...Course Schedule Course Modules Review and Practice Exam Preparation Resources Module 1: Conceptual issues in assurance Overview This module builds on the fundamental concepts of auditing and other assurance services introduced in your prerequisite auditing course. It begins with an overview of the key drivers in the demand for audits, and then surveys current challenges and issues such as the audit and regulatory environment and the expectation gap. You will also study issues related to the economics of auditing and their impact on auditor motivation and standard-setting; in the process, you will consider different perspectives on protecting the public interest and the public accountant’s role in helping to advance the profession. The various topics integrate information sources related to research in the field and readings from the Ethics Readings Handbook (ERH) , drawing on concepts from your prerequisite accounting theory course. In AU2 , you will study a wide variety of technical, practical, and theoretical material. This module lays the foundation for exploring some of the more difficult areas of professional judgment you will encounter as you progress through the course. When faced with issues that challenge your professional judgment, you are encouraged to think back to the concepts studied in this module to help frame your decision making. Please be sure that you have purchased the CPA Canada Handbook, CGA Student Edition mentioned in the course introduction...
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...audit report. After much research, we have found the following recent developments in audit report; 1. Key Audit Matters * In the future, effective for audits of financial statements for periods ending on or after 15 December 2016, the auditor’s report of listed entities will include a section on Key Audit Matters (KAM). A new auditing standard, ISA 701, has been issued to give effect to this. KAM is defined as those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial statements of the current period. 2. Transparency in Audit Procedure * Superior transparency about the audit procedure is very much expected in the auditor’s report. This will effect ISA 700,701 and 720. 3. Addressing disclosures * The revised standard Addressing Disclosures in the Audit of Financial Statements aims to focus auditors more explicitly on disclosures throughout the audit process and drive consistency in auditor behaviour in applying the requirements of the ISAs. 4. Going Concern * The changes in auditing standards require auditors to raise certain going concerns flags in auditor’s report. This will be done if; a) Management uses going concern basis of accounting inappropriately in preparing its financial statements. b) If management did not adequately disclose about material uncertainties. c) Where a material uncertainty exists, which has been adequately disclosed by the entity, the auditor’s report must...
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...Can Auditors be Truly Independent With the globalization of investment market and enhanced regulation, independent audits of the financial statements of public companies are one of the most valued contributor to the confidence of the investors. It is crucial that auditors could provide reasonable assurance of the fair presentation of a company’s financial statements. In the past decades, especially with the enactment of Sarbanes-Oxley Act of 2002, auditors are required to comply with more strict regulations to restore investor’s confidence that was compromised by the scandals such as Enron. To discuss whether auditors can be truly independent, it is of necessity to explain what requires to be independent as auditors. The definition of independence does not require the auditor to be completely unbiased when it comes to make audit decisions. In stead, independence requires auditors to be not only independent of mind also independent in appearance. With this being said, independence means that auditors have to make an objective assessment of his or her objectivity and to support user reliance on the financial reporting process and to enhance capital market efficiency. However, it is not that simple to be ethical in public accounting profession. According to AICPA Code of Professional Conduct, there are mainly five potential threats to auditor independence: intimidation threat, self-interest threat, self-review threat, advocacy...
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...Gaviola, Harold Dave B. BSA-V Assignment in COMED421/0180/8:30-9:30PM PSA 401: Auditing in a Computer Information Systems Environment - The increasing availability of computer-based accounting systems that is capable of meeting both functional and economic circumstances of even the smallest entity impacts on the audits of those entities. Small entities’ accounting systems often make use of personal computers. Philippine Auditing Practice Statement 1001, “CIS Environments—Stand-Alone Personal Computers” gives additional guidance regarding the special considerations of such an environment. - Small entities are likely to use less sophisticated hardware and software packages than large entities (often “packaged” rather than developed “in house”). Nevertheless, the auditor has sufficient knowledge of the computer information system to plan, direct, supervise, and review the work performed. The auditor may consider whether specialized skills are needed in an audit. - Because of the limited segregation of duties, the use of computer facilities by a small entity may have the effect of increasing control risk. For example, it is common for users to be able to perform two or more of the following functions in the accounting system. • Initiating and authorizing source documents. • Entering data into the system. • Operating the computer. • Changing programs and data files. • Using or distributing output. • Modifying the operating systems. - The use of computer information...
