Lecture One (1)

Lecture One (1) - AFM 451 Audit Strategy Ms. Shelley...

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02/28/12 AFM 451 1 AFM 451 Audit Strategy Ms. Shelley Donald, CA School of Accounting & Finance Term lecturer
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02/28/12 AFM 451 2 What is your conclusion? What tests will you conduct? W h a t i s y o u r c n l ? e w d p Who is your Auditee? Client & their Financial Statements P f io l J g m J Professional Judgment ro fe I & B N , T E x
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02/28/12 AFM 451 3 Introduction Introduction The role of audits is critical in the business environment Important decisions are made on the basis of accounting information. Audits reduce the risk that these decisions will be based on inaccurate information. Auditors provide assurance as to the accuracy of accounting information. This creates “three-party accountability.”
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02/28/12 AFM 451 4 Three-Party Accountability Three-Party Accountability Subject Matter Auditor Accountable Party User(s) Accountability Conclusion
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The Public Interest The Public Interest Under three-party accountability the auditor is expected to act in the interest of the user of the information. To meet the public interest, it is important that the auditor is trustworthy.
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02/28/12 AFM 451 6 Demand for Reliable Demand for Reliable Information Information Accounting attempts to record and summarize a company’s transactions into F/S for the benefit of users. Accounting is a function of the organization’s management. Users are removed from accounting due to complexity , remoteness or consequences.
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02/28/12 AFM 451 7 Auditing Auditing Preparation of financial information by management creates a conflict of interest between users of financial information and management. The auditor serves as an independent intermediary who lends credibility to the financial information. Also called providing assurance as to the reliability of the information.
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02/28/12 AFM 451 8 Auditing Auditing An external auditor is independent of management and of the production of the financial information. This creates three-party accountability. Auditee refers to the organization whose financial information is being audited. Client refers to the person who hires the auditor and pays the fee.
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Professional Judgement Professional Judgement A professional reaching a complex decision by incorporating standards and ethics in a coherent manner. Professional judgement is used widely in accounting and auditing. Application of professional judgement requires critical thinking .
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02/28/12 AFM 451 10 Definition of Auditing Definition of Auditing Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested parties.
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02/28/12 AFM 451 11 Audit Objectives Audit Objectives “The objective of the audit of F/S is to express an opinion whether the F/S are prepared, in all material respects, in accordance with the applicable financial reporting framework” CAS 200
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Lecture One (1) - AFM 451 Audit Strategy Ms. Shelley...

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