Chapter 9: Considering Materiality and Audit Risk
a. Auditors responsible to bring to clients attention so correction can be made
a.i. Issue qualified/adverse opinion
b. Steps applying materiality5 (discussed throughout chapter)
DISCOUNT RATES IN VALUATION
Why different valuation models use different discount rates.
The capital asset pricing model and how it relates to discount rates.
How to estimate the discount rate for each model.
Corruption involves theft of assets for personal gain
Not even the strongest system of controls can eliminate all risk of organizations
defrauded by employees who are sufficiently motivated to find loopholes.
What percentage of occupation
Microsoft Publisher Quiz:
Instructions: Change the color of the answer you choose. For example if you think A is the
correct answer for number 1 change A. to A.
1. What are some things that Microsoft Publisher is used for?
I. Certified Public Accounting Firms
a. Audits of all general use done by CPA firms
a.i. 45k CPA firms exist in U.S.
a.ii. Big 4 international firms: offices throughout the world and U.S.
a.iii. National firms: offices in most major cities (#5-
Chapter 5: Ethics and Audit profession
I. What are Ethics?
a. Ethics: set of moral principles/values
a.i. Ex. Laws and regulations, church doctrine, codes of busieness
b. 6 core ethical values
Chapter 4: Profession of Auditing
I. Changed Legal Environment
a. Duty of reasonable care
b. Major contributors to lawsuits
b.i. Growing awareness of responsibiillitis of public accountants by
users of financial statements
b.ii. Increase consciousness on
Chapter 3: Audit Reports
I. Standard Unqualitifed Audit Report for Non-Public Entitites
a. Contains 8 parts
a.i. Report title: must include the word independent in the title
a.ii. Audit report address: Usually addressed to the company,
stockholders, or bo
Chapter 6: Audit Responsibilities and Objectives
Objective of conducting an Audit of Financials
a. Provide financial statement users w/ opinion by auditor on whether financials
presented fairly in accordance w/ applicable financial accounting framework
Chapter 7: Nature and Type of Audit Evidence
Nature of Evidence
a. Audit Evidence Contrasted with Legal and Scientific Evidence
II. Audit Evidence Decisions
a. Audit Procedure: detailed instruction that explains audit evidence to be obtained
I. Nature of Auditing
a. Auditing: accumulation and evaluation of evidence about information to
determine and report on the degree of correspondence between the
information and established criteria. Auditing should e done by a
Chapter 10: Considering Internal controls
Internal control objectives
a. Reliability of financial reporting: management has legal & prof responsibility
info fairly presented according to GAAP
b. Efficiency and effectiveness of operations: controls in c
Chapter 8: Planning
a. The auditor must plan the work and properly supervise any assistants
b. 3 reasons why auditor plan engagements
b.i. Enable auditor to obtain sufficient appropriate evidence for
b.ii. Keep audit cost