module05 - Module 5 Substantive testing and evidence...

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Unformatted text preview: Module 5: Substantive testing and evidence Overview Module 5 covers all aspects of substantive testing and evidence to reduce the risk of material misstatement. In your External Auditing [AU1] (or equivalent) course, you studied the substantive testing of each financial statement assertion. This module addresses additional topics: its technical focus is on determining the impact of risks and business issues on the audit engagement, developing appropriate assurance procedures, executing the assurance program in accordance with professional standards, and analyzing and documenting results. The module concludes with the process of aggregating misstatements for purposes of reaching an overall conclusion on the fairness of the financial statements. As you work through a series of ACL computer activities, you develop your ability to use technological tools in the workplace. You also learn to develop and advise on a framework for the detection of fraud. Through your study of the use of a spet, you should be able to determine engagement resource requirements as well as when and how to refer to other professionals. Test your knowledge Begin your work on this module with a set of test-your-knowledge questions designed to help you gauge the depth of study required. Learning objectives 5.1 Explain how the auditor responds to the assessed risks of material misstatement of the financial statements, the factors that determine the appropriateness and sufficiency of evidence, the available evidence-gathering techniques, and the concerns when using management ’ s representations as evidence. (Level 1) 5.2 Identify the three factors making up the fraud triangle and common types of fraud, and explain the auditor ’ s response to the risk of fraud during an audit of financial statements in accordance with GAAS. (Level 2) 5.3 Identify the five types of data-oriented CAATs and explain how generalized audit software can be used to perform specific audit-related testing of transactions and balances. (Levels 1 and 2) 5.4 Outline the considerations and procedures for auditing accounting estimates, related party transactions, financial derivatives, segment disclosures, and environmental exposures in the context of an audit of financial statements in accordance with GAAS. (Levels 1 and 2) 5.5 Determine a public accountant ’ s responsibilities when using the services of a spet in an audit or review engagement. (Levels 1 and 2) 5.6 Determine how the auditor aggregates misstatements and interprets the financial statements at the conclusion of the audit, and identify the available alternatives if the amount of misstatement exceeds the amount considered material for the audit. (Level 1) AU2 - Module 5 Page 1 5.1 Sufficiency and appropriateness of evidence Learning objective ● Explain how the auditor responds to the assessed risks of material misstatement of the financial statements, the factors that determine the appropriateness and sufficiency of evidence, the available evidence-...
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module05 - Module 5 Substantive testing and evidence...

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