ACCT_3444_Chapter_5_and_6 - Accounting 3444 Lecture 3 NOTE:...

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Accounting 3444 Lecture 3 NOTE: Make sure your group has finalized its company selection by next week! Chapter 3 Recap: Ethics: a system or code of conduct based on moral duties and obligations that indicates how individuals should behave. 3 Key Elements: 1. Ethics involves questions requiring decision making/choices 2. Ethics involves guidelines of right and wrong 3. Ethics is concerned with considering consequences of decisions Ethical behavior – acting in a way that conforms to moral rules and principles Ethical Principles – listing of characteristics and values that many people and organizations associate with ethical behavior (Trustworthiness, Respect, Responsibility, Fairness, Caring, Citizenship) Rules of Professional Conduct and Code of Ethics -Each of the professional accounting bodies in Canada have established a set of rules as part of the member’s Handbook -Balance between overriding principles and detailed rules (minimum standards) 5 Key Threats to Independence: 1. Self review threat 2. Self-interest threat 3. Advocacy threat 4. Familiarity threat 5. Intimidation threat 1
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Chapter 4 Recap: Common Law – key concepts: innocent until proven guilty and the auditor must perform professional services with due care. Common Issues: Breach of Contract - a claim that accounting or auditing services were not performed in the manner agreed (per the engagement letter) Negligence - a wrongful act- other than breach of contract 1. Obtain sufficient evidence (including proper elicitation (drawing out) of oral evidence and documentation of oral evidence). For Negligence- the plaintiff must prove the following: 1. The auditor had a duty of care 2. The auditor breached the duty by not following professional standards ( therefore the financial statements were materially misleading/ the accountant’s advice was faulty) 3. That he or she relied on the statements or advice which resulted in injury 4. The party suffered an actual loss as a result Key Factors that Auditors Should be Aware of: 1. Be wary of what kinds of clients are accepted. 2. Know (thoroughly) the client’s business 3. Perform Quality Audits- follow professional standards: 1. Use qualified personnel, properly trained and supervised, and motivated. 2. Obtain sufficient evidence (including proper elicitation (drawing out) of oral evidence and documentation of oral evidence). 3. Prepare good working papers (audit documentation). 4. Obtain engagement and representation letters. 5. Be alert to risk factors 6. Ensure Independence Review Homework re: Hand in Chapter 5 and 6 Questions In Class Chapter 3 and 4 Wrap up Questions Chapter 3: 3-22 Rules of Professional Conduct Chapter 4: 4-19 Professional Judgment Problem 2
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Chapter 5- Audit Responsibilities and Objectives Learning Objectives Describe the objective of an audit of financial statements per CAS 200 Explain the difference between auditor and management responsibilities with respect to the financial statements Examine the preplanning steps an auditor completes
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ACCT_3444_Chapter_5_and_6 - Accounting 3444 Lecture 3 NOTE:...

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