...CHAPTER 6 Audit Planning, Understanding the Client, Assessing Risks and Responding Brief Topical Outline A. The audit process 1. Obtaining clients (PowerPoint 6-2) — Submit a proposal — communicate with predecessor auditors 2. Overall process (PowerPoint 6-3,4) B. Audit planning (PowerPoint 6-5) 1. Establish an understanding with client, ordinarily through use of an engagement letter (PowerPoints 6-6, and 6-7) 2. Overall on audit planning (PowerPoint 6-8) C. Obtain an understanding of the client and its environment 1. Risk assessment procedures (PowerPoint 6-9) 2. Business risk approach to the audit (PowerPoint 6-10 through 6-16) 3. Materiality D. Assess the risks of material misstatement and design further audit procedures 1. Overall approach (PowerPoint 6-17) 2. Assessing fraud risks (PowerPoints 6-18 through 6-21) 3 Design further audit procedures (PowerPoints 6-22 and 6-23) E. Organization of the audit program 1. The systems portion 2. The substantive test portion (PowerPoint 6-24) 3. Analyzing transactions affecting accounts (PowerPoint 6-25) 4. Indirect verification of income statement accounts (PowerPoint 6-26) 5. Assertions, objectives and procedures (PowerPoint 6-27) — Management assertions — Direction of audit testing (PowerPoint 6-28) — Substantive objectives for the audit of asset accounts ...
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... |School of Business/Graduate | | |ACC/546 Version 2 | | |Auditing | Copyright © 2009, 2008, 2007 by University of Phoenix. All rights reserved. Course Description In this course, students focus on the auditing practice performed by public accountants. Topics include the CPA profession and the auditor’s role, planning the audit, audit reporting and required communications, evaluating internal controls, audit programs for current assets and liabilities, and audit programs for other business cycles. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials ...
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...Audit Program Design Part III Tywana Bowman University of Phoenix ACC545/Financial Accounting Professor Michael DeMarco September 26, 2010 Introduction In order to conduct a substantial audit of Apollo Shoes the auditor must obtain a sufficient understanding of the entity and the entity’s environment, including the internal control. The understanding of the entity and its environment helps the auditor in a variety of ways throughout the audit, including establishing materiality, considering appropriateness, and designing audit procedures that can facilitate the growth of Apollo Shoes. Before the auditor can begin the process of conducting the audit of the inventory and warehousing cash cycles, the auditor must prepare the audit plan and program for Apollo Shoes. Developing the audit strategy and plan aids the auditor in determining the necessary resources to perform the engagement. The auditor must develop a plan in mind that will reduce audit risk to an acceptable level for the inventory and warehousing cash cycle. The audit plan should include a description of nature, timing, and extent of the planned risk assessment procedures. The audit plan and program significantly affects the types and extent of further audit procedures to be used by the auditor in determining whether the financial statements are fairly stated in accordance with the US GAAP. The auditor should consider audit risk in relation to the individual account balances, classes of transactions, and disclosures...
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... Philippine Auditing Practice Statement 1009 COMPUTER-ASSISTED AUDIT TECHNIQUES PAPS 1009 PHILIPPINE AUDITING PRACTICE STATEMENT 1009 COMPUTER-ASSISTED AUDIT TECHNIQUES CONTENTS Paragraphs Introduction Description of Computer Assisted Audit Techniques (CAATs) Considerations in the Use of CAATs Using CAATs Using CAATs in Small Entity IT Environments Effective Date Acknowledgment 1-3 4-6 7-16 17-25 26 27 28-29 The Auditing Standards and Practices Council (ASPC) issues Philippine Auditing Practices Statements (PAPS or Statements) to provide practical assistance to auditors in implementing the Philippine Standards on Auditing (PSAs) or to promote good practice. Statements do not have the authority of PSAs. This Statement does not establish any new basic principles or essential procedures; its purpose is to assist auditors, and the development of good practice, by providing guidance on the application of the PSAs regarding the use of Computer Assisted Audit Techniques as an audit tool. This Statement applies to all uses of CAATs involving a computer of any type or size. The auditor exercises professional judgment to determine the extent to which any of the audit procedures described in this Statement may be appropriate in the light of the requirements of the PSAs and the entity’s particular circumstances. PAPS 1009 Introduction 1. The overall objectives and scope of an audit do not change when an audit is conducted in a computer information technology (IT) environment...
