CHAPTER 5 - CHAPTER 5 5-9 The three general types of audit...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 5 5-9 The three general types of audit tests are risk assessment procedures, tests of controls and substantive tests. Risk assessment procedures are used by the auditor to obtain an understanding of the entity and its environment, including internal control. Examples include inquiries of management and others, analytical procedures, and observation and inspection. Tests of controls are audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level. Examples of tests of controls include inquiries of appropriate client personnel, inspection of documents and reports, observation of the application of a specific internal control, and reperformance of the application of the control by the auditor. Substantive procedures are performed to detect material misstatements (i.e., monetary errors) in an account balance, transaction classes, and disclosure components of the financial statements. Examples of substantive procedures are substantive tests of transactions, substantive analytical procedures, and tests of details of account balances. 5-10 The purposes for using analytical procedures at the planning stage of an audit are (1) to enhance the auditor's understanding of the client's business and the transactions and events that have occurred since the last audit and (2) to identify areas that may represent risks relevant to the audit. 5-33 a. An audit committee is an important part of a company's organizational structure. It is a special committee formed by the board of directors. It should be a group of outside (independent) directors who have no active day-to-day operational role and who are a liaison between the independent auditor and the board of directors. The audit committee assists and advises the full board of directors and in doing so aids the board in fulfilling its responsibility for public financial reporting.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 4

CHAPTER 5 - CHAPTER 5 5-9 The three general types of audit...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online