Chapter_Nine-Class - Upcoming Quiz: covers chapter 8, 9....

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Upcoming Quiz: covers chapter 8, 9. Bring in a fraud story for the quiz. We are not going to finish chapter nine today. Chapter 9 material that we don’t get to today, will be slightly covered. Chapter 8+ 9, fraud component. H.W: 9-22: A.4 B.4 C.1 9-23: A.1 B.1 C.1 9-24: A.2 B.3 C.1 9-34 GOOD Practice Problem Control Risk Inherent Risk Acceptable Audit Risk Planed Evidence A N N or I D I B N N D I C D N N D D N I N I E N N I D F D D N D G I I N I H I I D I I I I N I J D I N C Auditing Lecture Notes- Chapter Nine Opening Vignette Discussion- No sympathy from the public for the auditors when the public loses $/investments The public is desperate for auditors to be guarantors – but this is not possible Auditors must seriously consider the risk individual clients pose and act accordingly Because right now the economic situation The couple is going to be mad at the CPA firm. They were responsible for the audit. Audit planning- we need to think about whether to accept a client or not and for that we need to look at risk. If high risk, high price of audit. Someone will audit you for the right price. Setting Materiality and Risk – Part of audit planning…….remember from Chp. 8 This is step 5 that we summarized as planning the audit. Objective 1 and 2 -Understanding materiality is under 1 -Set preliminary judgment is under 2
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Steps in Applying Materiality – Figure 9-1………pg. 221 Must know/understand the definition of materiality……. .pg. Potential essay: FASB has formal definition of materiality. Look at the formal definition of materiality, and recognize it is good enough. You need to be able to remember key words of the formal definition. In the professio Step 1 – Set preliminary judgment about materiality- (PM) planning materiality or can also be TM PM- look at the overall client, and be able to think of what amount of error I will accept in order to be satisfied. What is the overall misstatement for these financial statements that I am willing to accept? What amount of mistakes am I willing to live with? Must be done early on during the audit. As we go we will learn new things, and if we feel like we need to adjusted, then adjust it. Must know the FORMAL language for this Know by definition……pg. 221 *This may change as more is learned during the engagement *This involves professional judgment – there is no right or wrong. Your experience *It tells the auditor how much evidence they will have to collect. ADVICE: In your studies of 411 take the time to make the connection of the material
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This note was uploaded on 11/30/2009 for the course ACCT 411 taught by Professor Jackson during the Fall '09 term at Michigan State University.

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Chapter_Nine-Class - Upcoming Quiz: covers chapter 8, 9....

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