monograph2 - The 21st Century Public Company Audit...

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The 21st Century Public Company Audit Conceptual Elements of KPMG’s Global Audit Methodology Timothy B. Bell Mark E. Peecher Ira Solomon AUDIT
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By Timothy B. Bell Mark E. Peecher Ira Solomon Foreword by Stuart Campbell and Michael Hughes © 2005 KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent firms operating under the KPMG name. KPMG International provides no services to clients. Each member firm of KPMG International is a legally distinct and sepa- rate entity and each describes itself as such. All rights reserved. Printed in the U.S.A. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of inde- pendent firms operating under the KPMG name. KPMG International provides no audit or other client services. Such services are provided solely by member firms of KPMG International (including subli- censees and subsidiaries) in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied, or otherwise) to obligate or bind KPMG International or any other member firm, nor does KPMG International have any such authority to obli- gate or bind any member firm, in any manner whatsoever. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. This monograph does not exhaustively cover the policies and procedures comprising KPMG’s audit process, nor does it cover how KPMG’s audit process comports with applicable auditing standards. The 21st Century Public Company Audit Conceptual Elements of KPMG’s Global Audit Methodology A
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Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Evolution of the Risk-Assessment Orientation in Auditing . . . . . . . . . . .7 Evidence-Driven, Belief-Based Risk Assessment . . . . . . . . . . . . . . . . . .17 Triangulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Overview of KPMG’s Global Audit Methodology . . . . . . . . . . . . . . . . .39 Planning Risk Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Control Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Risk Assessments During Substantive Testing and Completion . . . . . . .59 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Appendix: Legend of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 Footnotes may be sourced to the references at the end of this document. For ease of exposition, we use acronyms throughout this monograph to represent key terms that are repeated. To assist the reader, the Appendix is a legend of these acronyms.
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Foreword By Stuart Campbell and Michael Hughes – i – Thought leadership in auditing is a deeply embedded tradition at KPMG. From innovations on new audit risk assessment frameworks to programs that support scholarly activities like the Research Opportunities in Auditing program and the KPMG and University of Illinois Business Measurement Case Development and Research Program , KPMG has supported new developments in auditing practice, education, and research in a variety of ways. Today, at a time when thought leader-
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This note was uploaded on 08/18/2011 for the course ACCY 304 taught by Professor Bol during the Spring '11 term at University of Illinois at Urbana–Champaign.

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monograph2 - The 21st Century Public Company Audit...

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