ACCT3101_Topic2_08_4_colour

ACCT3101_Topic2_08_4_colour - Topic 2 lecture

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1 ACCT 3101 Auditing & Public Practice Topic 2 Audit Report and responsibilities 2 Outline 1. Objective of audit 2. Responsibilities of management 3. Responsibilities of auditor 4. Audit objectives and transactions 5. Parts of the audit report 6. Unqualified and Modified audit report 7. Emphasis of matter and the going-concern assumption 8. Demand, benefits & limitations of audit 4 Objective of conducting an audit of financial statements ± ASA 200 ± .5 To enable to auditor to express an opinion (ie the audit report) ± . 24 an audit be designed: ± to provide reasonable assurance of detecting material misstatements in the ± ASA 240 provides further detail on the auditor’s responsibility for detecting fraud Topic 8 2.1 Audit objective 5 Auditor’s responsibilities Material versus immaterial misstatements Material versus immaterial misstatements Reasonable assurance Reasonable assurance Errors versus fraud Errors versus fraud Professional scepticism Professional scepticism 2.1 Audit objective
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1. Material v. Immaterial ± Misstatements are usually considered material if the combined uncorrected errors and fraud in the financial statements would influence a reasonable person using the statements. ± It would be extremely costly and probably impossible to hold the auditor accountable for immaterial errors and fraud. 2. Reasonable Assurance Auditors can not guarantee that there are no material misstatements because: ± Auditors use judgment based on samples. Errors in judgment can occur. ± Accounting presentations are based on complex estimates that involve uncertainty. ± Fraudulently prepared financial statements are difficult to detect, especially if there is collusion. 3. Error v. Fraud ± An error is an unintentional misstatement of the financial statements, whereas fraud is intentional. ± For fraud, there is a distinction between misappropriation of assets and fraudulent financial reporting. 4. Professional Skepticism ± Audit should be designed to provide reasonable assurance of detecting both material errors and fraud in the financial statements. ± Although an auditor should not assume that management is dishonest, the possibility of dishonesty must also be considered.
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10 Responsibilities under Corporations Act- management ± The directors’ declaration (s.295): comply with Accounting Standards, give a true and fair view, able to pay debts when fall due, the financial statements and notes are in accordance with the law. ± CEO & CFO declaration (s.295A): financial records properly maintained, compliance with accounting standards, true & fair view, other matters prescribed by the Act. 2.2 Statutory responsibilities
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This note was uploaded on 08/24/2010 for the course ACCT 3101 taught by Professor Drmarcsim during the Two '09 term at Queensland.

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ACCT3101_Topic2_08_4_colour - Topic 2 lecture

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