Week 04 Slide.ppt - Auditing 1 1 2 Auditing Assurance An Overview(Ch 1 Audit Regulation Structure of Profession Auditor’s Liability(Ch 2 3 Ethics

Week 04 Slide.ppt - Auditing 1 1 2 Auditing Assurance An...

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Auditing 1 1. Auditing & Assurance: An Overview (Ch 1) 2. Audit Regulation, Structure of Profession & Auditor’s Liability (Ch 2) 3. Ethics, Independence and Corporate Governance (Ch 3) 4. Overview of the Financial Report Audit Process (Ch 4) 5. Understanding the Entity and Business Risk (Ch 5) 6. Assessing Inherent Risk & Other Risks (Ch 6) 7. Understanding and Assessing Internal Control (Ch 7) 8. Tests of Controls (Ch 8) 9. Substantive Tests of Transactions and Balances (Ch 9) 10. Completion and Review (Ch 11) 11. Auditor’s Reporting Obligations (Ch 12) 12. Revision Lecture
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CHAPTER 4 Overview of elements of the financial report audit process
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Agenda 1. Financial report assertions, audit objectives 2.Common audit procedures 3. Sufficient appropriate audit evidence 4.Audit risk model. 5. Materiality 6.Types of audit tests 7. Use an expert or component auditor 8.Audit working papers.
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Figure 4.1 Flowchart of planning and risk assessment stage of a financial report audit
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Figure 4.2 Accounting and auditing contrasted
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Directors and managers make assertions (embodied in the financial report) when they present a financial report. Auditors use these assertions to identify and assess risks by considering different types of potential misstatements that may occur and designing audit procedures in response to risks. There are three categories of assertions : classes of transactions and events(purchase, sales,etc) account balances(balance sheet-revenue, costs of goods sold) presentation and disclosure.
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Past exam question List and describe FIVE audit assertions of sale transaction FOUR audit assertions of accounts receivables balances FOUR audit assertions of presentation and disclosures of inventory
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Financial report assertions
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Financial report assertions (continued)
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Financial report assertions (continued)
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Summary of assertions Transactions Balances Disclosures Occurrence Completeness Accuracy Cut-off Classification Understandability Existence Rights & obligations Valuation & allocation
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Figure 4.3 The audit equation
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Preparation question What are SEVEN common audit procedures? When/Why/How to decide an audit procedure?(select which audit procedure to test)
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4.2 Common audit procedures 1. Inspection(checking report,invoicesparty) 2. Observation(look how clients perform internal control, do stock) 3. External confirmation 4. Recalculation 5. Re-performance 6. Analytical procedures(ratio calulation) ch6 7. Enquiry (ASA/ISA 500.A14-25)
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