...Fund. As it is necessary to clarify my role to you, under the Superannuation Industry (Supervision) Act 1993 (the SIS Act) and Regulations, I wish to set out the detail of my terms of engagement as follows: 1. Audit of Financial Report In accordance, with section 113 of the Superannuation Industry (Supervision) Act 1993 (SISA), the financial report of a regulated superannuation fund must be audited by an approved auditor. The auditor must give the trustees an audit report on the financial report in the approved form within the prescribed time after the year of income to which the financial report relates. I direct your attention to the fact that the trustees are responsible for the maintenance of adequate accounting records and internal controls, the safeguarding of superannuation fund assets, the selection of accounting policies and the preparation of financial reports and returns. The trustees are required to keep minutes of meetings, reports and records of trustee changes for a period of at least 10 years. My audit will be conducted in accordance with Australian Auditing Standards. Those auditing standards require that I comply with relevant ethical requirements relating to auditing engagements and that I plan and perform the audit to obtain reasonable assurance that the financial report is free of material misstatement. In forming my opinion on the financial report, I will perform sufficient tests to obtain reasonable assurance that: the underlying accounting records...
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...Objectives, Advantages and Limitations of Auditing in a Globalized Business world There are two main objectives of auditing. The primary objective and the secondary or incidental objective. a. Primary objective – as per Section 227 of the Companies Act 1956, the primary duty (objective) of the auditor is to report to the owners whether the balance sheet gives a true and fair view of the Company’s state of affairs and the profit and loss A/c gives a correct figure of profit of loss for the financial year. b. Secondary objective – it is also called the incidental objective as it is incidental to the satisfaction of the main objective. The incidental objectives of auditing are: i. Detection and prevention of Frauds, and ii. Detection and prevention of Errors. Detection of material frauds and errors as an incidental objective of independent financial auditing flows from the main objective of determining whether or not the financial statements give a true and fair view. As the Statement on auditing Practices issued by the Institute of Chartered Accountants of India states, an auditor should bear in mind the possibility of the existence of frauds or errors in the accounts under audit since they may cause the financial position to be misstated. Fraud refers to intentional misrepresentation of financial information with the intention to deceive. Frauds can take place in the form of manipulation of accounts, misappropriation of cash and misappropriation of goods....
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...terms, and nature of services to be provided for this engagement. The audit will be conducted in accordance with generally accepted auditing standards in the United States and internationally. These standards require our company to plan and perform the audit to obtain assurance the financial information presented in the statements is free from errors or material misstatements whether unintentional or due to fraud. Our firm will provide reasonable, but not absolute assurance within the opinion at the end of the audit. Audits do have an inherent risk of material misstatements existing but escaping the examination of the auditors. This is unavoidable due to the limitations of accounting and inherent limitations of any internal control system. Included in the final audit report to management will be a letter outlining what material weaknesses our audit team has identified in both your company’s accounting practices and internal controls in detecting misstatements or errors in the financial information. The management of Apollo Shoes, Inc.’s has responsibility for the financial statements. They are also responsible for...
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...material modifications to make it conform with GAAP. Our audit will be conducted with the objective of our expressing an opinion on the financial statements. We will issue a written report upon completion of our audit of Oceanview Marine Company’s financial statements. Our report will be addressed to the board of directors of Oceanview Marine Company. We cannot provide assurance than an unqualified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph. We may reserve the right to decline is issue a report due to any reason caused by your party. Should such situation arise, we will notify you in writings. Our Resposibilities and Limitations An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend...
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...1. The auditor should agree upon the terms of the audit engagement with management or those charged with governance, as appropriate. (Ref: par. .A20– .A21) . The agreed-upon terms of the audit engagement should be documented in an audit engagement letter or other suitable form of written agreement and should include the following: (Ref: par. .A22–.A26) a. The objective and scope of the audit of the financial statements b. The responsibilities of the auditor c. The responsibilities of management d. A statement that because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk exists that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with GAAS e. Identification of the applicable financial reporting framework for the preparation of the financial statements f. Reference to the expected form and content of any reports to be issued by the auditor and a statement that circumstance may arise in which a report may differ from its expected form and content. (AU-C §210.12) 2. If the auditor concludes that the terms of the preceding engagement need not be revised for the current engagement, the auditor should remind management of the terms of the engagement, and the reminder should be documented. (Ref: par. .A33–.A34).( AU-C §210.13) 3. In order to establish whether the preconditions for an audit are present, the auditor should ...
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...the audit. In order to keep the overall audit risk of engagements below acceptable limit, the auditor must assess the level of risk pertaining to each component of audit risk. The model is: Audit Risk = Inherent Risk x Control Risk x Detection Risk Inherent Risk is one of the major items or topics that are a part of auditing and here is what I have found. It is considered to be a risk of material misstatement in the financial statements arising due to error or omission as a result of factors other than the failure of controls. Factors that may cause a misstatement due to absence or lapse of controls are considered separately in the assessment of control risk. Inherent risk is also generally considered to be higher where a high degree of judgment and estimation is involved or where transactions of the entity are highly complex. Inherent risk in the audit of a newly formed financial institution which has a significant trade and exposure in complex derivative instruments may be considered to be significantly higher exposure as compared to the audit of a well-established manufacturing concern operating in the relatively stable competitive environment. The next topic that I wanted to bring up with regards to audit risk just so happens to be Control Risk...
