Chapter 8 Power Point

Chapter 8 Power Point - Chapter 8 Planning and Testing the...

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Chapter 8 Planning and Testing the Design and Operating Effectiveness of Internal Control over Financial Reporting Prepared by Adrianne E. Slaymaker, D.B.A. CPA
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FRAUD RISK Learning Objective #2
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ILLEGAL ACTS Learning Objective #2
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RELATED PARTY TRANSACTIONS Learning Objective #2 Related party transactions are transactions conducted with an entity or a person meeting the definition of a related party set forth in the FASB definition of related parties. Related parties include :
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AUDIT RISK MODEL Learning Objective #4 AR stands for audit risk RMM is the risk of material financial statement misstatement IR stands for inherent risk CR stands for control risk DR stands for detection risk. TD is the risk that a material misstatement will be missed by the auditor’s tests of details of balances. AP is the risk that a material misstatement is missed by the audit’s analytical procedures
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Management As s ertions , Control Objectives , and Evaluation Criteria Learning Objective #1 EXHIBIT 8-2
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Tes ts of ICFR Operating Effectivenes s Learning Objective #1 Exhibit 8-1
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PLANNING THE TESTS Learning Objective #1 Define the potential error that results from failure of the control and the appropriate evidence related to the error. Identify when testing should be performed. Determine the extent of testing needed—how many different types of tests should be performed and how many items to test. Decide the timing of the Risks associated with a control: 1) the risk that a control might not be effective and 2) the risk that if a control is not effective a material weakness would result.
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TIMING OF TESTS The frequency with which controls operate affects not only the time frame in which the operation of the control is tested, but also the sample size required. The audit procedures for testing automated controls that operate continuously or frequently differ from those that are used for manual controls that operate with similar frequency. Auditors limit the extent of tests of automated controls because the controls function in a consistent manner.
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This note was uploaded on 02/22/2012 for the course ACCT 512 taught by Professor Slaymacker during the Spring '12 term at Globe.

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Chapter 8 Power Point - Chapter 8 Planning and Testing the...

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