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...Harmonization of the Auditor’s Report Jagdish S. Gangolly State University of New York at Albany Mohamed E. Hussein University of Connecticut Gim S. Seow University of Connecticut October 14, 1996 Revised, January 31, 1997 Revised, September 9, 1998 We acknowledge the use of foreign annual reports at Harvard University’s Baker Library, and the many hours that our research assistant K. Tam spent there. We would like to thank N. Barsky, M. Bongiovanni, T. Clausen, D. Dekadjevi, Y. Eisler, R. Fermin, F. Kapmeier, and H. Lee for their help with data collection, analyses, and translations into the English language. We are also grateful to the two anonymous referees and participants at the AAA/KPMG Peat Marwick International Accounting Research Conference and the accounting workshop at the University of Connecticut for their valuable comments and suggestions. Harmonization of the Auditor’s Report 1. Introduction The globalization of capital markets and the growth of international capital flows have heightened the significance of cross-national comprehension of corporate financial reports as well as the associated audit reports. The accounting literature is replete with assessments of the harmonization efforts and the international differences in the financial accounting area (Nair and Frank, 1981; Evans and Taylor, 1982; McKinnon and Janell, 1984; Doupnick and Taylor, 1985; Nobes, 1987; Archer, et. al., 1989; and Guenther and Hussein, 1995). However, there have been...
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...Vol. 6(1), pp. 1-18, April 2014 DOI: 10.5897/JAT2013.0127 ISSN 2141-6664 Copyright © 2014 Author(s) retain the copyright of this article http://www.academicjournals.org/JAT Journal of Accounting and Taxation Full Length Research Paper Auditors’ perceptions on impact of mandatory audit firm rotation on auditor independence –Evidence from Bahrain Kousay Said* and Hussein Khasharmeh Department of Accounting, College of Business Administration, University of Bahrain, P.O. Box: 32038, Kingdom of Bahrain. st th Received 21 November 2013; Accepted 13 February 2014; Published April 2014 The current study examined several issues regarding auditor independence from the perspective of an emerging market such as Bahrain. Factors affecting the ability of auditors to remain independent include long audit tenure, financial dependence on a single audit client, non-audit services provided to audit clients, ex-auditor employment with an audit client and the existence of audit committees. It is therefore timely to examine the importance of auditor independence in the provision of reliable and credible financial information. The current study uses a questionnaire survey to examine auditors’ perceptions of the impact of mandatory audit firm rotation on auditor independence. The results of the study revealed that the majority of auditors agreed that MAR could safeguard auditor independence. The results also reveal that there is a significant relationship between...
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...financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust. So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future. The Beginning of a New Era I am pleased – indeed proud – to announce that in July the IAASB published its Exposure Draft “Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs).” The IAASB...
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...ISSUES IN ACCOUNTING EDUCATION Vol. 26, No. 3 2011 pp. 547–568 American Accounting Association DOI: 10.2308/iace-50004 Koss Corporation Case: Trouble in Brew City Brian Daugherty and Daniel G. Neely ABSTRACT: This instructional case provides auditing students an opportunity to examine an interesting real-life embezzlement and financial statement fraud occurring at a publicly traded company in the post-Sarbanes-Oxley (SOX) era. The case focuses on independent auditors’ and senior management’s reporting responsibilities related to internal control over financial reporting involving smaller public companies (nonaccelerated filers). While all public companies are subject to external auditor and management attestation on the effectiveness of internal control over financial reporting following SOX, the Securities and Exchange Commission (SEC) granted nonaccelerated filers numerous extensions for the effective date of required auditor attestation. In 2010, President Obama signed legislation to permanently exempt nonaccelerated filers from auditor attestation. The case also highlights inherent risk assessments by the independent auditor when one individual holds multiple C-level titles (Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, etc.) within the organization concurrent with membership on the board of directors, and requires students to recommend internal control policies and procedures designed to prevent or detect the embezzlement...
