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Unformatted text preview: alances. We have just identiﬁed three stages in the accounting
process that take place in the preparation of ﬁnancial statements: internal controls are implemented to ensure appropriate capturing and recording of individual transactions, which are then collected into ending account balances. This
summary might seem like an oversimpliﬁcation, but it will help you understand
the stages of a client’s accounting process on which auditors focus to collect
Keep in mind that the auditor’s job ultimately is to express an opinion on
whether the ﬁnancial statements are fairly stated. It makes sense, then, that the
auditor can design procedures to collect direct information about the ending
account balances that make up the ﬁnancial statements. For example, an auditor
might conﬁrm the ending balance of the cash account by contacting the client’s
bank, or the auditor might verify the ending balance of the inventory account by
physically examining individual inventory items that make up the ending balance. But remember—account balances are made up of individua...
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