2009 A-3 Class Notes

2009 A-3 Class Notes - Becker CPA Review Auditing 3 Class...

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Becker CPA Review – Auditing 3 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. AUDITING 3 CLASS NOTES I. AUDITING 3 Auditing 3 primarily deals with two key areas on the exam, planning (which includes consideration of fraud/illegal acts) and risk assessment (which includes consideration of internal control). A. PRE-ENGAGEMENT ACCEPTANCE ACTIVITIES 1. You must be familiar with the specific procedures an auditor performs before deciding to accept a client. 2. You must separate these procedures from the procedures that are performed after acceptance. 3. Pre-acceptance activities: a. Make inquiries of the predecessor auditor. b. Assess the auditablity of the client. (1) Evaluate management's integrity. (2) Consider the availability and adequacy of the client's accounting records. (3) Determine whether the audit firm is capable of performing the audit (knowledge, staffing, etc.). (4) Consider whether an audit is the most appropriate form of engagement. c. Assess the client's business risk and the CPA's business risk. d. Evaluate compliance with ethical requirements (i.e., independence; quality control procedures). B. ESTABLISH AN UNDERSTANDING WITH THE CLIENT 1. The auditor must establish an understanding with the client regarding the services to be performed. a. Be aware of the general contents of the letter. b. An engagement letter is required in most circumstances. C. PLANNING PHASE OF THE AUDIT 1. The objective of this phase is to develop an overall strategy for the audit. 2. The following are required during the planning stage of the audit: a. Obtain a sufficient understanding of the entity and its environment, including its internal control. b. Obtain knowledge of the client's industry and business (tour facilities, review financial history, etc.). c. Perform analytical procedures. d. Develop an overall audit strategy, and develop and document a written audit plan. e. Consider materiality and audit risk so that an overall low level of audit risk is attained.
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Becker CPA Review – Auditing 3 Class Notes 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. D. DEVELOPING THE AUDIT PLAN 1. An audit plan is a list of procedures to be performed. The audit plan must be in writing and should include the nature, extent, and timing of: a. Risk assessment procedures, to assess the risk of material misstatement. b. Planned further audit procedures (i.e., tests of controls, substantive tests). c. Other required procedures. 2. The auditor should consider the need to utilize other professionals. a. Internal Auditor – The auditor may choose to make use of the client's internal auditor. (1) The internal auditor must be objective and competent.
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This note was uploaded on 02/19/2011 for the course BMGT 360 taught by Professor Spina during the Spring '07 term at Maryland.

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2009 A-3 Class Notes - Becker CPA Review Auditing 3 Class...

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