...ISA ISA 500 March 2009 International Standard on Auditing Audit Evidence 500 INTERNATIONAL STANDARD ON AUDITING 500 Audit Evidence Explanatory Foreword The Council of the Malaysian Institute of Accountants has approved this standard in March 2009 for publication. This standard should be read in conjunction with the Preface to Malaysian Approved Standards on Auditing; Preface to International Standards on Quality Control, Auditing, Review, Other Assurance and Related Services; Glossary of Terms and International Framework for Assurance Engagements. The status of International Standards on Auditing is set out in the Preface to Malaysian Approved Standards on Quality Control, Auditing, Review, Other Assurance and Related Services. Applicability International Standards on Auditing (ISAs) are to be applied in the audit of financial statements under all reporting frameworks. Reporting frameworks are determined by legislation, regulations and promulgations of the Malaysian Institute of Accountants and where appropriate mutually agreed upon terms of reporting. ISAs are to be applied in the audit of historical financial information. Effective Date in Malaysia Effective for audits of financial statements for periods beginning on or after January 1, 2010. Reproduction of Full Text of Final IFAC Publication “Copyright © April 2010 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact Permissions@ifac...
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...ON AUDITING 500 AUDIT EVIDENCE (Effective for audits of financial statements for periods beginning on or after December 15, 2009) CONTENTS Paragraph Introduction Scope of this ISA ........................................................................................ 1−2 Effective Date ............................................................................................. 3 Objective .................................................................................................... 4 Definitions .................................................................................................. 5 Requirements Sufficient Appropriate Audit Evidence ....................................................... 6 Information to Be Used as Audit Evidence ................................................. 7−9 Selecting Items for Testing to Obtain Audit Evidence ................................ 10 Inconsistency in, or Doubts over Reliability of, Audit Evidence ................ 11 Application and Other Explanatory Material Sufficient Appropriate Audit Evidence ....................................................... A1−A25 Information to Be Used as Audit Evidence ................................................. A26−A51 Selecting Items for Testing to Obtain Audit Evidence ................................ A52−A56 Inconsistency in, or Doubts over Reliability of, Audit Evidence ................ A57 International Standard on Auditing (ISA) 500, “Audit Evidence” should be...
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...Prepared by : Mohd Hafiz Bin Abdul Halim | Mohd Faizal Bin Jamaluddin | Rosnida Binti Othman |Nur Iliza Binti Misnan | Syaifulradzman Bin Shaifuddin | Asmidar Binti Ahmad@Salleh | Majdi@Abdul Hadi Bin Ishak | Hasmawazi Binti Hamzah | Azwira Binti Mahmud |Nur Azreen Azriana Binti Azham | PA 603 Auditing and Assurance PA 603AUDITING AND ASSURANCE CASE STUDY: Phase 2,3 & 4 PROBLEM BASED LEARNING PROCESS STAGES 1 PBL ACTION PROCESS Group Introduction students to PBL via experiential learning Setting Assign student with a course guide that consist of rationale, objective and content Define roles of facilitator and student Introduce members DOCUMENT & RECORD ASSIGN 2 Trigger Designation of work groups Establish ground rules Student confront a problem 4 groups (max 10 person per group) of student are given by case study Rancangan Mengajar Semester Course Outline PBL Process First meeting minute Member`s Organization Chart, Directory & Group`s Rules Facilitator Facilitator Facilitator Learning member`s Facilitator & Learning member`s 3 4 5 6 7 Present the problem Identify and clarify problem Describe the problem Idea Student design a plan Generation Inquire the possible ideas (solve the problem) Learning Determine what needs to be learnt in order to understand or solve the Issue problem Generate learning issue and action plan Identify resources Self – Inquire the research sources Directed Seek and summarize relevant information...
