notes2 - Audit Stages FIRST INTERIM AUDIT STAGE 1:...

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Audit Stages FIRST INTERIM AUDIT STAGE 1: Understand the Business Understand the business and industry in which it operates. An example of business risk factors evaluation report is shown in Illustration 1. Other aspects of understanding the business: A general understanding may lead to other areas of investigation and planning. (1) First time audits require more work than a repeat engagement. (2) Work with company internal auditors . (3) Analyses of the client’s financial statements. (4) Employment of specialists on the audit. The auditor must have a knowledge and understanding of the client’s business. The understanding aids in planning and developing an audit program , which is a list of procedures necessary to obtain sufficient competent evidence. Methods and sources of information: The auditor obtains an understanding of the client’s business and industry by: Inquiry and reviews with client management and personnel. Review of prior year audit work papers. Observation and tour of company’s physical facilities. Study and review of published materials, guides, Web sites, and references on industry and client. Financial Statements There are two important points to remember about client financial statements: (1) Management is responsible for preparing them, and they contain management’s assertions about economic actions and events. (2) The financial statement numbers are produced by the company’s accounting system, and summarized in the trial balance. The Financial Statements are mainly Balance Sheet and Income Statement (profit and loss account) and additional statement; cash flow statement, fond flow statement, cost of sales statement, as are identified as being within the scope of the audit opinion.
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The Balance Sheet gives a statement of financial position of a company at a particular date. Assets represent the resources owned by the firm, whereas liabilities and shareholders’ equity indicate how those resources are financed. The Income Statement gives a statement of profit or loss of the company for the specified period. An income statement answers the question “how profitable is the business?” For the preparation of the financial statements, every company must keep accounting records and they must be sufficient to show and explain the company 's transactions and financial position. All transactions in the company must show source documents, which are; Invoices, checks, receipts, delivery notes, payrolls. .. These documents are attached with the cash receipt voucher, cash payment voucher. The source documents are first authorized by senior staff and then entered in accounting records, which are: Daily book, ledger, cashbook, inventory book, check book. According to the Turkish Tax and Commerce Code, Notary public must stamp these
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notes2 - Audit Stages FIRST INTERIM AUDIT STAGE 1:...

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