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...decided because of the reduction in cost to acquire the program compared to a customized system. Also the training on and maintenance of the program will be included in the purchase price. The next step would be to determine what type of audit that would best fit the processes that are targeted. There are four types of audits. There is the attestation audit, which according to "KHSA Karren, Hendrix, Stagg, Allen" (2012), "are assurance engagements that require procedures to be applied to financial reporting processes and controls, but do not necessarily require an audit. Then there are findings and recommendations that are used when implementing a system. The next type of audit is the SAS 70 audit. According to "NBD Accountants Consultants" (2008), “It is an auditing standard put forth by the AICPA that is utilized by auditors for examining internal controls in service organizations. Service organizations are the host of companies that provide critical, third-party outsourcing services to other companies.” The final type of audit is the Statement on Auditing Standards (SAS) 94: The effect of information technology on the Auditor’s consideration of internal control in a Financial Statement Audit. The SAS 94 audit provides guidance to auditors concerning the influence of information technology on internal control, and on the auditor's understanding of internal control and assessment of control risk. The auditor is required to design procedures to understand the...
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...Syllabus Certified General Accountants Association of Canada 100 – 4200 North Fraser Way Burnaby, British Columbia Canada V5J 5K7 www.cga-canada.org © CGA-Canada, 2013 All rights reserved. These materials or parts thereof may not be reproduced or used in any manner without the prior written permission of the Certified General Accountants Association of Canada. Printed in Canada ISBN for an individual volume: 978-1-55219-599-4 About CGA-CANADA _________________________________________ CGA-Canada today The CGA designation focuses on integrity, ethics, and the highest education requirements. Recognized as the country’s accounting business leaders, CGAs provide strategic counsel, financial leadership, and overall direction to all sectors of the Canadian economy. The Certified General Accountants Association of Canada — CGA-Canada — sets standards, develops education programs, publishes professional materials, advocates on public policy issues, and represents CGAs nationally and internationally. The Association represents 75,000 CGAs and students in Canada, Bermuda, the Caribbean, Hong Kong, and China. Mission CGA-Canada advances the interests of its members and the public through national and international representation and the establishment of professional standards, practices, and services. A proud history CGA-Canada was founded in Montréal in 1908 under the leadership of John Leslie, vicepresident of the Canadian Pacific Railway. From the beginning, its objective...
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...Act 359 final exams Chapter 9 Introduction to internal control systems Internal controls: the controls established to protect the assets of an organization. Internal control: describes the policies, plans, and procedures implemented by the management of an organization to protect its assets, to ensure accuracy and completeness of its financial information, and to meet its business objectives. Four objectives of internal control system: 1. Safeguard assets, 2. Check the accuracy and reliability of accounting data, 3. Promote operational efficiency, 4. Enforce prescribed managerial policies. Sarbanes Oxley Act of 2002 piece of legislation with respect to internal controls Section 404: reaffirms management is responsible for establishing and maintaining an adequate internal control structure. 1992 Coso report: established common definition of internal control for assessing control system, as well as determined how to improve controls. An internal control system should consist of the five components: 1. The control environment 2. Risk assessment 3. Control activities 4. Information and communication 5. Monitoring Control environment: foundation for all other internal control components and provides discipline and structure. Top management oversight, integrity, and ethical principles that guide the organization Risk assessment: identify organizational risks, analyze their potential in terms of costs and likelihood of occurrence, and implement only those...
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...DIFFERENCE BETWEEN A FUNCTIONAL MANAGER AND A PROJECT MANAGER FUNCTIONAL MANAGER 1. He is in-charge of a firm’s functional depts. Such as marketing, engg., or finance. 2. They are more skilled at analysis. Such heads are specialists in certain areas only. 3. They are analytical in approach (breaking the system into smaller and smaller elements) and they know something abt. the operation for which they are responsible. 4. In case of any difficulty, they know how to analyze and attack it. 5. They are administratively responsible for deciding how something will be done, who is going to do it, and what resources will be devoted to accomplish a task. 6. He is a direct, technical supervisor. 7. He should have knowledge in the technology of the process being managed. 8. The FM cannot allow the PM in taking control of the technical decisions in the functional areas or to control the assignment of the functional area personnel. PROJECT MANAGER 1. A PM starts his career as a specialist in some field, later on being promoted to some higher post. 2. He is required to be more skilled at synthesis. 3. The PM uses a system approach i.e. understanding the organizational problem, for which the project is a part, the organization for which the program exists, as well as the environment of the organization. 4. The PM is a facilitator and generalist. 5. He should be competent in the science of project along with having the...
