...Zone Analytical Procedures – A Powerful Tool for Auditors (Relevant to Paper 8 – Principles of Auditing and Management Information Systems) David Chow FCCA, FCPA, CPA (Practising) Audit tests Auditors normally carry out the following types of audit tests to determine whether financial statements are fairly stated: (i) procedures to obtain an understanding of internal control (ii) tests of controls (iii) substantive tests: • substantive tests of transactions; • analytical procedures; and • tests of details of balances. assessment of risks of material misstatement at the assertion level includes an expectation that controls are operating effectively. This means that auditors perform tests of controls only when: (i) a system exists; and (ii) the system has controls. The performance of tests of controls is to establish whether those controls in the systems are actually functioning properly and effectively so that the auditors can determine whether or not they can rely upon the controls. Substantive tests Substantive tests (also known as substantive procedures) are procedures designed to test for dollar errors or irregularities directly affecting the correctness of financial statement balances. Auditors perform substantive tests in an audit to detect material misstatement at the assertion level. Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then posted in the general ledger. ...
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...and inquiries, as well as a walk-through to support the understanding. 3. Types of Tests - there are four types of further audit procedures auditors perform after performing risk assessment procedures: | | |Relation to | | | |Risk Model | |Test |Name |CR |PDR | |TOC |Tests of Controls |X | | |STOT |Substantive Tests of Transactions |X |X | |AP |Analytical Procedures | |X | |TODB |Tests of Details of Balances |...
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...Case Studies to accompany Auditing and Assurance Services in Australia by Gay and Simnett Prepared by Renee Radich and Philip Ross [pic] McGraw-Hill Australia [pic] A Division of The McGraw-Hill Companies Copyright © 2002 McGraw-Hill Australia Pty Limited Additional owners of copyright are named in on-page credits. Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Enquiries should be made to the publisher, marked for the attention of the Publishing Manager, at the address below. Copying for educational purposes Under the copying provisions of the Copyright Act, copies of parts of this material may be made by an educational institution. An agreement exists between the Copyright Agency Limited (CAL) and the relevant educational authority (Department of Education, university, TAFE, etc.) to pay a licence fee for such copying. It is not necessary to keep records of copying except where the relevant educational authority has undertaken to do so by arrangement with the Copyright Agency Limited. For further information on the CAL...
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...ITT TECHNICAL INSTITUTE DATA MINING REPORT ONE AND TWO Shirly Mu, Todd Hughson, James Wall PROBLEM SOLVING THEORY ONSITE COURSE GS1140 INSTUCTOR LJILJANA MORRIS Today we are doing a project report on Costco. For Sol and Robert Price in 1976 they asked friends and family to help out with an opening price of two point five millon to open Price Club on July twelfth, they open their shop in an air hanger on Boulevard in San Diego, California. They were originally going to serve only small business. Mr. Price found out that it will be more beneficial to serve select customers. Costco was founded by James Sinegal and Jeffery H. Brotman. Costco opened its doors in 1983 in Seattle, Washington. Price Club and Costco later merged and renamed the business PriceCostco. And in 1997 due to its success the name was changed again to Costco Wholesale. (About History, 2014) Costco Wholesale stores headquarters are located in Issaquah, WA. The mission statement for Costco is to continually provide our members with quality goods and services at the lowest possible prices. (Farfan, 2014) There are three types of membership cards at Costco; Executive membership, Business membership and Gold membership. The one I have is executive membership this cost about one hundred and twenty dollars sounds like a lot but I’ll be able to get two percent back in my shopping. If I do not get back more than fifty five dollars back for the entire year they will give me that amount or the two percent of...
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...Ashley Richardson 11/15/2013 Western Governors University AUO1 – Auditing and Information Systems Additional Study Questions/ Study Guide 1. Accounting Information Systems Competency 302.1.1: Nature and Purpose The student understands the nature and purpose of information systems. * What is the difference between transaction processing systems, management information systems, and decision support systems? 2. Transaction processing systems - document financial activities 3. Management information systems - used to collect qualitative as well as quantitative information for decision making within organizations 4. Decision support systems - help the developers of an AIS identify what information they need for their planning, decision making, and control functions * How is a flowchart used? 5. A document flowchart traces the physical flow of documents through an organization—that is, the flow of documents from the departments, groups, or individuals who first created them to their final destinations. * How is the accounting information system documented? 6. An accounting information system is a collection of data and processing procedures that creates needed information for its users. An information system's components: Data or information is input, processed, and output as information for planning, decision-making, and control purposes. 1. Data flow diagrams provide both a physical and a logical view of a system...
