Lecture_04_S22009 - The University of Sydney ACCT3014 -...

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1 The University of Sydney ACCT3014 - Auditing and Assurance Semester 2, 2009 Week 4 Lecture c Audit Evidence and Use of Assertions Additional Optional Reading : ICAA Audit Manual, pp. 70-72 and 219-236
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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 ASA 500 3.1 Tests of control ASA 500 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 – ASA 500 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
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3 ASA 500: ‘Audit Evidence’ The auditor shall obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion (para. 5). __________________ Audit evidence is obtained from performance of: Substantive testing (Financial Information – i.e. $) Tests of controls (Internal Controls)
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4 Sufficient and Appropriate Audit Evidence (ASA 500 para. 10) Sufficient = measure of quantity Appropriate = measure of quality (i.e. relevance and reliability) Both are a function of the risk of misstatement and are interrelated
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5 Audit Evidence Audit evidence (ASA 500, paras. 6 - 9): c Accounting records of initial entries and supporting records c Other information (e.g. minutes of directors’ meetings)
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6 Audit Procedures for Obtaining Audit Evidence (ASA 500 para. 24) Planning Stage : RISK ASSESSMENT PROCEDURES Evidence Stage : TESTS OF CONTROLS (TOC) and / or SUBSTANTIVE PROCEDURES (ST) (Test of Details, Substantive Analytical Procedures)
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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_04_S22009 - The University of Sydney ACCT3014 -...

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