apollo Shoes on the basis of documentation provided. It is with the understanding that with the performing of test and procedures an opinion can be formed but management of Apollo shoes is responsible for the maintenance and assessment internal controls of over financial reporting. The design of test of controls of the sales and collection cycle follows.…
In this case, when Sam book a holiday trip with “The Easy as ABC to travel Co Ltd”, he is entering into an agreement. The information that is provided in the advertising in all local newspapers must not be false or misleading. If Sam enter into the contract on the basis of what was in the advertising given by the company, he can claim damages if the information turn out to be incorrect. He can file a complaint against the company because he is not satisfied with the overseas trip and he may be entitled to take the company to the small claim court. Businesses must take care that consumers aren't misled or deceived. Sam have been misled because the information that he received…
The three risks that make up audit risk are inter-related because they assist the auditor in determining the scope of auditing procedures for a particular account balance or class of transactions. The audit risk model is specified as AR=IR x CR x DR. The inherent risk and control risk is the risk that the balance or class and related assertions contain misstatements that could be material to the financial statements when aggregated with misstatements in other balances or classes. The detection risk is the risk that the auditor will not detect such misstatements. The…
Kresna Dubchuk lives in Kenya and is in the process of selling her Canadian real property, situated in New Brunswick, which has been rented to various tenants over the last 10…
Are the employees in charge of shipping comparing the product shipped with the sales invoice to determine that the goods are being shipped to the customer who ordered them?…
The risk assessment process happens at the very beginning of the engagement and is to determine the level of risk present in the company. The risk assessment phase is when the auditor assess the client’s situation, conducts an independence threat analysis and decides whether to accept the client or not. The risk assessment is influenced by various factors such as the degree to which external users will rely on the audited statements, the company’s financial position (liquidity), the nature of operations, competence of management and their integiryt, if it is a first time client or not, etc. The riskier the company seems, the lower the engagement risk will be. The engagement risk is a measure of the auditor’s willingness to accept that the financial statements may be materially misstated even though a proper audit has been conducted. The more evidence he will need to gather and the more test he will perform to give an opinion. Therefore, depending on the risk assessment, the amount of work in the collection of evidence will vary largely.…
3. The oversight structure of financial reporting in Australia had many levels. CALDB is part of which level?…
Large dollar coverage in which the auditor focuses on selecting the relatively large items in the population for testing.…
83The possibility that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated…