In developing the basis for his or her opinion the

  • Notes
  • HighnessDangerFish9508
  • 20
  • 100% (2) 2 out of 2 people found this document helpful

This preview shows page 5 - 7 out of 20 pages.

In developing the basis for his or her opinion, the auditor is responsible for conducting an audit that conforms to auditing standards. These standards constitute the measure of the adequacy of the audit. Those standards require the auditor to obtain sufficient appropriate evidence about material management assertions in the financial statements. The informed judgment of a qualified professional accountant is required of an independent auditor. The auditor must exercise this judgment in selecting the procedures he or she uses in the audit and in arriving at an opinion. In presenting himself or herself to the public as an independent auditor, the auditor is responsible for having the abilities expected of a qualified person in that profession. Such qualifications do not include those of an appraiser, valuer, expert in materials, expert in styles, insurer, or lawyer. The auditor is entitled to rely upon the judgment of experts in these other areas of knowledge and skill. 6-5
Image of page 5

Subscribe to view the full document.

6-23 (continued) c. Auditors are responsible for obtaining reasonable assurance that material misstatements included in the financial statements are detected, whether those misstatements are due to error or fraud. Professional standards acknowledge that it is often more difficult to detect fraud than errors because management or employees perpetrating the fraud attempt to conceal the fraud. That difficulty, however, does not change the auditor’s responsibility to properly plan and perform the audit. Auditors are required to specifically assess the risk of material misstatement due to fraud and should consider that assessment in designing the audit procedures to be performed. There has been increased emphasis on auditors’ responsibility to evaluate factors that may indicate an increased likelihood that fraud may be occurring. For example, assume that management is dominated by a president who makes most of the major operating and business decisions himself. He has a reputation in the business community for making optimistic projections about future earnings and then putting considerable pressure on operating and accounting staff to make sure those projections are met. He has also been associated with other companies in the past that have gone bankrupt. These factors, considered together, may cause the auditor to conclude that the likelihood of fraud is fairly high. In such a circumstance, the auditor should put increased emphasis on searching for material misstatements due to fraud. The auditor may also uncover circumstances during the audit that may cause suspicions of fraudulent financial reporting. For example, the auditor may find that management has lied about the age of certain inventory items. When such circumstances are uncovered, the auditor must evaluate their implications and consider the need to modify audit evidence.
Image of page 6
Image of page 7
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern