Chapter 06 Slides

Chapter 06 Slides - Do Problems 6-25 6-26 and 6-27 for Next...

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6 - 1 Click to edit Master subtitle style Acct 4510/5510 Audit Responsibilities and Objectives Chapter 6 11 Do Problems 6-25; 6-26; and 6-27 for Next Class
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6 - 2 Acct 4510/5510 Objective of Conducting an Audit of Financial  Statements The objective of the ordinary audit of financial statements is the expression of an opinion of the fairness with which they present fairly, in all respects, financial position, result of operations, and its cash flows in conformity with GAAP. 22
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6 - 3 Acct 4510/5510 Steps to Develop Audit Objectives 1. Understand objectives and responsibilities for the audit. 2. Divide financial statements into cycles. 3. Know management assertions about accounts. 33 4. Know general audit objectives for classes of transactions and accounts. 5. Know specific audit objectives for classes of transactions and accounts.
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6 - 4 Acct 4510/5510  Management’s Responsibilities 44 Management is responsible for the financial  statements and for internal control. The Sarbanes-Oxley Act increases management’s  responsibility for the financial statements. It requires the CEO and the CFO of public companies to  certify the quarterly and annual financial statements  submitted to the SEC. It provides for criminal penalties for anyone who knowingly  falsely certifies the statements.
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6 - 5 Acct 4510/5510 Auditor’s Responsibilities 55 SAS 1 (AU 110) requires the auditor to  plan and perform the  audit  to obtain reasonable assurance that material  errors and  fraud will be found. It does not require that the auditor is responsible for  all  instances. Only  material  errors must be identified. Reasonable assurance is a high but not absolute level. Sampling involves acceptance of some level of risk. Estimates exist in financial statements. An  error  is an  unintentional  misstatement whereas  fraud  is  intentional .
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6 - 6 Acct 4510/5510 Three Equally Material Errors or Frauds 66 1. Unintentional use of inventory method not in accordance with GAAP.
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Chapter 06 Slides - Do Problems 6-25 6-26 and 6-27 for Next...

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