ACCT_3444_Chapter_12 - ACCT 3444 Week 6 Chapters 9 and 10...

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ACCT 3444 Week 6 Chapters 9 and 10 Recap: Control Systems: Control Objectives: Validity – recorded transactions are valid and documented Completeness – all valid transactions are recorded and none are omitted Authorization – transactions are authorized according to company policy Accuracy – transaction dollar amounts are properly calculated Classification – transactions are properly classified in accounts Accounting – transaction accounting is complete Proper period – transactions are recorded in the proper period Control Procedures Authorization of transactions/activities General authorization – management establishes criteria for acceptance of specific types of transactions (e.g. criteria for extending credit to customers) Specific authorization – transactions are authorized on an individual basis – (top management must authorize all expenditures over a specific dollar amount) Segregation of duties No one individual or department should handle all aspects of a transaction from beginning to end Separate individuals should handle each of the following parts of a transaction: C – Custody of the asset A – Authorization of a transaction R – Recording the transaction Safeguards over access to and use of assets and records Chapter 9 and 10 Wrap Up In Class Exercises: Chapter 9: 9-29 Case – provide guidance on which controls to audit Chapter 10:10-21 Assess IT governance and provide recommendations for improvement 1
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Chapter 12: Overall Audit Plan and Audit Program Audit Strategy – the planned approach to conduct the audit, based on the audit risk assessment. The audit strategy is the last task of PHASE 3 – Plan the Audit. Auditor uses the audit risk model (AR=IR*CR*DR) to assist with planning Phase 3 Tasks to be completed: Determine audit risk (chapter 7) Determine inherent risk (chapter 7) Set preliminary materiality levels (chapter 7) Document internal controls, including entity-level controls
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ACCT_3444_Chapter_12 - ACCT 3444 Week 6 Chapters 9 and 10...

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