...c 1.) Which item is not included in the General Principles governing the audit of financial statements? a.The auditor should comply with the relevant ethical requirement. b.The auditor should exercise professional judgment. c.The auditor should conduct an audit in accordance with Philippine Accounting Standards. d.The auditor should plan and perform the audit with an attitude of professional skepticism. d 2.) Which of the following choices is not the reason for conducting an audit? a. Expertise b. Financial Consequences c. Remoteness d. Justification a 3.) The audit function operates within a theoretical framework. Choose the incorrect statement regarding the Theoretical Framework of Auditing. a. There should be long-term conflict between the auditor and the client management. b. The audit operates on the assumption that all financial data are verifiable. c. An audit benefits the public. d. What was held true in the past will continue to hold true in the future in the absence of known conditions to the contrary. a 4.) An auditor only provides reasonable assurance. Which of the following reasons supports such idea? a. Because inherent limitations exist in regards the client's accounting and internal control systems. b. Because auditors assume that most assertions presented by the client management are not verifiable. c. Because most auditors do not follow the Philippine Standards on Auditing. d. All of the above. b 5.) Which one of the...
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...to the many scandals in corporate financial reporting, the United States Congress passed legislature in 2002 that required publicly traded companies to contain within each annual report an internal control report. The internal control report requires companies to state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The internal control report must also contain an assessment of the effectiveness of the internal control structure and procedures of the issuer for financial reporting. These rules are referred to as and contained in Section 404 of the Sarbanes Oxley Act (“SOX”). This paper will touch upon an introduction to the SOX Act,...
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...Auditor’s Responsibility when Issuing a Report Abstract The objective of an Independent auditor is to render an opinion about whether the financial statements of a company, legal entity or an organization have been fairly presented in all material respects and in accordance to the generally accepted auditing standards. In expressing an auditor’s opinion, they will typically issue one of four types of reports, an unqualified report, qualified report, an adverse opinion, or a disclaimer of opinion. In contrast, a qualified report indicates that the auditor has concerns about matters affecting the financial statements (this could include the client’s accounting policies or the method of their application or the adequacy of financial statement disclosure) or the limited scope of the auditor’s work. An adverse report is issued when an auditor “has concluded that the audited financial statement do not fairly represent the organization's financial position or financial performance, and that there are significant departures from GAAP” (Schmidt, 2013). A disclaimer of opinion also called disclaimer of report is issued when the auditor has not been able to obtain the sufficient audit evidence on which to base their opinion. Any of the reports issued by an auditor can bring legal consequences against the auditor and/or the firm they are employed with. Auditor’s Responsibility when Issuing a Report The objective of an Independent auditor is to render an opinion about whether the...
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... Auditing This inquiry will exemplify what the staff should anticipate auditors to do should auditors come into a division as part of an organizational – wide audit prior to issuing an audit opinion for the organization’s financial report. What precisely can an auditor ascertain from the examination of an organization’s financial report, and what can the audit provide? According to Merriam-Webster, 2014 an audit is a stylized scrutinization and verification of an organization’s or individual’s financial reports or financial position. This procedure is deemed crucial for the verification of the exactness of an organization’s financial reports. Based on information provided by Epstein, 2014 the audit process incorporates three instrumental gradations, interpreting the extent of the audit, executing fieldwork, and finally writing the audit report. In interpreting the extent of the audit, the auditor essentially has an encounter with top management and an internal council of the board of directors. The audit may embody a consummate inspection of the organization’s functions, or merely centralize on just a solitary aspect. This is commonly ascribed to as a limited scope audit. Executing fieldwork occurs when the auditor sojourns an organization’s headquarters and installations to ascertain whether the internal controls debated at the organizational top levels are implemented decorously. Furthermore...
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...Public Company Accounting Oversight Board Bylaws and Rules – Standards – AS3 AUDITING STANDARD No. 3 – Audit Documentation June 9, 2004 AUDITING AND RELATED PROFESSIONAL PRACTICE STANDARDS Auditing Standard No. 3 – Audit Documentation [Effective pursuant to SEC Release No. 34-50253; File No. PCAOB-2004-05, August 25, 2004] 302 As of February 15, 2005 Public Company Accounting Oversight Board Bylaws and Rules – Standards – AS3 Auditing and Related Professional Practice Standards Auditing Standard No. 3, Audit Documentation [supersedes SAS No. 96, Audit Documentation] Introduction 1. This standard establishes general requirements for documentation the auditor should prepare and retain in connection with engagements conducted pursuant to the standards of the Public Company Accounting Oversight Board ("PCAOB"). Such engagements include an audit of financial statements, an audit of internal control over financial reporting, and a review of interim financial information. This standard does not replace specific documentation requirements of other standards of the PCAOB. Objectives of Audit Documentation 2. Audit documentation is the written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise. Audit documentation also facilitates the planning, performance, and supervision of the engagement, and is the basis for the review of the quality...