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...AUO1 – Auditing and Information Systems Additional Study Questions Accounting Information Systems Competency 302.1.1: Nature and Purpose The student understands the nature and purpose of information systems. * What is the difference between transaction processing systems, management information systems, and decision support systems? Transaction processing systems - document financial activities Management information systems - used to collect qualitative as well as quantitative information for decision making within organizations Decision support systems - help the developers of an AIS identify what information they need for their planning, decision making, and control functions * How is a flowchart used? A document flowchart traces the physical flow of documents through an organization—that is, the flow of documents from the departments, groups, or individuals who first created them to their final destinations. * How is the accounting information system documented? An accounting information system is a collection of data and processing procedures that creates needed information for its users. An information system's components: Data or information is input, processed, and output as information for planning, decision-making, and control purposes. Nine reasons to document an AIS are (1) to explain how the system works, (2) to train others, (3) to help developers design new systems, (4) to control system development and maintenance costs, (5) to standardize...
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...Table of Contents Meet the Audit Team 3 Partner Summary 5 Introduction 6 Part 1.1 a) Advanced Analytics in Professional Standards 6 Part 1.1 b) Academic Research on Advanced Analytical 6 Part 1.3 Simple Trend-line Regression 7 Part 2.1 Specific Risk of Material Misstatement 11 Part 2.2 An Appropriate Audit Program 12 Appendix 15 References 16 List of Key Audlish terms 17 Partner Summary In order to better understand the audit reports, we have documented academic research and existing audit standards relevant to planning stage APRs. This background information will provide a summary of professional standards and guidance directly related to APRs. First and foremost, every auditor must follow the standards called the Generally Accepted Auditing Standards (GAAS) which are set by the Public Company Accounting Oversight Board (PCAOB). Important sections within the standards required to know include: Independence, Consideration of Fraud in a Financial Statement Audit, and Communications about Control Deficiencies in Financial Statements, which includes nine rules that deal with identifying and reporting deficiencies found in financial statements. In the second part of our report, we prepared basic ARP’s and identified some key red flags for the Chevron Company. To access client viability, we used vertical and horizontal analysis, where we found information to create concern about their...
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...Audit Program Design Part II ACC/546 May 2, 2011 Audit Program Design Part II The audit of Apollo Shoes, Inc. requires a design of steps to develop audit objectives to plan the audit. The financial statements are divided into cycles to better manage the audit and disperse to staff within the firm. The following cycle’s sales and collection, payroll and personnel and acquisition and payment were developed to design test of controls, substantive tests of transactions and analytical procedures. Anderson, Olds, and Watershed, LLP will be designing test of controls, substantive tests of transactions and analytical procedures for Apollo. This will allow our firm to better understand the internal controls within their company along with making sure the company is in compliance with the requirements of the Sarbanes-Oxley Act of 2002 and generally accepted accounting principles. Sales & Collection cycle Sales and collections audits test financial information relating to the sales of goods and services to consumers and the payment collection for these sales. In Apollo shoes audit AOW will involve the decisions and processes necessary for the transfer of the ownership of goods and services to customers after they are made available for sale; it begins with a request by a customer and ends with the conversion of material on service into an account receivable and ultimately into cash. There are several functions include in this cycle such as processing customer...
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...Planning the Audit Process I wanted to let you know that Apollo Shoes is satisfied with our services and wants to continue with a full audit. Therefore I wanted to explain to you how I plan to conduct the audit. I will begin with an explanation of the objectives, responsibilities and strategies for completing the audit. This will be followed by explanations on how analytical procedures will be used to plan, conduct and complete the audit, how materiality and risk will be consider in designing the audit and how technology will be incorporated into the audit. The objective in conducting an audit are to obtain reasonable assurance about whether Apollo Shoe’s financial statements as a whole are free from material misstatement, whether due to fraud or error; allowing us to express an opinion that the financial statements are presented fairly, and in accordance with an applicable financial reporting framework. (Arens, J., & & Beasley, 2014) We have a responsibility to conduct this audit in accordance with established standards. These standards indicate that we should have a high, but not absolute, level of assurance that Apollo Shoe’s financial statements are free of material misstatements. However, it is possible that even when we conduct their audit in accordance with standards, we may fail to detect a material misstatement. Therefore, we have a responsibility to work to overcome judgment biases and to continually remind ourselves of the importance of maintaining appropriate...
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...I. II. TABLE OF CONTENTS Summary................................................................................................................... 1 Background .............................................................................................................. 2 A. The Examinations ................................................................................................ 2 B. Current Regulatory Requirements and Proposed New Rules and Rule Amendments With Respect to Credit Rating Agencies....................................... 4 III. The Ratings Process................................................................................................. 6 A. The Creation of RMBS and CDOs ...................................................................... 6 B. Determining Credit Ratings for RMBS and CDOs.............................................. 7 IV. The Staff’s Examinations: Summary of Factual Findings, Observations and Recommendations .................................................................................................. 10 A. There was a Substantial Increase in the Number and in the Complexity of RMBS and CDO Deals Since 2002, and Some Rating Agencies Appeared to Struggle with the Growth................................................................................... 10 B. Significant Aspects of the Ratings Process Were Not Always Disclosed ......... 13 C. Policies and Procedures for Rating RMBS and CDOs Can be Better Documented ..........
