1 / 32

Audit Responsibilities and Objectives

Audit Responsibilities and Objectives. Chapter 5. Learning Objective 1. Explain the objective of conducting an audit of financial statements. Objective of Conducting an Audit of Financial Statements. The primary objective of the audit is to express an opinion on the financial statements.

santo
Télécharger la présentation

Audit Responsibilities and Objectives

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Audit Responsibilitiesand Objectives Chapter 5

  2. Learning Objective 1 Explain the objective of conducting an audit of financial statements.

  3. Objective of Conducting an Audit of Financial Statements The primary objective of the audit is to express an opinion on the financial statements.

  4. 1 Understand objectives and responsibilities for the audit. 2 Divide financial statements into cycles. 3 Know management assertions about accounts. Steps to DevelopAudit Objectives

  5. 5 Know specific audit objectives for classes of transactions and accounts. Steps to DevelopAudit Objectives 4 Know general audit objectives for classes of transactions and accounts.

  6. Learning Objective 2 Distinguish management’s responsibilities for preparing financial statements from the auditor’s responsibilities for verifying those financial statements.

  7. Responsibilities Management is responsible for the financial statements, and for internal control. Auditors issue an opinion on fairness of the financial statements.

  8. Learning Objective 3 Explain the auditor’s responsibility for discovering material misstatements.

  9. Auditor’s Responsibilities Material versus immaterial misstatements Reasonable assurance Errors versus fraud Professional skepticism

  10. Responsibilities forDiscovering Illegal Acts Direct-effect illegal acts Indirect-effect illegal acts Evidence accumulation when there is no reason to believe indirect-effect illegal act exists

  11. Responsibilities forDiscovering Illegal Acts Evidence accumulation and other actions when there is reason to believe direct- or indirect-effect illegal acts may exist Actions when the auditor knows of an illegal act

  12. Learning Objective 4 Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit.

  13. Transactions Journals Ledger, Trial Balance, and Financial Statements Sales Sales journal General ledger and subsidiary records Cash receipts Cash receipts journal General ledger trial balance Acquisition of goods and services Acquisitions journal Financial statements Transaction Flow Example

  14. Journals Ledger, Trial Balance, and Financial Statements Cash disburse- ments journal General ledger and subsidiary records Payroll journal General ledger trial balance General journal Financial statements Transaction Flow Example Transactions Cash disbursements Payroll services and disbursements Allocation and adjustments

  15. Capital acquisition and repayment cycle Sales and collection cycle Acquisition and payment cycle Payroll and personnel cycle Inventory and warehousing cycle Relationships AmongTransaction Cycles General cash

  16. Learning Objective 5 Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts.

  17. Accounts Receivable (in thousands) Beginning balance $ 18,827 144,328 $ 20,197 138,393 1,242 3,323 Sales Cash receipts Sales returns and allowances Charge-off of uncollectible debts Ending balance Balance and TransactionsAffecting Balances Example

  18. Learning Objective 6 Distinguish among the five categories of management assertions about financial information.

  19. Management Assertions 1. Existence or occurrence 2. Completeness 3. Valuation or allocation 4. Rights and obligations 5. Presentation and disclosure

  20. Learning Objective 7 Link the six general transaction- related audit objectives to the five management assertions.

  21. Existence Recorded transactions exist. Completeness Existing transactions are recorded. Accuracy Recorded transactions are stated at the correct amount. Transaction-RelatedAudit Objectives

  22. Timing Transactions are recorded on the correct dates. Posting and summarization Transactions are included in the master files and are correctly summarized. Transaction-RelatedAudit Objectives Classification Transactions are properly classified.

  23. Management Assertions General Transaction- Related Audit Objectives Existence or occurrence Existence Completeness Completeness Valuation or allocation Accuracy, Classification timing, Posting and summarization Rights and obligations N/A Presentation and disclosure N/A Transaction-Related Audit Objectivesand Management Assertions

  24. Learning Objective 8 Link the nine general balance- related audit objectives to the five management assertions.

  25. Existence Amounts included exist. Completeness Existing amounts are included. Accuracy Amounts included are stated at the correct amounts. General Balance-RelatedAudit Objectives

  26. Cutoff Transactions are recorded in the proper period. Detail tie-in Account balances agree with master file amounts, and with the general ledger. General Balance-RelatedAudit Objectives Classification Amounts are properly classified.

  27. Rights and obligations Assets must be owned. Presentation and disclosure Account balances and disclosures are presented in financial statements. General Balance-RelatedAudit Objectives Realizable value Assets are included at estimated realizable value.

  28. Management Assertions General Balance- Related Audit Objectives Existence or occurrence Existence Completeness Completeness Valuation or allocation Accuracy, Classification, Cutoff, Detail tie-in, Realizable value Rights and obligations Rights and obligations Presentation and disclosure Presentation and disclosure Assertions and Balance-Related Audit Objectives

  29. Learning Objective 9 Explain the relationship between audit objectives and the accumulation of audit evidence.

  30. How Audit ObjectivesAre Met Auditors plan the combination of objectives and evidence by following an audit process. An audit process is a methodology for organizing an audit.

  31. Phase I Plan and design an audit approach. Phase III Perform analytical procedures and tests of details of balances. Phase II Perform tests of controls and substantive tests of transactions. Phase IV Complete the audit and issue an audit report. Four Phases of an Audit

  32. End of Chapter 5

More Related