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...associated with gaining information about financial systems and the financial records of a company or a business (see financial audit[->5]). However, recent auditing has begun to include other information about the system, such as information about security risks, information systems performance (beyond financial systems), and environmental performance. As a result, there are now professions conducting security audits, IS audits, and environmental audits[->6]. In financial accounting[->7], an audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person known as auditors or accountants[->8], who then issue an auditor's report[->9] based on the results of the audit. Such systems must adhere to generally accepted standards set by governing bodies regulating businesses; these standards...
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...Course Schedule Course Modules Review and Practice Exam Preparation Module 1: Conceptual issues in assurance Overview This module builds on the fundamental concepts of auditing and other assurance services introduced in your prerequisite auditing course. It begins with an overview of the key drivers in the demand for audits, and then surveys current challenges and issues such as the audit and regulatory environment and the expectation gap. You will also study issues related to the economics of auditing and their impact on auditor motivation and standard-setting; in the process, you will consider different perspectives on protecting the public interest and the public accountant’s role in helping to advance the profession. The various topics integrate information sources related to research in the field and readings from the Ethics Readings Handbook (ERH) , drawing on concepts from your prerequisite accounting theory course. In AU2 , you will study a wide variety of technical, practical, and theoretical material. This module lays the foundation for exploring some of the more difficult areas of professional judgment you will encounter as you progress through the course. When faced with issues that challenge your professional judgment, you are encouraged to think back to the concepts studied in this module to help frame your decision making. Please be sure that you have purchased the CPA Canada Handbook, CGA Student Edition mentioned in the course introduction, as it is required...
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...CHAPTER 1 INTRODUCTION 1.1 Research Background The auditor’s roles are to provide an opinion on financial statement and to ensure that the statements are based on true and fair image of company performance to the stakeholders. They are authorized in checking the accuracy of business records. Opinions given by the auditor gives an added credibility to the financial statements (Maqableh, 2014). Commonly, investors often rely on financial statements provided by auditor in making investment judgement and increase the productivity of financial markets. Financial statements provided by the auditors are often reviewed as credible, unbiased opinion that truly reflects the company financial positions. There’s no doubt that auditor independence is the core of auditing profession when establishing its objectivity and integrity. Auditor independence, in particular, indicates the ability of an auditor to disregard any influence or control when conducting an opinion (AAA, 1973). Therefore, auditor must be, and must be seen to be independent of company management. Lack of independence causes audits to be considered to have little value (Johnstone, Sutton, & Warfield, 2001). This is further supported by Elliott and Jacobson (1998) that a particular interest may trigger a risk that could weaken the outcome of the audit which in turn impairs the auditor independence. Hence, independence is fundamental to the purpose served by auditors (Moore et al., 2002). This study is limited to...
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...Auditor Independence and Non-Audit Services: A Literature Review Vivien Beattie University of Stirling and Stella Fearnley University of Portsmouth TABLE OF CONTENTS Page List of tables and list of figures About the authors v vi List of abbreviations vii Executive summary ix Part 1 Auditor independence 1 Introduction 1 1.1 1 1.2 The ‘problem’ of non-audit services (NAS) 1 1.3 The current UK regulatory and professional environment 2 1.4 Motivation for this study 3 1.5 2 The role of audit in regulating capital markets Structure of report 3 Auditor independence 4 2.1 Introduction 4 2.2 Definitions of auditor independence 4 2.3 Economic models of auditor independence not including NAS 5 2.4 Models of auditor pricing and independence in the presence of NAS 5 2.5 2.6 Economic power models of auditor independence Moral psychology, ethical reasoning and independence 8 8 2.7 Broader based studies into auditor decision making 9 2.8 Summary and comments 11 Part 2 Current regulatory frameworks 3 Auditor independence and NAS: analysis of current regulatory frameworks 3.1 Introduction 13 13 3.2 Regulation of auditor independence 13 3.3 Independence in professional and legal regulatory frameworks 13 3.4 3.5 Independence and NAS Overall economic dependence 19 22 3.6 Small companies 22 ...