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...Internal Controls XXXXX XXXXXXX XACC/280 Financial Accounting Concepts and Principles January 2014 Internal Controls Internal Controls two primary goals are to protect their assets from employee theft, robbery, and unauthorized usage. Also to increase accuracy of the company financial information, reducing risk of errors whether they are accidental or intentional. Internal Controls also ensure compliance with federal, state, and local laws and regulations that affect the operations of a business. Internal Controls are the responsibilities of the company to put into place, the responsibility of the management to see they are kept in place, and the responsibility of the employees to adhere to. With Internal Controls they are classified as either preventive or detective. Preventive controls are designed to avoid error or irregularities from occurring. A few examples of preventive could be; separation of duties for cash handling by assigning different individuals to duties such as collecting cash, maintaining documentation, preparing deposits, and reconciling records. Detective controls are designed to identify an error or irregularity after it has occurred. These controls should be performed on a routine basis to identify any issues that pose potential risks to a company on a timely basis. A few examples are; an exception report detects and list incorrect or invalid entries or transactions; a comparison of validated Cash Receipt Vouchers to monthly account detail to detect...
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...Just for Feet, Case Study 1. Balance Sheets Just for FEET, Inc. | Balance Sheet | Years ending Jan 31st | | | | Current Assets: 1996 1997 1998 | Cash & Equivalents | 36.93% | 18.40% | 1.80% | Marketable Securities AFS | 9.04% | 0.00% | 0.00% | Accounts Receivable | 1.74% | 3.53% | 2.74% | Inventory | 35.47% | 45.97% | 58.01% | Other Current Assets | 0.56% | 1.50% | 2.65% | Total Current Assets | 83.75% | 69.40% | 65.20% | Property & Equipment, net | 14.61% | 21.08% | 23.29% | Goodwill, net | 0.00% | 8.05% | 10.31% | Other | 1.64% | 1.46% | 1.19% | Total Assets | 100.00% | 100.00% | 100.00% | Current Liabilities: | Short-Term Borrowings | 26.61% | 20.22% | 0.00% | Accounts Payable | 10.35% | 11.41% | 14.55% | Accrued Expenses | 1.46% | 2.07% | 3.60% | Income Taxes Payable | 0.11% | 0.30% | 0.13% | Current Maturities of LT Debt | 0.56% | 0.72% | 0.96% | Total Current Liabilities | 39.09% | 34.73% | 19.25% | LT Debt & Obligations | 2.76% | 5.48% | 33.51% | Total Liabilities | 41.85% | 40.21% | 52.75% | Shareholders' Equity: | Common Stock | 0.00% | 0.00% | 0.00% | Paid-In Capital | 50.69% | 48.76% | 36.20% | Retained Earnings | 7.47% | 11.03% | 11.04% | Total Shareholders' Equity | 58.15% | 59.79% | 47.25% | Total Liabilities & SH' Equity | 100.00% |...
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...strength of the company. Our preliminary judgment about Smacky Dog Food’s materiality is negative in respect to their Reliability of financial reporting: Management is responsible for preparing statements for inventors, creditors and other users. Income statements, balance sheet, and cash flow statements are not provided by management. We have conducted the audit in accordance with Generally Accepted Accounting Standards. By following these standards we will perform this audit so it will be free of material misstatements. An audit includes understanding the clients business and industry, assessing client business risk, performing analytical procedures, set materiality and assess acceptable audit risk and inherent risk, understanding internal control and assess internal control risk, and finally gather information to assess fraud risk. We will review all financial statements provided by our client to formulate an unbiased opinion on the company and its financial operations. As the auditor we provide that our opinion will be unbiased and we will maintain a high level of assurance. Given so as the auditor we cannot guarantee a perfect audit and thus there will be minor misstatements made during the audit procedures. During the audit we will...
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...ENGAGEMENT LETTER The Board of Directors Bank of America 100 North Tryon Street Charlotte, NC 28255 Dear Members of the Board: The purpose of this letter is to outline the terms of our engagement to audit the financial statements of Bank of America, which comprise the balance sheet as at December 31, 2013, and the statement of income, the statement of comprehensive income, statement of changes in shareholders equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Objective, scope and limitations Our statutory function as auditor of Bank of America is to report to the shareholders by expressing an opinion on Bank of America annual financial statements. We will conduct the audit in accordance with Canadian generally accepted auditing standards and will issue an audit report. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness...
