Lecture_02_S22009 - The University of Sydney ACCT3014...

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Unformatted text preview: The University of Sydney ACCT3014 Auditing and Assurance Semester 2, 2009 Week 2 Lecture c Introduction to the Audit Process c Audit Planning c Understanding the Entity and Assessing Risk Additional Optional Reading : ICAA Audit Manual, pp. 75-84; 88-92; 131-156; 243-244 and 351-364 2 What are the General Responsibilities of Management? c Efficient running of the organisation c Compliance with laws and regulations c Safeguarding of the assets of the organisation 3 General Responsibility of Management that Most Directly Affects Us? c Compliance with laws and regulations part of this includes preparation and presentation of the financial report Note: The laws and regulations include a broad range of laws and regulations relevant to the clients business (e.g. environmental laws for a mining company) as non-compliance may materially affect financial report (refer ASA 250) 4 We Thus Perform an Audit to Fulfil Our Obligations Express our professional opinion as to whether or not a financial report presents fairly or is true and fair . We cannot do so if management has not done its job. 5 Audit Process c Audit involves various stages Pre-engagement Planning Evidence Collection and Evaluation Opinion Forming and Reporting 1. Pre-engagement activities 1.1 Accept / reject new client 1.2 Established terms of engagement 1.3 Engagement letter 2. Planning activities 2.1 Obtain knowledge of the business 2.1.1 Preliminary analytical procedures 2.2 Appraisal of risks, including fraud risk, going concern 2.3 Estimate of materiality 2.4 Review of control components 2.4.1 Preliminary evaluation of control environment 2.5 Develop overall audit plan (i.e. develop an audit strategy) in response to risks 2.5.1 Determine reliance on internal controls 2.5.2 Determine extent and nature of testing 2.5.3 Write audit plan 2.6 Assignment of staff 3. Audit evidence 3.1 Tests of control 3.1.1 Conducts tests 3.1.2 Make final evaluation of internal control 3.1.3 Modify audit approach 3.2 Substantive testing activities 3.2.1 Conduct substantive tests of transactions and balances 3.2.2 Conduct substantive analytical procedures 3.2.3 Evaluate results of substantive procedures 3.2.4 Modify audit approach 3.3 Obtain representations 3.3.1 Management 3.3.2 Solicitors 3.3.3 Bank 4. Opinion formulation and reporting activities 4.1 Review financial report 4.5 Related party transactions 4.2 Review audit results 4.6 Formulate audit opinion 4.3 Subsequent events 4.7 Draft issue reports 4.4 Fraud and error 5. Continuous activities 5.1 Supervise conduct of examinations 5.2 Review work of assistants 5.3 Consider appropriateness of continuing relationship with client 5.4 Make required special communication 5.4.1 Material weaknesses of internal accounting control 5.4.2 Material errors or irregularities 5.5 Consult with appropriate persons in connection with special problems 5.6 Document work performed, findings, and conclusions in appropriate working papers 5.7 Consider going concern A U D I T P R O C E S S 7...
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This note was uploaded on 11/18/2010 for the course ACCT 3014 taught by Professor - during the Three '09 term at University of Sydney.

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Lecture_02_S22009 - The University of Sydney ACCT3014...

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