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...TEACHING NOTES FLAT CARGO BERHAD: AN AUDITOR’S CONUNDRUM ZAKIAH MUHAMMADDUN MOHAMED TAKIAH MOHD ISKANDAR SYNOPSIS Flat Cargo Berhad (hereafter referred to as FCB) was one of the largest air freight companies in Malaysia. It provided freight services to several government linked companies, including Freight Malaysia Bhd. The company began its operations in November 1997 with two aircrafts to provide overnight air express transport services to Singapore for Freight Malaysia Bhd. Its air express market’s impressive growth paralleled with that of its 1997-2004 expansion plans. On 15 September 2001, FCB was listed on Bursa Malaysia. It had several subsidiaries, which included FC Spare Sdn Bhd, Cargo Management Sdn Bhd, FCB (SPV), Cargo Air Services Sdn Bhd and FC Air Ltd. The company’s head office was located in Selangor. Their main activities covered air transportation services, aircraft ground handling services, aircraft engineering, technical and maintenance services, trading and leasing of aircraft and supplying of aircraft spare parts and accessories. Kencana & Associates served as FCB’s auditors. During their audit of the 2006 accounts, the auditors identified several discrepancies. They incurred a number of auditing difficulties, i.e. the inability to verify aircrafts, returned debtors’ confirmation letters, unsupported sales transactions, improper amounts of recorded loan, and unverified abnormal items. The situation posed reconciliation problems to the auditors with...
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...“A STUDY ON BANK AUDITING” BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V (2013-14) SUBMITTED BY: ANERI SHAH ROLL NO - 88 PROJECT GUIDE: PROF. SONALI DEOGIRIKAR K.J SOMAIYA COLLEGE OF ARTS,& COMMERCE, VIDYAVIHAR (EAST), MUMBAI-400077 K.J.SOMAIYA COLLEGE OF ARTS, & COMMERCE, VIDYAVIHAR (EAST), MUMBAI – 400077 PROJECT ON: “A STUDY ON BANK AUDITING” BACHELOR OF COMMERCE (B&I) SEMISTER V (2013-2014) Submitted In Partial Fulfillment of the requirements For the Award of the Degree of Bachelor of Commerce- Banking & Insurance By Ms. ANERI SHAH ROLL NO.88 K.J.SOMAIYA COLLEGE OF ARTS, & COMMERCE, VIDYAVIHAR (EAST), MUMBAI-400077 CERTIFICATE This is to certify that Ms.ANERI SHAH of B.com. Banking & Insurance Semester V (Academic Year) 2012-2013 has successfully Completed Project on “A STUDY ON BANK AUDITING” under the guidance of PROF.SONALI DEOGIRIKAR (Mrs.SMITA DAYAL) (Dr.SUDHA VYAS) Course co-ordinator Principal INTERNAL EXAMINER EXTERNAL EXAMINER (Mrs. SONALI DEOGIRIKAR) Project Guide DECLARATION I, Ms. ANERI SHAH the student of B.com - Banking & Insurance - Semester V (2013-2014) hereby declares that I have completed Project on “A STUDY ON BANK AUDITING”. Wherever the data/information has been taken from any book or other sources have been mentioned in bibliography. The information submitted is true and original to the best of my knowledge. Student’s Signature Ms. ANERI SHAH (ROLL...
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...Generally Accepted Auditing Standards Paper Name Institution Generally Accepted Auditing Standards Paper Recently, the need for enhanced auditing regulations has increased. This has been orchestrated by the demand from the public for an increase in the regulation of corporate accounting. In particular, following a number of scandals that have befallen major companies leading to their bankruptcy, investors have been keen on the auditing standards as they do not wish to risk their money. The aim of this paper is to discuss the elements of GAAS, as a set of auditing standards that are generally used in the U.S.A. The paper will specifically examine how these standards are applied in financial and compliance audits. It will also highlight the impact that the PCAOB and SOX have had on the auditing of public companies. The extra requirements imposed on auditors by the PCAOB and the SOX will also be discussed. In the later years of 1940, members of the AICPA, an institution tasked with overseeing accounting standards in the U.S. then, came up with a number of standards that were to be used by auditing professionals (Kinyo, 2013). The standards were afterward included into Statements on Auditing Standards, commonly known by the abbreviation, SAS. They consist of ten generally accepted standards for auditing, which are categorized into three groups. The first category consists of general...
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