BUS 425 – Auditing

1. BUS 425 – Auditing Chapter 1 The Demand for Audit Services

2. WorldCom – Cynthia Cooper The company had recorded billions of dollars of regular fees paid to local telephone companies as capital assets. This accounting trick allowed the company to turn a $662 million loss into a $2.4 billion profit in 2001.

3. WorldCom – Cynthia Cooper Line cost expense 3,062 Cash 3,062 Adjusting JE PP&E 3,062 Line cost expense 3,062

5. Adam What is the definition of Auditing?

6. financial statements Auditing ---- Is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Page 2 GAAP

7. Page 33

8. Brian C What is audit evidence?

9. Evidence ---- is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. page 2

10. Evidence ---- electronic data about transactions documented data about transactions written communications observations by the auditor oral testimony (responses to questions)

11. Brianna What is the objective of AU-C 330

12. AU-C 330 response to RoMM The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risk of material misstatement through designing and implementing appropriate responses to those risks.

13. Chelsey What is the objective of AU-C 500

14. AU-C 500 Audit Evidence The objective of the auditor is to design and perform audit procedures that enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.

15. Page 59

16. Vouch or Trace project Go to web site http://clubs.cob.calpoly.edu/~cmiller/ACTG%20425%20page.html look up sales journal - talk about overstatement / occurrence look at sales journal – talk about overstatement / valuation look at sales orders – talk about understatement / completeness

17. Materiality page 118 • The magnitude of an omission or misstatement of accounting information that, in light of the surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement,

21. Christopher (m) What is “our” operational definition of independence?

22. Independence A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing professional auditing or attestation services.

23. Independence Independence enhances the auditor’s ability to act with integrity, to be objective, and to maintain an attitude of professional skepticism. Independence includes independence of mind (fact) Independence of appearance

24. Holly • What is Business Risk? • What is Information Risk?

25. Business Risk - the risk (probability) that an entity will fail to meet its objectives Information Risk - the probability that the information upon which the decision was made was inaccurate.

26. Ifunanya • What is the Risk-Free interest rate?

27. Melanie You are a bank lending officer In relation to the risk-free interest rate What interest rate would you charge to a company with a great deal of business risk?

28. Kaitlyn (with a Y) You are a bank lending officer In relation to the risk-free interest rate What interest rate would you charge to a company with a great deal of information risk?

29. Katherine K • What are some causes of information risk?

30. What are some causes of Information Risk Page 5 Remoteness owner separate from management Motives of the provider Voluminous data Complex transactions

31. Talk about the difference between assurance attestation auditing

32. Assurance – improves the quality of information Attestation – report regarding the reliability of specific assertions made by management Audit– opinion regarding management’s assertions embodied in financial statements

34. Important • Specified audit objectives • AU-C 200, 315, 500, 700 & Independence) • Unmodified Audit Report • Management’s Assertions p. 59

35. Manuel What are the three lines of service typically provided by a public accounting firm ?

36. Typical lines of business Audit (accounting, attestation, audit) Tax Consulting (advisory services)

37. Megan What are the various job levels or career levels in a public accounting firm ?

38. CPA partnership structure Partner P Senior Mngr SM SM Manager X Y Z Senior X X X Y Y Y Z Z Staff XXX XXX XXX YYY YYY YYY ZZZ ZZ

39. As of Dec. 31, 2013 / Jan. 1, 2014 Bachelors degree 225 quarter hours 36 business 36 + 30 accounting 20 accounting 10 ethics + 1 year experience http://www.dca.ca.gov/ Education cpa exam