Chapter _6, Internal Control Overview

Chapter _6, Internal Control Overview - Standards of...

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Unformatted text preview: Standards of Fieldwork (“PIE”) Planning & Supervision The auditor must adequately plan the work and must properly supervise any assistants. Internal control The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to fraud or error, and to design the nature, timing, and extent of further audit procedures. Evidential matter The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit. SAS 107 “Audit Risk Model” Again and Again and Again… AR =IR * CR * DT If CR is high, then lower DR (if control risk is assessed “at the maximum,” the audit approach is “wholly substantive” which means “no reliance on I/C”) If CR is “less than the maximum,” then DR can be allowed to be higher (note that the assessment of CR had better be right!!) May choose to report other lesser matters, too “Inherent Limitations”...
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This note was uploaded on 04/22/2011 for the course ACCY 360 taught by Professor T during the Spring '08 term at Northern Illinois University.

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Chapter _6, Internal Control Overview - Standards of...

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