CACC521-Week06-text

CACC521-Week06-text - CACC521-Week06 14:22:00 ← Chapter 8...

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Unformatted text preview: CACC521-Week06 24/10/2010 14:22:00 ← Chapter 8 ← MC 1b,2c,3d,4d,5d,6c,7c,8a,9d Chapter 7 review Audit Risk • how business risk is related to the audit risk model ← Business analysis ← Business risk high level ← internal control • components • 7-4 no Exhibits 7-14, 7-15, no 6 basic types of evidence recalculate a component of the financial statements • strong evidence due to auditor doing the calculation ← Observation • Inventory count – watch staff do inventory count • Weak evidence - problem – at a point in time – employees on best behaviour ← Reperformance – • strong evidence • auditor does test counts ← Confirmation • Strong form • going external instead of internal • written enquiry to verify accounting records • Does not confirm ownership in case AR are factored • confirms cutoff date • Positive confirmation o party must responds o exceptions are investigated • Negative confirmation o only respond if info is incorrect not used often, mainly for small accounts only exceptions are investigated • procedures o address is legitimate o recipient provide the info o printed on client’s letterhead, signed by client officer o auditor must mail the confirmations o responses returned to auditor o ← Enquiry • Weak form • relies on management's answers • don't know management's ? • collection of oral evidence from client and independent 3 rd parties o evidence needs corroboration ← Inspection – 3 types • Tracing – start from when goods were ordered until payment is received o cradle to grave o assertions - completeness • vouching o grave to cradle look at AR and trace to sales order o assertion - existence • scanning o looking for something unusual • Analysis – slide 19 o ratio analysis o at finer detail o reduce cost of more costly substantive procedures o Compare current year to prior year.Compare current year to prior year....
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This note was uploaded on 04/14/2011 for the course ACC 521 taught by Professor G.caers during the Spring '11 term at Ryerson.

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CACC521-Week06-text - CACC521-Week06 14:22:00 ← Chapter 8...

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