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...States Government Accountability Office GAO February 2009 GAO-09-232G FEDERAL INFORMATION SYSTEM CONTROLS AUDIT MANUAL (FISCAM) This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. United States Government Accountability Office Washington, DC 20548 February 2009 TO AUDIT OFFICIALS, CIOS, AND OTHERS INTERESTED IN FEDERAL AND OTHER GOVERNMENTAL INFORMATION SYSTEM CONTROLS AUDITING AND REPORTING This letter transmits the revised Government Accountability Office (GAO) Federal Information System Controls Audit Manual (FISCAM). The FISCAM presents a methodology for performing information system (IS) control 1 audits of federal and other governmental entities in accordance with professional standards, and was originally issued in January 1999. We have updated the FISCAM for significant changes affecting IS audits. This revised FISCAM reflects consideration of public comments received from professional accounting and auditing organizations, independent public accounting firms, state and local audit organizations, and interested individuals on the FISCAM Exposure Draft issued on July 31, 2008 (GAO-08-1029G). GAO...
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...METHODIST UNIVERSITY BACHELOR OF BUSINESS ADMINISTRATION DEPARTMENT OF FINANCE AND ACCOUNTING ACCT 432: AUDITING 1 COURSE OUTLINE GENERAL OBJECTIVE To introduce students to the concept of the audit of financial statements and the issues surrounding the audit of such statements EXPECTED LEARNING OUTCOMES By the end of the course, the student is expected to be able to; a) b) c) d) e) f) Explain what is an audit and the qualifications and duties of an auditor Understand the legal and professional rules governing the audit and the auditor Able to design an adequate internal control system Able to design an audit plan and an audit program to conduct an audit Able to audit a computerized client Able to design an audit report Week Topics Content Time (Hours) Definition of auditing 3 Distinction between auditing and accounting Objectives of an audit Types of audits Appointment of an auditor Qualifications of auditors 6 1 GENERAL ENVIRONMENT AUDIT 2-3 THE LEGAL PROFFESIONAL AND Week Topics Content Time (Hours) Rights of auditors Dismissal and duties of auditors REQUIREMENTS AUDITOR 4 OF AN CONDUCTING AN AUDIT 5-6 ERRORS, FRAUD AND OTHER IRREGULARITIES 7 INTERNAL SYSTEMS CONTROL 8 9-10 CAT AUDIT EVIDENCE General audit steps 3 Accepting an audit engagement Letter of engagement Planning an audit Types of errors 6 Fraud Detection, correction and prevention of errors and fraud Role of the auditor in respect of...
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...Audit Program Design Part Ii Audit Program Design Part II Company: Apollo Shoe Company Audit Begins: January 19, 2010 Audit Ends: March 31, 2010 (Tentative) AUDIT SCOPE: Sales/revenue and collection cycle Payroll and personnel cycle Acquisition and payment cycle All Transactions, orders, and payments processed January 1, 2007 through December 31, 2007 AUDIT OBJECTIVES: • To determine internal control compliance to sub objectives for payroll and personnel cycle, sales/revenue and collection cycle, and the acquisition and payment cycle. • To obtain control evidence and documentation about the existence, accuracy, classification, timing and completeness of recorded acquisition transactions. CRITERIA: Statement on Auditing Standards (SAS) No. 99 – Fraud Auditing Standards AUDITOR ASSIGNMENTS: John Butler – Sales and Collection David Sargent – Payroll and Personnel Perry Boydstun – Acquisition and Payment Cycle METHODOLOGY: Each auditor will perform their assigned area of tests of controls and substantive test using sampling techniques as appropriate. Strengths and weaknesses’ should be denoted by using a “S” or “W” on each area applicable area of the flowchart and checklist of each assigned area. The summary status (“Ss” and “Ws”) will be listed in the bridge worksheet for SOX 404 Audit analysis. Bridge Worksheet for Sales and Collection Cycle – SOX 404 Audit Public companies typically rely heavily on proper internal controls to maintain...
