lecture_06 4240

lecture_06 4240 - ACCT 4240: AUDITING Audit Planning...

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ACCT 4240: AUDITING Audit Planning
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Overview of the Audit Process Beginning of the Year Planning Interim period Review of internal control Tests of controls Interim substantive tests Final substantive tests Balance sheet date Last day of field work
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Phases of the Audit and the Auditing Environment Generally Accepted Auditing Standards General Standards Field Work Standards Reporting Standards Accepting the audit engagement Planning the audit Performing audit tests Reporting the findings Public Expectations Quality Control Standards Firm Regulation Government Regulation Professional Ethics Legal Liability P u b l i c C o m p a n y A t g O v e r s h B d
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Audit Planning Decide whether or not to accept the prospective client Obtain knowledge of the client’s business and industry Make preliminary arrangements with the client Prepare the engagement letter Prepare the audit plan, preliminary program, and time budget
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Steps in Accepting an Audit Engagement Evaluate integrity of management Identify special circumstances and unusual risks Assess competence to perform audit Evaluate independence Determine ability to use due care Prepare engagement letter
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Client Screening Evaluate relationship between auditor and client Evaluate the integrity of the potential client’s management team Communicate with predecessor auditors Agree on fee arrangements Determine auditability Obtain engagement letter
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Communication between Predecessor and Successor Auditors ( SAS 84 ) Attempt to communicate required If client permits, issues to discuss Disagreements about accounting principles or audit procedures. Communications the predecessor gave the former client about fraud, illegal acts, and internal control recommendations. The predecessor’s understanding about the reasons for the change of auditors (particularly about the predecessor’s termination).
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KPMG’s KRisk A client acceptance/continuous decision-aid Evaluates the following factors Specific factors about the entity Independence/relationship issues Third party information/due diligence issues Quantitative information Qualitative information Entity’s organization/operations Financial reporting and recent audit results
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Engagement Letter Documents the contractual duties agreed to by the auditor and the client Description of scope of services to be provided Obligation of client’s staff in assisting auditor Fee or method of determining fee Other services to be provided
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Items Usually Included in Audit Engagement Letters Name of the entity Statements to be examined Scope of services, including any limitations Type of opinion expected to be issued if other than unqualified Disclaimer of responsibility for detecting fraud Obligations of the client’s staff to prepare schedules and statements
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Items Usually Included in Audit Engagement Letters Requirement that auditors read all printed
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This note was uploaded on 03/08/2012 for the course ACCT 4240 taught by Professor Staff during the Spring '08 term at U. Memphis.

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lecture_06 4240 - ACCT 4240: AUDITING Audit Planning...

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