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...ACCT 4304, Fall 2014 Audit case Read the attached audit case and answer all the questions that follow. A total of 90 points are available for the actual responses to the questions and 10 points are available for presentation, clarity and grammar. Total points for the assignment are 100. Note: Answer the questions as comprehensively as possible. Reference to Auditing Standards, your textbook, and other relevant authoritative sources is expected where appropriate. Even where some of the questions are quite general, try as much as possible to relate your answer to the case. 1. Some of the members of Phar-Mor's financial management team were former auditors for Coopers & Lybrand. (a) Why would a company want to hire a member of its external audit team? (3pts) (b) If the client has hired former auditors, would this affect the independence of the existing external auditors? Explain. (3pts) (c) How did the Sarbanes-Oxley Act of 2002 and related rulings by the PCAOB, SEC or AICPA affect a public company's ability to hire members of its external audit team? (3pts) 2 (a) What factors in the auditor-client relationship can put the client in a more powerful position than the auditor? (3pts) A) A client can be put in a more powerful position than the auditor in an auditor-client relationship if the auditor is trying to sell the client additional services. When an auditor is trying to preserve the relationship with the client in order to get more business revenue, this...
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...members of the professional bodies are to act with integrity, objectivity, professional competence and due care, confidentiality and professional behaviour (APES 110, 100.4). The requirement to act in the public interest means that auditors should consider how their actions impact the client and their employer. They must also consider the impact of their actions on others such as the client’s employees, investors, credit providers, and those without direct financial interests in the client such as the broader business and financial community and members of the public. All these people could be reliant on the quality of the auditor’s work, even though they are not party to the contract between the client and the audit firm. The reliability of the financial reports and the audit report is potentially damaged if the auditor does not act with integrity (honesty), objectivity (being independent), with professional competence and due care (executing the work with the required level of skill and attention), confidentiality (discussing the client’s affairs with others inappropriately), and professional behaviour (protecting their reputation and the profession’s reputation). A dishonest auditor could knowingly help publish a materially false, misleading, or reckless financial report. Auditors...
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...Case #3.4 – Sunbeam – Incentives and Pressure to Commit Fraud I. Technical Audit Guidance To maximize the knowledge acquired by students, this book has been designed to be read in conjunction with the post-Sarbanes-Oxley technical audit guidance. All of the post-Sarbanes-Oxley technical guidance is available for free at http://www.pcaobus.org/Standards/index.aspx. In addition, a summary of the Sarbanes-Oxley Act of 2002 is also available for free at http://thecaq.aicpa.org/Resources/Sarbanes+Oxley/Sarbanes-Oxley+–+The+Basics.htm. II. Recommended Technical Knowledge PCAOB Auditing Standard No. 5 Paragraph #9 Paragraph #11 Paragraphs #29-30 Paragraph #32 Paragraph #A8 (in Appendix A) III. Classroom Hints This case provides students with an opportunity to apply their technical knowledge about inherent risk and fraud risk to Sunbeam's business model during the 1990's. By providing details about Sunbeam business during this time, students are able to see the relationship between an audit client's business strategy and inherent risk assessment at the financial statement assertion level. In addition, this case provides students with an opportunity to think about fraud risk assessment during times of significant change at an audit client. To meet these objectives, this case illuminates a number of relevant issues about the development of Sunbeam. In particular, the case focuses on the changes that occurred at Sunbeam after hiring Albert J. Dunlap as...
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...functions of auditing. Relate your explanation to the audit functions in your organization, or an organization with which you are familiar. In your paper, be sure to address the following: Describe the elements of the Generally Accepted Auditing Standards (GAAS). Describe how these standards apply to financial, operational, and compliance audits. Explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB), will have on audits of publicly traded companies. Discuss the additional requirements that are placed on auditors from this Act, and the actions of the PCAOB. ACC 491 Week 1 DQs Access the SEC home page at http://www.sec.gov. What is one of the most recent litigation brought by the SEC against a public firm or against an accounting firm? Read the abstract of the complaint and download the document filed with the court. Comment on the nature of the litigation. What is one the most recent Staff Accounting Bulletin that provides guidance to the profession? What was the guidance given? The Sarbanes-Oxley Act of 2002 has been described as the most far-reaching legislation affecting business since the passage of the 1933 Securities Act. What are the specific portions of the legislation that affect the external audit profession, and how do they affect the profession? How does the legislation affect the internal audit profession? What are some activities that...