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...Internal Audit of Al Fresco Audit Program Objective: To find out whether their financial information is free from irregularities. Audit Steps to Be Completed I. Planning and Administration Section 1. Prepare permission letter and engagement letter, and obtain approval from the audit director and the auditee. 2. Conduct audit planning, and the following should be discussed: * Timing of audit and planned participants * Timing of fieldwork * Internal control checklist * Risk areas/ internal controls * Assignment of audit objectives * Testing to be performed * Budgeted hours * Permission letter * Engagement letter 3. Conduct pre-audit interview with auditee and document discussions held. 4. Set the schedule of the preliminary audit with the applicable management and discuss the following: * Timing of the audit * Audit objectives * Key contacts for the audit 5. Obtain permission to access relevant information like: * Organizational chart * Relevant reports utilized by the auditee * Strategic documents 6. Prepare and review the internal control questionnaire: * What is the Al Fresco’s perceived internal controls strengths and weaknesses? 7. Inquire of the auditee as to whether any relevant process flowcharts exist. If not, consider developing one for the permanent file. II. Fieldwork First Objective: To ascertain whether the use and recording of petty cash funds...
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...4.1 Audit objective relating to database access is verify that database access authority and privileges are granted to users in accordance with their legitimate needs. Audit procedures for testing data access controls are: Responsibility for authority tables and subschemas. The auditor should verify that database administration personnel retain exclusive responsibility for creating authority tables and designing user views. Evidence may come from three sources: (1) by reviewing company policy and job descriptions, which specify these technical responsibilities; (2) by examining programmer authority tables for access privileges to data definition language commands; and (3) through personal interviews with programmers and DBA personnel. Appropriate access authority. The auditor can select a sample of users and verify that their access privileges stored in the authority table are consistent with their job descriptions organizational levels. Biometric controls. The auditor should evaluate the costs and benefits of biometric controls. Generally, these would be most appropriate where highly sensitive data are accessed by a very limited number of users. Inference controls. The auditor should verify that database query controls exist to prevent unauthorized access via inference. The auditor can test controls by simulating access by a sample of users and attempting to retrieve unauthorized data via inference queries. Encryption controls. The auditor should verify that sensitive data, such...
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...Lecture 5 Audit of the Sales and Collection Cycle Summary of the Audit Process Phase 1 Plan and design an audit approach 1. Accept client and perform initial planning 2. Understand client’s business and industry 3. Assess client business risk 4. Perform preliminary analytical procedures 5. Set materiality & assess acceptable audit risk and inherent risk 6. Understand internal control and assess control risk 7. Gather information to assess fraud risk 8. Develop overall audit plan and audit program Phase 2 Perform tests of controls & substantive tests of transactions Plan to reduce assessed level of control risk? No Yes Phase 3 Perform analytical procedures and tests of details of balances 1. Perform analytical procedures 2. Perform tests 3. Perform additional tests of details of balances Phase 4 Complete the audit & issue an audit report 1. Perform tests for presentation & disclosure 2. Accumulate final evidence 3. Evaluate results 4. Issue Audit Report 5. Communicate with audit committee & management 1. Perform test of controls 2. Perform substantive tests of transactions 3. Assess likelihood of misstatements in financial statements Accounts in the Sales and Collection Cycle 14-3 Sales and Sales returns Transaction 4 Accounts Sales Accounts receivable Business Functions Processing customer orders Granting credit Shipping goods Billing customers and recording sales Documents & Records Customer order Sales order Customer or sales order Shipping...
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...ILLUSTRATIVE AUDIT ENGAGEMENT LETTER (Date) Name of Auditee Address Dear ________________ We are pleased to confirm our understanding of the services we are to provide you with under this engagement. Audit Scope. USAID’s applicable scope of work that was part of your RFP will be included or referenced to. Audit Objectives. The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles, the objective also includes reporting on: • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts and grant agreements, noncompliance with which could have a material effect on the financial statements, in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Our audit will be conducted in accordance with generally accepted auditing standards established by the Auditing Standards Board (United States); the standards for financial audits contained...
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