6-15 Specific audit objectives are the application of the general audit objectives to a given class of transactions, account balance, or presentation and disclosure. There must be at least one specific audit objective for each general audit objective and in many cases there should be more. Specific audit objectives for a class of transactions, account balance, or presentation and disclosure should be designed such that, once they have been satisfied, the related general audit objective should also have been satisfied for that class of transactions, account, or presentation and disclosure. 6-16 For the specific balance-related audit objective, all recorded fixed assets exist at the balance sheet date, the management assertion and the general balance-related audit objective are both “existence.” 6-17 Management assertions and general balance-related audit objectives are consistent for all asset accounts for every audit. One or more specific balance- related audit objectives are developed for each general balance-related auditobjective in an audit area such as accounts receivable to allow the auditor to satisfy the balance-related audit objectives and test management’s assertions about account balances. For any given account, a CPA firm may decide on aconsistent set of specific balance-related audit objectives for accounts receivable, or it may decide to use different objectives for different audits. 6-4
6-18 For the specific presentation and disclosure-related audit objective:“read the fixed asset footnote disclosure to determine that the types of fixed assets, depreciation methods, and useful lives are clearly disclosed,” the management assertion and the general presentation and disclosure-related audit objective are both “classification and understandability.” 6-19 The four phases of the audit are: 1. Plan and design an audit approach. 2. Perform tests of controls and substantive tests of transactions. 3. Perform analytical procedures and tests of details of balances. 4. Complete the audit and issue an audit report. The auditor uses these four phases to meet the overall objective of the audit, which is to express an opinion on whetherthe financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with applicable accounting standards. By accumulating sufficient appropriate evidence for each audit objective throughout the four phases of the audit, the overall objective is met. Multiple Choice Questions From CPA Examinations 6-20 a. (2) b. (3) c. (1) 6-21 a. (1) b. (2) c. (1) 6-22 a. (3) b. (2) c. (2) Discussion Questions And Problems 6-23 a. The purpose of the first part of the report of management is formanagement to state its responsibilities for internal control over financial reporting. The second part of the report states management’s responsibility for the fair presentation of the financial statements.
- Spring '12
- Balance Sheet