Chapter 6 Power Point

Chapter 6 Power Point - Chapter 6 Audit Planning and Risk...

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Chapter 6 Audit Planning and Risk Assessment Prepared by Adrianne E. Slaymaker, D.B.A. CPA
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Overview of the Planning and Ris k Ass essment Process Learning Objective #1 Exhibit 6-1
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I. PLANNING THE OVERALL AUDIT STRATEGY In establishing the overall audit strategy the auditor considers the scop e of the engagement. 1) Accounting Principles 2) Entity Structure 3) IT Requirements 4) Client Outsourcing 5) Work of Others 6) Continuing or First-year Audit 7) Time Frame for the Audit 8) Recent Significant Developments Learning Objective #2
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I. Sources of Information The auditor obtains information about the client that helps with developing the audit strategy from the client acceptance and continuance process and setting the terms of the engagement. Reviews of quarterly financial statements also provide the auditor with information. If the company issues publicly traded stock or debt, the auditor’s involvement with the registration statement provides information. The auditor assesses the audit risk with the preliminary analytical procedures. Learning Objective #5
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II. Audit Scope Considerations 1) Accounting Principles used - US GAAP, GASB, IFRS, OCBA 2) Entity Structure -The structure of the entity affects the scope of the audit. 3) Information Technology - The pervasive use and importance of IT to the company’s activities and ICFR also impact the scope of the engagement. 4) Client Outsourcing - if a company “outsources” any of its financial activities to a service provider, the auditor’s plan differs from what it would be if all the financial activities were performed “in house”. Learning Objective #2
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II. Audit Scope Considerations Appendix A 5) Using the Work of Others Sharing responsibility occurs when another independent auditor has done a significant portion of the work. In contrast to when the auditor relies the “work of others,” there are times when the principal auditor does share responsibility for the audit opinion with another auditor and so states in the auditor’s report.
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5) Using the Work of Other Auditors The volume of work, and consequently, scope of an audit engagement, is impacted by the auditor’s ability to rely on and use the work performed by others. In some situations employees of an audit client, such as internal auditors, can perform audit steps, and the external auditor can use that work as audit evidence. Learning Objective #2 Exhibit 6-3
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5) Deciding to Rely on the Work of Others When considering the subject matter or target of the work performed, the auditor evaluates: a) Materiality of the account balances or classes of transactions. b) Risk associated with controls. c) Subjectivity of the evaluations that are a part of the procedures. d)
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Chapter 6 Power Point - Chapter 6 Audit Planning and Risk...

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