Chapter 08 Slides

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Unformatted text preview: 8 - 1 Click to edit Master subtitle style Acct 4510/5510 8 - 1 Audit Planning and Analytical Procedures Chapter 8 11 Acct 4510/5510 8 - 2 Acct 4510/5510 Three Main Reasons for Planning Acct 4510/5510 22 1. To obtain sufficient competent evidence for the circumstances Minimizes legal liability Maintains a good reputation 2. To help keep audit costs reasonable 3. To avoid misunderstanding with the client 8 - 3 Acct 4510/5510 Risk Terms Acct 4510/5510 33 Acceptable Audit Risk A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued. Inherent Risk A measure of the auditors assessment of the likelihood that there are material misstatements in an account balance before considering the effectiveness of internal control. Assessing these types of risk leads to the determination of the amount of evidence that will be collected. 8 - 4 Acct 4510/5510 Planning an Audit and Designing an Audit Approach (Chapter 8 Discussion Items) Accept client and perform initial audit planning. Understand the clients business and industry. Assess client business risk. Perform preliminary analytical procedures. 44 Acct 4510/5510 8 - 5 Acct 4510/5510 Planning an Audit and Designing an Audit Approach (Subsequent Chapter Discussions) Set materiality and assess acceptable audit risk and inherent risk. Understand internal control and assess control risk. Gather information to assess fraud risks. Develop overall audit plan and audit program. 55 Acct 4510/5510 8 - 6 Acct 4510/5510 Accept client and perform initial audit planning. Client acceptance and continuance I dentify clients reasons for audit Obtain an understanding with the client about the terms of the engagement. SAS 108 requires an engagement letter . SOX requires hiring by audit committee for a public company. Develop overall audit strategy Staffing Use of outside spets 66 Acct 4510/5510 8 - 7 Acct 4510/5510 Understanding of the Clients Business and Industry Factors that have increased the importance of understanding the clients business and industry: Global operations I nformation technology Human capital 77 Acct 4510/5510 8 - 8 Acct 4510/5510 Understanding of the Clients Business and...
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Chapter 08 Slides - 8 - 1 Click to edit Master subtitle...

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