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The auditors assessments of audit risk and

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Unformatted text preview: rvices. Fundamental Concepts in Conducting a Financial Statement Audit LO 6 FIGURE 1–3 Figure 1–3 presents a simplified overview of the process for a financial statement audit. Take a moment to stop and think through the steps in this figure. The auditor gathers evidence about the business transactions that have occurred. The auditor uses this evidence to compare the assertions contained in the financial statements to the criteria used by management in preparing them (i.e., GAAP). The auditor’s report communicates to the user the degree of correspondence between the assertions and the criteria. The conceptual and procedural details of a financial statement audit build on three fundamental concepts: materiality, audit risk, and evidence relating to management’s financial statement assertions. The auditor’s assessments of audit risk and materiality influence the nature, timing, and extent of the audit work to be performed (referred to as the scope of the audit). This section briefly discusses the concepts of mater...
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