...| | | |The objectives of the auditor are: | |To obtain appropriate audit evidence regarding the appropriateness of management's use of the going concern assumption in the preparation of the | |financial statements; | |To conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt | |on the entity's ability to continue as a going concern; and | |To determine the implications for the auditor's report | PART I – Identification of Events and Conditions |No. |Audit procedure |Comment and/or Ref. | |1. |Does management’s assessment of the entity’s ability to |N/A | | |continue as a going concern cover a period not less than | ...
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...PHILIPPINE STANDARD ON AUDITING 570 (REDRAFTED) GOING CONCERN (Effective for audits of financial statements for periods beginning on or after December 15, 2009) * CONTENTS Paragraph Introduction Scope of this PSA................................................................................................ Effective Date..................................................................................................... Objectives........................................................................................................... Requirements Risk Assessment Procedures and Related Activities.......................................... Evaluating Management’s Assessment.............................................................. Period beyond Management’s Assessment......................................................... Additional Audit Procedures When Events or Conditions Are Identified.......... Audit Conclusions and Reporting....................................................................... Use of Going Concern Assumption Appropriate but a Material Uncertainty Exists……………………………………….……… Use of Going Concern Assumption Inappropriate............................................. Management Unwilling to Make or Extend Its Assessment.............................. Communication with Those Charged with Governance.................................... Significant Delay in the Approval of Financial Statements............................... Application and Other Explanatory Material...
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...also audited management’s assessment including the Management’s Report on Internal Control over Financial Reporting, maintained by Apollo over the Financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The management of Apollo shoes is responsible for maintaining effecting internal control over financial reporting, its assessment of internal controls and for the financial statement. The responsibility of our firm is to express an opinion on the financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of Apollo Shoe’s, Inc. internal controls over financial reporting based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether there are effective internal controls in place over financial reporting. The audit of the financial statements including examination on a test basis with supporting evidence of the amounts and disclosures in the financial statements. Assessing accounting principles used by management and estimates made by management. Evaluating the financial statement presentation, overall. The audit of the internal control of financial reporting...
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...RISIRO BRIAN T C14123638W PROGRAM BSCAC LEVEL 2.1 COURSE CUAC 202 QUESTION 1 Discuss in detail both the purpose and the contents of the engagement letter INTRODUCTION Before the commencement of an engagement it is in the interest of both the auditor and client that the auditor sends an engagement letter.The auditor should obtain the acknowledgement and agreement of management and where necessary those charged with governance that they understand their responsibility.The auditor should only accept to audit financial statements only when he concludes that the applicable framework is acceptable and the audit should be conducted according to the...
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...Analysis of the WorldCom Internal Control Using the COSO Model The control environment 1. Integrity and ethical values Integrity and ethical values are the product of the entity’s ethical and behavioral standards, as well as how they are communicated and reinforced in practice. They include management’s actions to remove or reduce incentives and temptations that might prompt personnel to engage in dishonest, illegal, or unethical acts. They also include the communication of entity values and behavioral standards to personnel through policy statements, codes of conduct, and by example. In WorldCom, integrity and ethical values are absolutely abused. Specifically, Ebbers created a culture in which the legal function was less influential and less welcome than in a healthy corporate environment. He even did not include the company’s lawyers in his inner circle and appears to have dealt with them only when he felt it necessary. He let them know his displeasure with them personally when they gave advice-however justified-that he did not like. Under these special environment, Sullivan assured that they were not doing anything illegal and that he would take full responsibility for their actions. But actually, they were doing illegal actions totally. In addition, WorldCom’s growth through acquisitions led to a hodgepodge of cultures and people. These different cultures produced different ethical values that made the environment more complicated. Recommendations: If Ebbers...
