A1 - AUDITING 1 Audit Reports 1. Audited financial...

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AUDITING 1 Audit Reports 1. Audited financial statements: The basics 3 2. Professional standards 5 3. 4. 5. 6. Reports on audited financial statements , 12 Reports on comparative financial statements 42 Events occurring after year-end 46 Reporting on other information 51 7. Professional responsibilities 60 8. AppendiX: Licensing and disciplinary systems within the profession 85 9. Task-based simulations 89 10. Class questions ,..,. .".,"""""""""""""""' . .,."""" '.. '" , , """"., ,.., ,' . . ,. . ,. . ,. ." 93
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Auditing 1 Al-2 NOTES Becker Professional Education I CPA Exam Review © 2010 D~VryJB~ck~r Educational Dev~lopm~nt Corp. Al rights reserved.
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Becker Professional Education I CPA Exam Review I. THE INDEPENDENT AUDIT FUNCTION A. What is an Audit? Auditing 1 AUDITED FINANCIAL STATEMENTS The Basics An audit consists of a methodical review and objective examination of an enterprise's financial statements. The objective of the auditor's examination is to express an opinion on the financial statements. This expression takes the form of an audit report. B. Responsibilities The financial statements of an enterprise are prepared by the management of the enterprise, not by the independent auditor. Further, the financial statements are the product and property of the enterprise; the independent auditor merely audits and expresses an opinion on them. The expression of an opinion by the independent auditor is known as the "audit function." 1. Company's Management = Financial Statements 2. Auditors = Expression of Opinion C. Audit Function Adds "Credibility" The auditor's report gives credibility to the financial statements. The auditors, as a group independent of management, have an objective view and can report on a company's activities without bias or conflict of interest. Without a report from an independent auditor, a company's financial statements would be meaningless, because the public would have little faith in financial statements issued by the inherently biased company. D. An Examination is Made of a Company's Financial Statements The auditor carries out this examination by following the ten Generally Accepted AUditing Standards (GMS) and all of the official pronouncements that explain and interpret GMS. The auditor must be: a. Independent b. Expert (1) As to accounting (knOWledge of GMP) (2) As to auditing (knowledge of GMS) (3) As to industry (particular business) 3. The audit should be planned and performed with an attitude of "professional skepticism," whereby the auditor neither assumes management is dishonest nor assumes unquestioned honesty. © 2010 DeVry!Becker Educational Development Corp. All rights reserved. Al-3
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2. Auditing 1 Becker Professional Education I CPA Exam Review E. Auditor Must Then Report His or Her Findings Based Upon the Evidence Examined 1. The primary assertion is whether the statements are "presented fairly" in accordance with GAAP (Generally Accepted Accounting Principles).
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A1 - AUDITING 1 Audit Reports 1. Audited financial...

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