20 10172016 11 Independence in Mental Attitude The Code of Professional Conduct

20 10172016 11 independence in mental attitude the

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10/17/2016 11 Independence in Mental Attitude The Code of Professional Conduct and SASs stress the need for independence. CPA firms are required to follow several practices to increase the likelihood of independence of all personnel . For example, there are established procedures on larger audits when there is a dispute between management and the auditors. 21 Due Professional Care Involves due care in the performance of all aspects of auditing . Auditors are professionals responsible for fulfilling their duties diligently and carefully . Due care includes consideration of the completeness of the audit documentation , the sufficiency of the audit evidence , and the appropriateness of the audit report . As professionals, auditors must not act negligently or in bad faith, but they are not expected to be infallible. 22
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10/17/2016 12 Generally Accepted Auditing Standards United States Standards of Field Work 1. Proper planning and supervision 2. Understanding of the entity 3. Sufficient appropriate evidence 23 Adequate Planning and Supervision The first standard of field work requires that the audit be sufficiently planned to ensure an adequate audit and proper supervision of assistants. Supervision is essential in auditing because a considerable portion of the field work is done by less experienced staff members . 24
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10/17/2016 13 Understand the Entity and its Environment, Including Internal Control This understanding helps the auditor identify significant client business risks and the risk of significant misstatements in the financial statements . For example, to audit a bank, an auditor must understand the nature of the bank’s operations , federal and state regulations applicable to banks, and risks affecting significant accounts such as loan loss reserves. The client’s system of internal control is important to mitigating client business risks, safeguarding assets and records, and generating reliable financial information. If the auditor is convinced that the client has an excellent system of internal control, the amount of audit evidence to be accumulated can be significantly less than when controls are not adequate. In some instances, internal control may be so inadequate as to preclude conducting an effective audit. 25 Sufficient Appropriate Evidence Decisions about how much and what types of evidence to accumulate for a given set of circumstances require professional judgment .
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  • Fall '16
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  • Accounting, auditing standards

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