Essay on Audit notes

Submitted By carolinealley
Words: 762
Pages: 4
Open Document
Chapter 1
The study of auditing focuses on learning the analytical and logical skills necessary to evaluate the relevance and reliability of the information as well as the systems and processes responsible for recording and summarizing that information.
Important to understand that the relationship between owner and manager often results in information asymmetry between the two parties
Information asymmetry means that the manager generally has more information about the “true” financial position and results of operations of the entity than does the absentee owner.
Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.
Systematic Process: implies there should be a well-planned and thorough approach for conducting an audit.
The assessment of internal control will be in greater depth if it is a public company because for public companies the auditor is required to report on both the company’s internal control over financial reporting and the company’s financial statements.
The auditor’s consideration of materiality is a matter of professional judgment
For a prospective new client, the auditor is required to confer with the predecessor auditor and the auditor frequently conducts background checks on top management.
If the misstatement is considered so material that it pervasively affects the interpretation of the financial statements the auditor will issue an adverse opinion indicating that the financial statements are not fairly stated and should not be relied upon.
The opinion paragraph indicates the auditor’s opinion as to whether or the financial statements are fairly presented in accordance with the criteria against which they were audited.
Scope paragraph includes:
Audit was conducted in accordance with applicable auditing standards
Emphasizes that the audit provides only reasonable assurance that the financial statements contain no material misstatements
Audit involves an examination of evidence on a test basis, an assessment of accounting principles used and significant estimates, and an overall evaluation of financial statement presentation
Asserts the auditor’s belief that the audits provide a reasonable basis for the opinion to be expressed in the report
Major Phases of the Audit
Client acceptance/continuance
Preliminary engagement activities
Plan the audit
Consider and audit internal control
Audit business process and related accounts
Complete the audit
Evaluate results and issue audit report
Attestation services occur when a practitioner is engaged to issue a report on subject matter, or an assertion about subject matter, that is the responsibility of another party.
Not limited to economic events or actions.
Financial statement auditing is a specialized form of an attest service.
All auditing services are attest services, and all attest services fall into the broader category of assurance services.
Assurance services can capture information, improve its quality, and enhance its usefulness for decision makers.
In most situations, the auditor is able to obtain only enough evidence
Show More

Related Documents: Essay on Audit notes

Audit Notes Essay

Nature, Timing & Extent Chapter 1: Why Audit: Legal and Contractual Requirements Restrictive Covenants in Debt Agreements Modern Corporation Setup – Absentee Stockholders and professional Managers Principal –Agent Relationships Lack on information symmetry Conflicts of Interest Cost Effective Monitoring Device Information asymmetry: when on party has more or better information that the other party. Independence: Independence is a backbone of auditing. If an auditor is not independent…

Words 1473 - Pages 6

Audit Notes Essay

Audit Case 2.3 01/23/14 Executive Summary: Joseph and Isaac Sutton started Happiness Express, Inc. in 1989. The company appeared a success, reporting $40 million in revenue in 1994. The company attained these revenue levels through various profitable licensing agreements. Most notably, the signing of the Mighty Morphing Power Rangers in the mid ‘90s posted record numbers for the toy store. With the Power Ranger line accounting for 75% of the firm’s revenue, analysts became skeptical about…

Words 1232 - Pages 5

A Brief Note On Conducting Audit

Conducting Audits Roman Zuniga February 27, 2014 Spartan College of Aeronautics and Technology Professor Doolittle Abstract Quality Management Systems (QMS) require regular performance assessments to ensure its compliance and continued effectiveness. The most valuable tool in the continued improvement of a QMS is an audit. Audits are a precise way of evaluating an organization’s processes, QMS or their compliance with either ISO or AS certification, and to ensure that they are also in compliance…

Words 535 - Pages 3

A Brief Note On Audit Of The Industry

Anushka Steephen ADV 206 4/10/2015 Term Paper Term Paper Audit of the Industry Digital media strategies are a crucial component of political campaigns. Established political elites use database and Internet technologies to raise money, organize volunteers, gather intelligence on voters, and do opposition research. Increasingly, digital technologies are used to organize political information in the public sphere, and unlike those used in traditional media, these interactive tools allow for both…

Words 2258 - Pages 10

Question 1 Essay

Title: An audit report is not a guarantee, certification, or even a statement of fact. Rather it is the auditor’s opinion about the compliance of a company's financial statements with Generally Accepted Accounting Principles (“GAAP”) based on the auditor's work performed under Generally Accepted Auditing Standards (“GAAS”) ABSTRACT This is a discussion that focuses on GAAP and GAAS standards of auditing. It is a write up that tackles important factors in the auditing field and ensures…

Words 641 - Pages 3

Auditing: Auditor ' s Report and Audit Essay

fact, explain the circumstance under which a standard unqualified audit report is issued. 1. Report Title- Auditing standards require that the report be titled and that the title includes the word independent. 2. Audit Report Address- The report is usually addressed to the company, its stockholders, or the board of directors. 3. Introductory Paragraph- The first paragraph of the report indicates that the CPA fir has performed an audit, which distinguishes the report from a compilation or review report…

Words 597 - Pages 3

Essay on Balance Sheet and Pcl

it means that the group engagement partner need to send in a team. The partner will be responsible for the direction, supervision and performance of the group audit engagement. In order to satisfy this requirement once the competency and independency of the group engagement partner has been established, the partner need to create a group audit plan. In this plan, the partner need to put emphasis on the impairment test that need to be done on Guther Limited inventory and Intangible asset “Exclusive…

Words 971 - Pages 4

ACCT444 WK7 HW7 Mk Essay

referred to in the audit report.) 2. Specific description of the change in method of accounting for long-term construction contracts need not be included in the report since it is discussed in the footnotes. But, the auditor's report must state that there is a change in accounting principles and refer to the footnote. 3. The fact that normal receivable confirmation procedures were not used should not be disclosed since the auditor was able to satisfy him or herself through alternative audit procedures.…

Words 1648 - Pages 7

Essay on The Runner's Shop-Case Study 11.1-Auditing Cases

AU 339 (SAS 103): Audit Documentation • Auditing Standard No. 3: Audit Documentation • International Standard on Auditing 230’ (Revised) (Site -http://irba.co.za/documents/doc_00535.pdf ) Questions 1] Describe the purposes of audit documentation and explain why each purpose is important. According to AU 339.03, “audit documentation provides the principal support for the”: (a) “representation in the auditor’s report that the auditor performed the audit in accordance with…

Words 2292 - Pages 10

Apollo Shoes Case Essay

[pic]APOLLO SHOES, INC. An Audit Case to Accompany AUDITING AND ASSURANCE SERVICES SUGGESTED SOLUTIONS Prepared by Professor Cal Christian East Carolina University Professor Tim Louwers James Madison University Introduction We designed the Apollo Shoes audit case to introduce students to the entire audit process, from planning the engagement to drafting the final report. Students are asked to assume the role of a veteran of two-to-three “busy” seasons, “in-charging”…

Words 33687 - Pages 135