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...Guidance for audit committees Reviewing auditor independence November 2003 The Combined Code on Corporate Governance – July 2003 C.3 Audit Committee and Auditors Main Principle: The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors. Code provisions C.3.1 The board should establish an audit committee of at least three, or in the case of smaller companies two, members, who should all be independent non-executive directors. The board should satisfy itself that at least one member of the audit committee has recent and relevant financial experience. C.3.2 The main role and responsibilities of the audit committee should be set out in written terms of reference and should include: • to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them; • to review the company’s internal financial controls and, unless expressly addressed by a separate board risk committee composed of independent directors, or by the board itself, to review the company’s internal control and risk management systems; • to monitor and review the effectiveness of the company’s internal audit function; • to make recommendations to the board, for it to put to the shareholders...
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...INTERNATIONAL STANDARD ON AUDITING 700 FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS (Effective for audits of financial statements for periods beginning on or after December 15, 2009) Introduction Scope of this ISA 1. This International Standard on Auditing (ISA) deals with the auditor’s responsibility to form an opinion on the financial statements. It also deals with the form and content of the auditor’s report issued as a result of an audit of financial statements. 2. ISA 7051 and ISA 7062 deal with how the form and content of the auditor’s report are affected when the auditor expresses a modified opinion or includes an Emphasis of Matter paragraph or an Other Matter paragraph in the auditor’s report. 3. This ISA is written in the context of a complete set of general purpose financial statements. ISA 8003 deals with special considerations when financial statements are prepared in accordance with a special purpose framework. ISA 8054 deals with special considerations relevant to an audit of a single financial statement or of a specific element, account or item of a financial statement. 4. This ISA promotes consistency in the auditor’s report. Consistency in the auditor’s report, when the audit has been conducted in accordance with ISAs, promotes credibility in the global marketplace by making more readily identifiable those audits that have been conducted in accordance with globally recognized standards. It also helps to promote the user’s understanding...
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...Executive summary Table of content (a) Explain the audit risk and each component of the audit risk model and how the audit risk works Audit risk is the auditor might give an incorrect or inappropriate opinion the financial statements. (Taylor, 2008). The audit risk model expresses the relationship among the audit risk components as follows: PDR = AAR IR x CR PDR = planned detection risk AAR = acceptable audit risk IR= inherent risk CR= control risk The four risks in the audit risk model are appropriately important to valuable detailed discussion. All four risks are discussed briefly in this section o provide an overview of the risks. Planned detection risk (PDR) is a measure of that audit evidence for a segment will fail to detect misstatements exceeding an acceptable amount, should such misstatements exists. (James, 2001) PDR is a function of the effectiveness of an audit test and of its application by the auditor. Decreases in PDR will require the auditor to increase the competence and sufficiency of audit evidence collected. (Taylor, 2008). Inherent risk (IR) represents the auditor’s assessment of the susceptibility of an assertion to a material misstatement assuming there are no related internal controls. (Boynton, 2001). If the auditor concludes that there is a high likelihood of misstatements, ignoring internal control, the auditor would conclude that inherent...
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...CASE 1.6 NEXTCARD, INC. Synopsis In November 2001, Arthur Andersen & Co. employees in that firm’s Houston office shredded certain Enron audit workpapers during the midst of a federal investigation of the large energy company. The decision to destroy those workpapers ultimately proved to be the undoing of the prominent accounting firm. A few years later, a felony conviction for obstruction of justice would effectively put Andersen out of business. Ironically, at the same time that the Andersen personnel were shredding Enron workpapers, three senior members of the NextCard, Inc., audit engagement team were altering the fiscal 2000 audit workpapers of that San Francisco-based company. NextCard was founded during the late 1990s by Jeremy Lent, the former chief financial officer of the large financial services company, Providian Financial Corporation. Lent’s business model was simple: use a massive Internet-based marketing campaign to quickly grab a large market share of the intensely competitive credit card industry. By 2000, NextCard, which by then was a public company, had signed up one million credit card customers. Unfortunately, NextCard’s customers tended to be high credit risks, which resulted in the company absorbing much higher than normal bad debt losses. When the company’s management team attempted to conceal those large credit losses, the SEC and other federal regulatory authorities uncovered the scam. By 2003, the once high-flying Internet company...
