On most engagements actually conducting the planned

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Unformatted text preview: misstated. Chapter 6 covers the role of internal control in a financial statement audit, and Chapter 7 specifically addresses the audit of internal control for public companies. Later chapters apply the process of considering and auditing internal control in the context of various business processes. Audit Business Processes and Related Accounts Auditors usually organize audits by grouping financial statement accounts according to the business processes that primarily affect those accounts. For example, sales revenue and accounts receivable are primarily affected by a company’s sales and collection process, and are audited together. The auditor applies audit procedures to the accounts in order to reduce the risk of material misstatement to an appropriately low level. Individual audit procedures are designed to produce evidence relating to specific assertions in the account balances that are likely to be misstated. For example, if the auditor is concerned about the possibility of obsolete inventory, the auditor could gather evidence to determine if the inventory on hand is properly valued at the lower of cost or market. On most...
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