Acct 4420 Chapter 4 new

Acct 4420 Chapter 4 new - Acct4420 Chapter4AuditRisk...

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Acct 4420 Chapter 4 Audit Risk,  Business Risk, and Audit  Planning
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Chapter 4 Audit Risk and Business  Risk Exhibit 4.1 Overview of Risk Elements Affecting an Audit Chapter 4 page 2
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Risk Factors Affecting the Audit Client acceptance or retention Contact with the prior auditor (if a client acceptance decision) Engagement letter (Exhibit 4.3) Understanding the Client’s Business Inquiry and observation of personnel Review of prior year’s working papers Review minutes of Board of Director’s meeting Chapter 4 page 3
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Risk Factors Affecting the Audit  continued Related parties and related party transactions (RPTs) Defined in SFAS 57 and include transactions between: Parent company and subsidiary Subsidiaries of a common parent company Company and pension or profit sharing trusts (for the benefit of employees) Company and its owners, management, and their immediate family Chapter 4 page 4
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Risk Factors Affecting the Audit  continued GAAP requires that RPTs be disclosed. Disclosure should include: The nature of the relationship(s) involved Brief description of the transactions Dollar amounts of transactions Amounts due from / to related parties and the terms of settlement Chapter 4 page 5
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Risk Factors Affecting the Audit  continued GAAS requires that an auditor: Identify Related Parties Identify Material Transactions with Related Parties Examine Identified Related Party Transactions Chapter 4 page 6
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Materiality Defined by the FASB as the: The concept of materiality includes both: Quantitative aspects or dollar amounts Individual item materiality Aggregate materiality Qualitative aspects or the nature of the item magnitude of an omission or misstatement of accounting information
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This note was uploaded on 09/20/2011 for the course ACCT 4420 taught by Professor Franz during the Spring '11 term at Toledo.

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Acct 4420 Chapter 4 new - Acct4420 Chapter4AuditRisk...

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