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...Internal Controls Name XACC/280 September 4, 2011 Instructor Internal Controls Internal controls are used to help companies reach their goals and different objectives. On a basis of transactions, internal controls are actions which are taken to complete certain objectives set out. In my paper I will be discussing two primary goals of internal controls, the effects on internal controls caused by the Sarbanes-Oxley Act of 2002, stock price drop due to internal control deficiencies, and internal control limitations. In internal controls there a few goals, but the primary two are to guard assets from theft and unauthorized use. The two goals help to increase accounting records with reliability and accuracy. Internal controls are brought into place within companies and organizations achieving a goal and avoiding undue problems while understanding the focused target without resource loss. By the implementation and use these controls, management is able to adapt within the economic changes and competitiveness while making sure regulations and laws are abided by. In business there is a simple fact of life which is, everyone is not an honest person. In business this includes employees along with customers to the organization and or business. Internal controls which are implemented in a correct manner can help the company identify cost consuming employees with unethical behavior and poor management style. There are times that mistakes happen and are a true mistake or error....
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...Internal Control Topic List 1. What is internal control? 2. Components of internal control 3. Information about controls Learning outcomes On completion of this section you should be able to: • State the reasons for organisations having effective systems of controls • Identify factors which contribute to an effective control environment • Identify the components of internal control in both manual and IT environments • Identify types of control activity • Distinguish between general controls and application controls • Identify inherent limitations of a system of internal controls • Specify the composition of an audit committee Internal Control [pic] Internal control: ‘The process designed, implemented and maintained by those charged with governance*, management, and other personnel to provide reasonable assurance about the achievement of an entity’s objectives with regard to:- • Effectiveness and efficiency of operations • Reliability of financial reporting, • Compliance with applicable laws and regulations. The term “controls” refers to any aspects of one or more of the components of internal control. A key audit question is: “How does management control the business?” *Usually directors - remember the difference between exec and non-exec Company Objectives • To ensure it correctly reports its financial position to shareholders • To ensure it operates effectively and...
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... 2. Explain why there is a demand between types of assurance services * Users demand audited financial statements because of their remoteness from the entity, accounting complexity their incentives competing with those of the entity’s manager and their need for reliable information on which to base decisions. 3. Differentiate between types of assurance services * Financial Statement – provides reasonable assurance regarding GAAP * Compliance- Determine whether the entity has followed the rules * Operational Audit – Assessment of the efficiency and effectiveness of the operation. * Comprehensive- range of audit, which covers FS, compliance, and operational audit. * Internal-Independent service within the entity that evaluates control, procedures, and governance 4. Explain different level of assurance * Reasonable assurance- Assurance that provides high but not absolute assurance on the reliability of the subject matter * Moderate Assurance- Assurance the provides negative assurance on the reliability of the subject matter * Review/compilation- No assurance, minimal work has been done . 5. Outline different audit opinion Unmodified > modified > adverse Unmodified > modified > disclaimer * Unmodified- a clean audit opinion( fs are fairly presented) * We can give unmodified opinion with “emphasis matter” which results when an auditor issue and unmodified opinion but there is...
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...Chapter 2 Financial Statement Audits and Auditors' Responsibilities |Learning Check | 2.1 The ultimate objective of accounting is the communication of relevant and reliable financial data that will be useful for decision making. Accounting methods involve identifying the events and transactions that affect the entity. Once identified, these items are measured, recorded, classified, and summarized in the accounting records and reported in accordance with generally accepted accounting principles (GAAP). The accounting process is carried out by an entity's employees, and ultimate responsibility for the financial statements lies with the entity's management. The primary objective of an audit is to add credibility to management's financial statements. The typical audit performed in accordance with generally accepted auditing standards (GAAS) involves obtaining and evaluating evidence concerning management's financial statements. Auditing culminates in the issuance of an audit report that contains the auditor's opinion on whether the financial statements do in fact present fairly the entity's financial position, results of operations, and cash flows in conformity with GAAP. The auditor is responsible for forming and expressing an opinion on the entity’s financial statements. 2.2 Verifiability is primarily concerned with the availability of evidence. In an audit the auditor needs to obtain evidence to support conclusions about the fair presentation...
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...Internal Controls XACC280 Internal Controls Internal controls are implemented for protection. There are two goals that are important aspects of internal controls to keep the company protected. Assuring that the company’s assets are protected is one goal of internal controls. Some examples would be: stealing, embezzlement, and misrepresentation. The next reason that internal controls are implemented would be to make sure all accounting documentation/records are being kept in the appropriate way. This is to make sure careless mistakes are not being made and to address them if they are. “The Sarbanes-Oxley Act came into force in July 2002 and introduced major changes to the regulation of corporate governance and financial practice. It is named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main architects, and it set a number of non-negotiable deadlines for compliance. The Sarbanes-Oxley Act is arranged into eleven 'titles'. As far as compliance is concerned, the most important sections within these eleven titles are usually considered to be 302, 401, 404, 409, 802 and 906. An over-arching public company accounting board was also established by the act, which was introduced amidst a host of publicity” (2003). When the act was put into motion, its purpose was to address flaws in internal controls as they were. Its main implementation was to assure that the means a company uses to compile develop, and display financial information meets the appropriate...
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