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...not apply to any subsequent exams, such as the ‘special’ exams (SPX) or the ‘Last to Complete’ exams (LTC) 4 Statistical Overview of Unit - Averages: Mid-Semester Test: 8.9 / 15 Presentations: 7.7 / 10 (77%) Essay: 8.9 / 15 (SFS now accessible through your My.Swinburne account) 5 (59%) (59%) Nature and Objectives of Auditing 6 Elements of an assurance engagement 1. Three-party relationship (i) Practitioner (auditor) (ii) Responsible party (preparer) (iii) Intended user (shareholders etc…) 2. Subject matter (what is being audited –> eg. fin. rpt) 3. Suitable criteria (against what -> eg.Acctg Stds) 4. Sufficient appropriate evidence (Enough quality) 5. Written assurance report Textbook page(s) 4 & 5 7...
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... IPOs also disappeared and this event led to the revelation other flaws in the market. It became apparent that the boom years had been accompanied by fraud. Corporations such as Enron, WorldCom, Tyco and Adelphia had a lot of misconduct in business principles. There was lack of fairness and integrity due to conflict of interest. Corporations focused on short-term goals. A lot of managers adjusted financial result to meet the projected results. Question 5: Compare and contrast management’s responsibility for the entity’s financial statements with the auditor’s responsibilities for detecting errors and fraud in the financial statements. Answer5: Managements are responsible for presenting fair financial statements in conformity with general accepted accounting principles and auditors are confined to express his or her opinion on the information provided. Auditors are responsible to check if managers are conforming to GAAP with no errors and materiality. Management and auditors both have to conform to GAAP. Question 9: What kind of organization is PCAOB, why was it formed, and what does it do? Answer 9: PCAOB is a quasi-governmental organization (government owned corporation) over seen by the SEC. Formed to provide governmental regulations of the standards used in conducting public company audits because of a perceived failure of the profession to adequately regulate itself. Question 10: What role does the SEC play in the establishment of accounting and...
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...Questions for Midterm Exam 1) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the: A) inherent risk. B) acceptable audit risk. C) statistical risk. D) financial risk. Answer: B 1) بمقياس لمدى رغبة مراجع الحسابات أن تقبل أن البيانات المالية قد يمكنه ماديا بعد اكتمال عملية المراجعة وقد تم إصدار رأي غير متحفظ: A) المخاطر الكامنة. ب) مخاطر المراجعة مقبولة. ج) خطر الإحصائية. د) خطر المالية. جواب: ب 2) A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called: A) control risk. B) acceptable audit risk. C) statistical risk. D) inherent risk. Answer: D بمقياس 2) لتقييم مراجع الحسابات لاحتمال أن هناك الأخطاء المادية في حساب قبل النظر في فعالية الرقابة الداخلية للعميل ويسمى: A) التحكم في المخاطر. ب) مخاطر المراجعة مقبولة. ج) خطر الإحصائية. مد) المخاطر الملازمة. جواب: D 3) When inherent risk is high, there will need to be: عند عالية المخاطر الكامنة، هناك حاجة إلى أن تكون: A) |A lower assessment of audit risk |More evidence accumulated by the auditor | |إجراء تقييم أقل من مخاطر المراجعة |المزيد من الأدلة المتراكمة لدى المراجع | |Yes |Yes...
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... The burden of communication rests with the successor auditor but the predecessor is required respond. The predecessor does have to get the client’s permission before making communication with successor auditor. The purpose of communication is to help the successor auditor evaluate whether to accept the engagement. 2. What is the purpose of the engagement letter? What is included in the engagement letter? Audit standards require that auditors document their understanding with the client in an engagement letter. It includes the engagement’s objectives, the responsibilities of the auditor and management, identification of the financial reporting framework used by management, reference to the expected form and content of the audit report, and the engagement’s limitations. It should also state any restrictions, deadlines and assistance to be provided by the client. 3. What does the auditor have to document about the audit strategy and plan? Documents the nature, timing and extent of the planned audit procedures to be used in order to comply with...
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...books and records so that we can do a thorough job and offer an opinion on the quality of the financial well-being of the Company. We will analyze the Accounts Receivable, Inventory, and Fixed assets of the company and the following describes the way we will attack this assignment. In the accounts receivable, the sales and billing procedures is a section that should call for its immediate consideration. Accounts receivable fraud usually starts with inaccuracies inside the billing procedure and can be looked at by taking a sample of client accounts receivable records and looking over the original transactions data towards the consumer balances. This procedure will reveal fake clients and receivables intended to make the business financial report stronger. The sales and billing procedure has to be accurate in order for the accounts receivable to be right (Wells, 2011). Another problem when the billing is being rectified is the stealing of the payments obtained on a client’s account. The theft usually happens between numerous client accounts where the first payment is taken and the following client’s payment is put towards to the first and the phase continues. To keep this fraud movement working, it’s going to take decent record keeping; but this could be uncovered rapidly if suitable client records are retained and assessed on a consistent basis can be shown fast. Discounting can be an additional part for fraudulent activity inside the accounts receivable practice. This can happen...
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