This preview shows page 1. Sign up to view the full content.
Unformatted text preview: financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion. 9-52 Internet Problem 3-1 (continued)
A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, The Home Depot, Inc. maintained, in all material
respects, effective internal control over financial reporting as of
February 3, 2008, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Consolidated Balance Sheets of The Home Depot, Inc. and
subsidiaries as of February 3, 2008 and January 28, 2007, and the
related Consolidated Statements of Earnings, Stockholders' Equity
and Comprehensive Income, and Cash Flows for each of the fiscal
years in the three-year period ended February 3, 2008, and our
report dated March 28, 2008 expressed an unqualified opinion on
those consolidated financial statements.
March 28, 2008
(Note: Internet problems address current issues using Internet sources. Because Internet sites
are subject to change, Internet problems and solutions may change. Current information on Internet
problems is available at www.pearsonglobaleditions.com/arens). 9-53 1Chapter 9
Materiality and Risk Review Questions 9-1
The parts of planning are: accept client and perform initial planning,
understand the client’s business and industry, assess client business risk,
perform preliminary analytical procedures, set materiality and assess acceptable
audit risk and inherent risk, understand internal control and assess control risk,
gather information to assess fraud risk, and develop overall audit plan and audit
program. Evaluation of materiality is in the fifth part of planning. Risk assessment
is in part three (client business risk), part five (acceptable audit risk and inherent
risk), part six (control risk), and part seven (fraud risk).
Materiality is defined as: the magnitude of an omission or misstatement of
accounting information that, in light of the surrounding circumstances, makes it
probable that the judgment of a reasonable person relying on the information
would have been changed or influenced by the omission or misstatement.
"Obtain reasonable assurance," as used in the audit report, means that
the auditor does not guarantee or insure the fair presentation of the financial
statements. There is some risk that the financial statements contain a material
Materiality is important because if financial statements are materially
misstated, users' decisions may be affected, and thereby cause financial loss to
them. It is difficult to apply because there are often many different users of the
financial statements. The auditor must therefore make an assessment of the
likely users and the decisions they will make. Materiality is...
View Full Document
This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.
- Fall '13