Transaction related audit objectives each balance

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transaction-related audit objectives, each balance-related audit objective should be tailored to the account balance being audited. Relationship Among Management Assertions and Balance-Related Audit Objectives —These relationships for Inventory are illustrated in Table 6-5. Presentation and Disclosure-Related Audit Objectives —These relationships for Notes Payable are illustrated in Table 6-6.
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How audit objectives are met Four phases of the audit. Phase I: Plan and Design an Audit Approach. The main objective of an audit is to accumulate enough evidence to provide an opinion on the financial statements. Two overriding considerations affect how an auditor approaches the audit: 1. Sufficient appropriate evidence must be accumulated to meet the auditor’s professional responsibility. 2. The cost of accumulating the evidence should be minimized. The audit plan should result in an effective audit at a reasonable cos t.
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How audit objectives are met (cont.) Phase I: Plan and Design and Audit Approach (cont.). Risk assessment procedures include the following: Obtain an understanding of the entity and its environment. Understand internal control and assess control risk. Assess risk of material misstatement. Phase II: Perform Tests of Controls and Substantive Tests of Transactions. Tests of controls allow the auditor to evaluate the efectiveness of internal controls and determine whether the controls can be relied upon to reduce planned control risks. Substantive tests of transactions allow the auditor to evaluate the client’s recording of transactions.
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How audit objectives are met (cont.) Phase III: Perform Substantive Analytical Procedures and Tests of Details of Balances. Analytical procedures consist of evaluations of plausible relationships among financial and nonfinancial data. Tests of details of balances are specific procedures intended to test for monetary misstatements in the financial statements. Phase IV: Complete the Audit and Issue and Audit Report. After all procedures have been completed, the auditor will reach an overall conclusion as to whether the financial statements are fairly presented. After the conclusion, the auditor must issue an audit report that will accompany the client’s financial statements.
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