Audit Exam 1 Review
Chapter 1:
3 Principles: created by ASB – page 42. responsibilities – who we are and what we need to be.
Competence and capabilities
Comply with ethical requirements
Interdependence
Due care – give your best everyday
Professional skepticism/ judgment
Performance: what we did or didn’t do
To obtain reasonable assurance
Plan and properly supervise audit.
Apply appropriate materiality
Assess risk of material misstatement
Based on understanding of entity (client)
Environment – inc. internal control
Sufficient appropriate evidence to reach opinions
Reporting – what we need to say
Express opinion or indicate why we don’t express opinion
Measure opinion in accordance with appropriate financial reporting framework
GAAP or IFRS
What is an Audit?
3943354572004 stages to an audit:
Planning Interim Substantive Testing Wrap up
Planning:
Analytical procedures required. (do the numbers make sense)
Layout step by step how to perform audit
Design of controls (could the controls work)
Interim:
Tests of controls (pressure tests)
If working – do less at the next stage. (do substantive testing at same time as interim – Dual purpose testing)
If not working – do more testing at next stage and re do audit plan.
Year end – substantive testing
Testing to see if amounts are appropriate (test numbers themselves)
Test of controls at year end to make sure they are still working (for public companies)
Wrap up:
Analytical procedures required.
Different levels of assurance:
Compilation – NO assurance
Put information together
Review – LIMITED (negative) assurance
Analytical procedures
Inquiries
Big picture kind of things to make sure the numbers make sense for high level information
Auditors will say “nothing has come to our attention”
HUGE GAP BETWEEN REVIEW AND AUDIT
Audit – REASONABLE assurance public company –
10-Q – review
10-Q – review
10-Q – review
3 Principles: created by ASB – page 42. responsibilities – who we are and what we need to be.
Competence and capabilities
Comply with ethical requirements
Interdependence
Due care – give your best everyday
Professional skepticism/ judgment
Performance: what we did or didn’t do
To obtain reasonable assurance
Plan and properly supervise audit.
Apply appropriate materiality
Assess risk of material misstatement
Based on understanding of entity (client)
Environment – inc. internal control
Sufficient appropriate evidence to reach opinions
Reporting – what we need to say
Express opinion or indicate why we don’t express opinion
Measure opinion in accordance with appropriate financial reporting framework
GAAP or IFRS
What is an Audit?
3943354572004 stages to an audit:
Planning Interim Substantive Testing Wrap up
Planning:
Analytical procedures required. (do the numbers make sense)
Layout step by step how to perform audit
Design of controls (could the controls work)
Interim:
Tests of controls (pressure tests)
If working – do less at the next stage. (do substantive testing at same time as interim – Dual purpose testing)
If not working – do more testing at next stage and re do audit plan.
Year end – substantive testing
Testing to see if amounts are appropriate (test numbers themselves)
Test of controls at year end to make sure they are still working (for public companies)
Wrap up:
Analytical procedures required.
Different levels of assurance:
Compilation – NO assurance
Put information together
Review – LIMITED (negative) assurance
Analytical procedures
Inquiries
Big picture kind of things to make sure the numbers make sense for high level information
Auditors will say “nothing has come to our attention”
HUGE GAP BETWEEN REVIEW AND AUDIT
Audit – REASONABLE assurance public company –
10-Q – review
10-Q – review
10-Q – review