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...Overview of PCAOB Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements Provided for use with Auditing and Assurance Services: An Integrated Approach, 12th edition Alvin A. Arens, Randal J. Elder, Mark A. Beasley Pearson Prentice Hall, Inc. INTRODUCTION The 12th Edition of Auditing and Assurance Services: An Integrated Approach, includes extensive coverage of key provisions of the Sarbanes-Oxley Act (the Act) and related Public Company Accounting Oversight Board (PCAOB) standards and rules applicable to the audits of financial statements and internal control over financial reporting for public companies. At the time the 12th Edition was released in March 2007, the PCAOB had issued Auditing Standard Nos. 1-4. On May 24, 2007, the PCAOB issued Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements (AS5). Subject to SEC approval, AS5 is effective for audits of fiscal years ending on or after November 15, 2007. AS5 supersedes PCAOB Auditing Standard No. 2 (AS2), An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements, which was issued in June 2004. The PCAOB and the Securities and Exchange Commission (SEC) have closely monitored the implementation of AS2 to evaluate the effectiveness of public company auditors in applying the provisions to audits...
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...Introduction- What is a financial statement analysis: Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis. Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Objectives- What manager need to analysis Financial statement: 1. Prepare and interpret financial statements in comparative and common-size form. 2. Compute and interpret financial ratios that would be most useful to a common stock holder. 3. Compute and interpret financial ratios that would be most useful to a short-term creditor 4. Compute and interpret financial ratios that would be most useful to long -term creditors. 1.Assessment Of Past Performance Past...
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...Management Representations 1941 AU Section 333 Management Representations (Supersedes SAS No. 19.) Source: SAS No. 85; SAS No. 89; SAS No. 99; SAS No. 113. See section 9333 for interpretations of this section. Effective for audits of financial statements for periods ending on or after June 30, 1998, unless otherwise indicated. Introduction .01 This section establishes a requirement that the independent auditor obtain written representations from management as a part of an audit of financial statements performed in accordance with generally accepted auditing standards and provides guidance concerning the representations to be obtained. Reliance on Management Representations .02 During an audit, management makes many representations to the auditor, both oral and written, in response to specific inquiries or through the financial statements. Such representations from management are part of the audit evidence the independent auditor obtains, but they are not a substitute for the application of those auditing procedures necessary to afford a reasonable basis for an opinion regarding the financial statements under audit. Written representations from management ordinarily confirm representations explicitly or implicitly given to the auditor, indicate and document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding concerning the matters that are the subject of the representations. [Revised, March 2006, to reflect conforming...
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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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...competitive position and its effect on the client’s business risk. These developments have been referred to as the strategic systems auditing (SSA audits) approach to auditing. An SSA audit can be characterized as a top-down approach that starts with understanding the corporate strategy and the business as a whole to determine the effects on the financial statements. A key innovation in the SSA audit was that the auditor must try to understand the business as management runs it, but with an objective point of view. In contrast, the traditional financial statement audit tended to focus on a bottom-up approach, or gathering evidence on individual transactions and aggregating them to the financial statement level. The strategic systems approach is an application of systems thinking, as discussed in the chapter. The audit team obtains an understanding of management’s strategy by interviewing the senior managers and the managers of the various business units in the organization. The auditors learn about the business objectives (e.g., cost leadership, differentiation, market share) and strategies that management has in place to meet those objectives. The appendix provides an introduction to frameworks auditors can use for this strategic analysis. It covers two commonly used approaches: an environment-centred approach (Political, Economic, Social, and Technological analysis [PEST] analysis of political-legal, economic, social, and technological factors) and the firm’s position in the industry...
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...to be a publicly traded company in the near future. Our firm needs to evaluate the internal controls To determine where we are on the continuum of internal control compliance, where they need to be and how to close the gaps. One means of assessing readiness is to conduct a “dry run” to detect early warning signs of control deficiencies. A dry run will assess identified financial reporting risks, processes and controls, as well as control designs, against leading practices. We have gathered and provided information of internal control, also arranging the necessary the data into 3 aims of this case study: 2.Background Study LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The president wants to be aware of any new regulations required of his company if they go public, so he met with a colleague of yours at a local restaurant. The president of the company explained the current system of internal controls to your colleague. Your colleague has since been promoted to a tax position so she has passed on the information below so you can generate recommendations for the partner at your accounting firm to share with the president of LJB Company. Since LJB Company is a relatively lean organization, they have a lot of faith in their long-term employees. They have one accountant who serves as treasurer and controller, which streamlines...
