Finally if the client is publicly held the auditor may need to report the

Finally if the client is publicly held the auditor

This preview shows page 11 - 13 out of 19 pages.

Finally, if the client is publicly held, the auditor may need to report the matter to the SEC. 75.mediumThere are five broad categories of management assertions. One category of assertions is called “existence or occurrence.” Assertions about existence deal with whether assets, liabilities, and equities included in the balance sheet actually existed on the balance sheet date. Assertions about occurrence deal with whether recorded transactions reflected in the income statement actually occurred during the accounting period. Identify and discuss each of the remaining four categories of management assertions.Answer:Completeness. All transactions and accounts that should be presented in the financial statements are included.Valuation or allocation. Assets, liabilities, equities, revenues, and expenses have been included in the financial statements at appropriate amounts.Rights and obligations. Assets are the rights of the company and liabilities are the obligations of the company at the balance sheet date.Presentation and disclosure. Components of the financial statements are properly combined or separated, described, and disclosed.76.mediumThere are six general transaction-related audit objectives. One is the existence objective which deals with whether recorded transactions have actually occurred. Identify and discuss each of the remaining five general transaction-related audit objectives.Answer:Completeness. Completeness deals with whether all transactions that should be included in the journals have actually been included.Accuracy. Accuracy deals with whether recorded transactions are stated at the correct amounts.Classification. Classification deals with whether transactions included in the journals are properly classified; i.e., whether the proper accounts were debited and credited.Timing. Timing deals with whether transactions are recorded on the correct dates.Posting and summarization. This objective deals with whether recorded transactions are properly included in the master files and are correctly summarized.77.mediumDiscuss three reasons why auditors are responsible for “reasonable” but not “absolute” assurance.Answer:Most audit evidence results from testing a sample of a population. Sampling involves some risk of not uncovering material misstatements.Accounting presentations contain complex estimates, which inherently involve uncertainty and can be affected by future events. As a result, the auditor has to rely on evidence that is persuasive but not convincing.6-11
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Fraudulently prepared financial statements are often very difficult for the auditor to detect, especially when there is collusion among management.78.mediumThere are nine general balance-related audit objectives. One is the existence objective which deals with whether the amounts included in the financial statements should actually be included. Identify and discuss each of the remaining eight general balance-related audit objectives.
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