ac316_4 - Chapter Chapter 6 Audit Audit Responsibilities...

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Unformatted text preview: Chapter Chapter 6 Audit Audit Responsibilities and Objectives What is the Objective of Audit Financial Statements? What are management’s responsibilities? a. Auditor’s Responsibilities To perform the audit to obtain reasonable assurance, not absolute absolute assurance, about whether F/S F/S are free of material misstatement. b. b. c. d. Adopting sound accounting policies Making fair representations in F/S F/S Maintaining adequate internal control All above are correct Why Why only reasonable assurance? What is material misstatement? Error vs Fraud 1. 2. 2. What is Professional Skepticism? Skepticism? In F/S, there is Machinery…………. There is loan payable……………………… 3. 4. What What are these? Misappropriation of assets Mistake in extending prices times times quantity on a sales invoice Misappropriation of Assets Fraudulent Financial Reporting F/S Cycles F/S Cycles Why divide F/S into cycles? Sales and Collection Cycle Acquisition and Payment Cycle Capital Acquisition and Repayment Cycle Payroll and Personnel Cycle Inventory and Warehousing Cycle What are What are Management Assertions? : Representations by Management Representations about transactions and the related accounts in F/S Five Broad Categories 1. Existence or Occurrence 2. Completeness 3. Valuation and Allocation 4. Rights and Obligations 5. Presentation and Disclosure 1. 1. 2. 3. 4. 5. 6. TransactionTransaction-Related Audit Objectives Existence Completeness Accuracy Classification Timing Posting and Summarization Specific Balance-Related Audit BalanceObjectives 1. Existence 2. Completeness 3. Accuracy 4. Classification 5. Cutoff 6. Detail tie-in tie7. Realizable Value Specific Balance-Related Audit BalanceObjectives 8. Right and Obligation 9. Presentation and Disclosure How Audit Objectives are Met? ...
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