A3 - I I I , .1 ! 1 I AUDITING 3 Engagement Acceptance,...

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AUDITING 3 Engagement Acceptance, Planning, and Risk Assessment I ! 1. Engagement acceptance and understanding the assignment . ......................................................................... 3 2. Planning and supervision . .......................................................... 9 3. Audit risk 21 4. Fraud risk . . 25 5. 6. 7. 8. Understanding the entity and its environment 40 Internal control 46 Responding to the assessed risk of material misstatement 64 Class questions 77 NOTE TO AUDITING STUDENTS Becker Professional Education is committed to keeping you up-to-date with the most recent effects of changes in audit rules and regulations. As we went to press, the Public Company Accounting Oversight Board (PCAOS) adopted eight (8) auditing standards (AS No.8 through No. 15) relating to the auditor's assessment ot and response to, risk in an audit. The new standards address audit procedures performed throughout the audit, from the initial planning stages through the evaluation ofthe audit results. Pending a public exposure period and formal approval by the Securities and Exchange Commission (SEC), the new standards will likely be effective for audits of fiscal periods beginning on or after December 15, 2010. In general, new standards become eligible for inclusion on the CPA Examination six (6) months after their effective date. Using this criteria, the earliest date the new PCAOB standards could become available for testing would be the third quarter of 2011. In the event these new standards do become testable in the third or fourth quarter of 2011, we will notify our students and provide instructions for accessing the updated content for this lecture. Please be sure to check the Auditing Course Updates posted on the Becker Knowledgebase site (www.beckercpa.com/knowledgebase). You can subscribe to automatic e-mail notifications of updates by clicking on the "Notify Me" button on the Course Updates page.
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Auditing 3 A3-2 NOTES Becker Professional Education I CPA Exam Review © 2010 DeVry/6ecker Educational Development Corp. Aillight~ reserved
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Becker Professional Education I CPA [x<lm Review Auditing 3 1---1 ~ ENGAGEMENT ACCEPTANCE AND UNDERSTANDING THE ASSIGNMENT APPOINTMENT OF THE AUDITOR A. Audit Committees The audit committee of the client's board of directors is responsible for the selection and appointment of the independent external auditor, and for reviewing the nature and scope of the engagement. 1. Sarbanes-Oxley Act a. Under the Sarbanes-Oxley Act (generally applying to issuers), the auditor reports to and is overseen by the client's audit committee. b. The audit committee must pre-approve all services provided by the auditor. c. Certain specified non-audit services (covered in Auditing & Attestation 1) are prohibited. 2. Those Charged with Governance The term "those charged with governance" refers to those who bear responsibility to oversee the obligations, financial reporting process, and strategic direction of an entity.
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This note was uploaded on 09/27/2011 for the course ACCT 540 taught by Professor Haight during the Spring '11 term at NMSU.

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A3 - I I I , .1 ! 1 I AUDITING 3 Engagement Acceptance,...

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