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...INTERNATIONAL STANDARD ON AUDITING 620 USING THE WORK OF AN AUDITOR’S EXPERT (Effective for audits of financial statements for periods beginning on or after December 15, 2009) CONTENTS Paragraph Introduction Scope of this ISA ........................................................................................ The Auditor’s Responsibility for the Audit Opinion ................................... Effective Date ............................................................................................. Objectives .................................................................................................. Definitions .................................................................................................. Requirements Determining the Need for an Auditor’s Expert ........................................... Nature, Timing and Extent of Audit Procedures ......................................... The Competence, Capabilities and Objectivity of the Auditor’s Expert ..... Obtaining an Understanding of the Field of Expertise of the Auditor’s Expert ................................................................................................... Agreement with the Auditor’s Expert ......................................................... Evaluating the Adequacy of the Auditor’s Expert’s Work .......................... Reference to the Auditor’s Expert in the Auditor’s Report ......................... Application and Other Explanatory Material Definition of an Auditor’s...
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...concluding whether the financial statements are fairly stated. [AU 312.65] AU Section 312 notes that if the auditor concludes that the client’s financial statements are materially misstated, then “the auditor should request management to make the necessary corrections” (312.64). This section goes on to discuss the documentation standards for “uncorrected misstatements” (see paragraphs 69-70). For example, auditors must document in their workpapers “whether uncorrected misstatements, individually or in the aggregate, do or do not cause the financial statements to be materially misstated, and the basis for that conclusion.” In summary, auditors’ lives would be considerably less complicated if clients would prepare an adjusting entry for each proposed audit adjustment, even those that are immaterial. Nevertheless, it is not reasonable for auditors to “insist” that clients record adjusting entries for immaterial proposed audit adjustments. 2. To the greatest extent possible, auditors should not provide clients with access to the critical parameters or facets of audit engagements, including materiality limits. Similar to what...
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...Types of Audits KWyrick Advanced Accounting 2/23/15 Audits are an important necessity to insure the foundation and integrity of any company in today’s business world. Audits provide credibility and assurance for the company’s management and financials. This is useful information for stakeholders when deciding whether or not to invest in the company. The audit also provides reasonable assurance that the financials are free from material errors. Therefore the information provided is guaranteed to be honest and truthful. It is also important for some companies, such as nonprofits to have an audit performed. This provides regulations by the government to make sure that people are following the rules and not being taken advantage of. Other benefits of audits include uncovering or preventing fraud. If someone has been hiding financial information or trying to improve the financial status of the company wrongfully, it will usually be uncovered by the auditors. The three types of audits from the text include operational, compliance, and financial statement audit. These three audits work to solve different things. An operation audit reviews operations and looks for ways to improve efficiency and effectiveness. Compliance audits review contracts and agreements to make sure that all parties are doing their part or performing the tasks required. This is more common in nonprofits or governmental entities because one party is funding the other for a service. Financial statements audits...
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...7 Planning Materiality C a s es inc lu de d in t his Se ction 7.1 Anne Aylor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Determination of Planning Materiality and Tolerable Misstatement O t he r c ase s t h at discuss topics rel ated to this section 5.6 Sarbox Scooter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . . Evaluation of Audit Differences . . . . . . . . . . . . . . . . . . . . . . . 369 12.2 Auto Parts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Considering Materiality When Evaluating Accounting Policies and Footnote Disclosures Instructor Resource Manual — Do Not Copy or Redistribute Instructor Resource Manual — Do Not Copy or Redistribute Anne Aylor, Inc. C a s e 7.1 Determination of Planning Materiality and Tolerable Misstatement Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt Ins tr uc t ional O b je c t ive s [1] To provide experience with establishing planning materiality. [2] To provide experience with establishing tolerable misstatement for individual financial statement accounts. [3] To illustrate factors considered when establishing planning materiality...
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