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...Going Concern Group 4 ACCT 632, Advanced Financial Acct Theory Liberty University Aug 7, 2013 GOING CONCERN Summary of Going Concern current exposure draft Comparison and Contrast of current Going Concern theory and standards 1 Guidance provided by AU Section 341 2 Guidance provided by 17 U.S.C. §229.303 3 Proposed guidance of exposure draft Comparison and Contrast of U. S. GAAP and IFRS with respect to Going Concern 1 Current Going Concern variations between U. S. GAAP and IFRS 2 Variations between proposed changes to Going Concern issues The Benefits and Costs of a Going Concern Amendment 1 Providing preparer guidance 2 Making management responsible 3 Addressing investor concerns Provisions in light of the FASB’s Conceptual Framework 1 Understandability 2 Decision usefulness 3 Relevance 4 Comparability Response to Going Concern Exposure Draft 1 Proposed changes or corrections to the current exposure draft References Going Concern People go into business for many reasons, but no one goes into business with the expectation that they are not going to be successful. For that reason, acquisition is made for those assets that are needed to run the company with the understanding that there will be no need to arrange for early liquidation. Because there is no prediction to inform someone that their business may or may not make it, managers must rely...
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...system helps a department to: * Promote orderly, economical, efficient and effective operations. * Produce quality products and services consistent with the department’s mission. * Safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud. * Promote adherence to statutes, regulations, bulletins and procedures. * Develop and maintain reliable financial and management data, and accurately report that data in a timely manner. What are the components of an internal control system? The Committee of Sponsoring Organizations (COSO) internal control framework identifies five inter-related components: Control Environment: The control environment, sometimes referred to as “tone at the top”, is the foundation for all other components of internal control. The control environment is influenced by management’s philosophy, operating style, integrity, ethical values, and commitment to competence. If this foundation is strong, if the control environment is positive, the overall system of internal control will be more effective. Risk Assessment: Risk assessment is the identification, analysis, and management of risks relevant to the achievement of the department’s goals and objectives. Risks include...
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...personnel which is vital for the success of the company. • Management’s Philosophy and Operating Style – The Corporation’s management is somewhat conservative in terms of accounting principles and practices. Weaknesses • Board of Director or Audit Committee Participation – New Phone Inc.’s Board of Directors and Audit Committee are not very active, which is important to maintain good internal controls and accurate financial reporting. Generally, auditors report their findings directly to the audit committee, who in turn reports to the Board of Director. The audit committee is also responsible for identifying potential risks. • Organizational Structure - New Phone Inc.’s organizational structure places the corporation at risk for unethical behavior by its upper management since it allows its individual divisions to operate autonomously. Managers are in a position to make decisions based solely on the performance of their division with little regard for the financial integrity of the entire organizational. In addition, there is little monitoring of the individual division unless they are underperforming. However, a department or division that is consistently performing at a high level should draw attention as well, since this could indicate manipulation of the financial data. • Integrity and Ethical Values – Although New Phone Inc.’s management has high integrity, their decision to based management’s...
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...expectations to problematic situations. They are looking to implement procedures that can ensure the company can control their systems. The company has divisions not always following the correct processes, such as existing safeguards that can cause inventory control to be nonexistent and cash flows to be inaccurate. When the departments are not working together in an effort to complete goals and follow policies the company needs to implement internal controls. One of the requirements that the SEC has for management is that they take “responsibility for establishing and maintaining adequate internal control over financial reporting” (U.S. Securities and Exchange Commission, 2013, Summary). What this means is that to be compliant with Section 404 of the Sarbanes-Oxley Act (SOX) the company will need the assistance of an internal auditor to help management’s assessment and ensure they are within compliance. Working System The main requirement for an internal control system is to have the right type of management in place. The management has to be willing to set the right kind of tone for the company. Management will need to create an environment within the company that ensures ethical values and integrity is met. The purpose of internal controls is to design safeguards for company assets, set procedures to control cash, and protect...
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