Chapter 10 Slides

Chapter 10 Slides - 10 - 1 Click to edit Master subtitle...

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Unformatted text preview: 10 - 1 Click to edit Master subtitle style Acct 4510/5510 10 - 1 Section 404 Audits of Internal Control and Control Risk Chapter 10 11 Acct 4510/5510 For next class prepare homework solutions for MC (10-30, 31, and 32 and 10-33, 34 10 - 2 Acct 4510/5510 Planning an Audit and Designing an Audit Approach (Chapters 8 & 9 Discussion Items) Accept client and perform initial audit planning. Understand the clients business and industry. Assess client business risk. Perform preliminary analytical procedures. 22 Acct 4510/5510 Set materiality and assess acceptable audit risk and inherent risk. 10 - 3 Acct 4510/5510 Planning an Audit and Designing an Audit Approach (Subsequent Chapter Discussions) Understand internal control and assess control risk. Gather information to assess fraud risks. Develop overall audit plan and audit program. 33 Acct 4510/5510 Subsequent Chapter Discussions Chapter 10 Discussion I tem 10 - 4 Acct 4510/5510 Clients Internal Control Objectives Acct 4510/5510 44 Reliability of financial repor ting Efficiency and effectiveness of operations Accurat e infor mation for decision making Safeguarding of assets Compliance with applicable laws and regulations Civil Rights Laws Federal Secur ities Laws 10 - 5 Acct 4510/5510 Management and Auditor Responsibilities Related to Internal Control Management Auditors Acct 4510/5510 55 Establish and Maintain System of I nter nal Controls Reasonable assurance Inherent limitations Section 404 Reporting Responsibilities Design of internal control Operating effectiveness of controls Understand I nter nal Controls to Assess Control Risk in the Audit Reliability of financial reporting Classes of transactions Section 404 Repor ting Responsibilities Testing internal control Issue a report on internal 10 - 6 Acct 4510/5510 Sales Transaction-Related Audit Objectives Transaction-Related Sales Transaction- Related Audit Acct 4510/5510 66 Recorded transactions exist (occur rence) Existing transactions are recorded (completeness) Recorded transactions are stated at the cor rect amounts (accuracy) Recorded transactions are cor rectly included in the master files and are cor rectly Recorded sales are for shipment made to existing customers Existing sales transactions are recorded Recorded sales are for the amount of goods shipped and are cor rectly billed and recorded Sales transactions are cor rectly included in the master files and are cor rectly summar ized Sales transactions are cor rectly 10 - 7 Acct 4510/5510 Five Components of Internal Control Risk assessment Control activities I nformation and communication Monitoring Control Environment 77 Acct 4510/5510 10 - 8 Acct 4510/5510 The Control Environment Acct 4510/5510 88 I nt egr ity and ethical values Commitment to compet ence Board of directors or audit committee par ticipation...
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Chapter 10 Slides - 10 - 1 Click to edit Master subtitle...

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