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...Complete overview of an Audit Executive summary A financial audit refers to the verification of the financial statements of a company by an audit firm in order to express a professional opinion regarding their credibility. This process begins when a client approaches the auditor if deemed reputable the auditor accepts he begins by planning how to carry out the audit. This is done by assessing several factors such as risk, materiality etc. and then obtaining feedback in order to draw up the audit plan. At this point an audit team is assembled based on the audit strategy who visit the clients premise to carry out the procedures agreed upon in the planning stage through practical work or field work. Once enough evidence is accumulated to support the auditor’s opinion a draft audit report is drawn up. The client is contacted after this and feedback is obtained to make final necessary adjustments. Once finished the final audit report is issued which expresses the auditors professional opinion and recommendations, depending on the issues at hand a follow-up review may be carried out afterwards to see clients progress in adopting the suggested changes thus concluding the audit process. Table of Contents Particulars | Page # | Introduction | 3 | Stage 1: Planning | 3 | Step 1: Notification/Engagement Letter | 4 | Step 2: Audit Strategy | 4 | Step 3: Initial Meeting | 4 | Step 4: Planning Analytical Procedures | 5 | Step 5: Risk, Materiality and Control assessment...
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...Audit Problems ACC 623 Test 1 Review I) Intro to Auditing a. The Need for High quality Information: i. Financial information is relied upon by investors to make their investment decisions, creditors to make lending decisions, and by other parties that include vendors, customers, and potential merger or acquisition partners. It is extremely important that this information be reliable since significant sums of money are at stake in these investment and lending decisions. ii. A user of the financial statements of an entity who views the information they obtain as being low quality, or risky, will demand a higher return for his or her investment in that entity. 1. Risk premium: the difference between the return demanded by the investors and the return that would be demanded in the absence of any associated risk iii. Low quality information can be caused by either intentional or unintentional misstatements of that information. 2. Unintentional misstatements in the financial statements often occur due to weak internal controls, unqualified staff, human judgment errors, or lack of attention to detail in the financial reporting process. 3. Mgt, who prepare the financial statements, have significant incentives to intentionally misstate the financial statements to make the company appear more profitable than it is a. Moral hazard: situation in which one party gets involved in a risky event...
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...of an audit report. An audit report is a crucial part in the auditing process. It is a guide for users of the financial information. Auditors issue opinions on the financial statements based on certain criteria. The main thing is if the financial statements are presented in accordance to GAAP. Also, modifications can occur after the opinion is issued. Modifications vary depending on the issue at hand. Changes in principles or a report involving other auditors are a few. More will be addressed in the paper. An audit report is different is many ways. Even for one company, the audit report may not be the same every year. Modifications and Opinions in Audit Reports Every publicly traded company gets audited. Pop Iuliana (2012) says, “The purpose of an audit is to improve the degree of trust of the users across the financial situations” (p.454). Companies must present their financial statements in accordance to Generally Accepted Accounting Principles (GAAP). The final stage of an audit is writing an audit report. An audit report “expresses an opinion over the audited financial situations so that any user of this information is able to take decisions based on it” (Iuliana, 2012, p. 453). A standard audit report contains eight parts. The eight parts are report title, audit report address, introductory paragraph, management’s responsibility, auditor’s responsibility, opinion paragraph, name and address of CPA firm, and audit report date...
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...Report on Secretarial Standards Parth Haldia Introduction ! The Institute of Company Secretaries of India (ICSI) has also long back introduced some set of rules and norms, which are supplementary to the Companies Act, 1956, called as Secretarial Standardsí and popularly termed as SS. ! ICSI has been the first professional body in the world to start the process of setting Secretarial Standards for integration, harmonization and standardization of corporate secretarial practices. International Federation of Company Secretaries (IFCS), formed with the efforts of ICSI, decided to form an International Secretarial Standards Board which will formulate international secretarial standards to spread good corporate governance discipline across national borders. ! Companies follow diverse secretarial practices and, therefore, there is a need to integrate, harmonize and standardize such practices so as to promote uniformity and consistency. The Standards were always recommendatory in nature. With the growing corporate scenario a need was felt to standardize the secretarial practices so the Standards were thereafter recommended to be made mandatory first somewhere in 2006. Many members of the Institute and big corporate houses were in favour of the SS being made mandatory. Many corporate houses had even started adopting such standards so it was therefore understood that all can therefore adopt and follow the same. Moreover, the members and council wanted the SS to be treated...
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... oversees auditors of companies. The PCAOB oversees audits including reports of compliance to promote the protection of investors. The Securities and Exchange Commission (SEC) has authority over The Public Company Accounting Oversight Board that includes approval of the PCAOB’s budget, standards, and rules. The PCAOB is responsible for setting professional practice standards for accounting firms in regards to preparation and issuing audit reports. The Financial Accounting Standards Board (FASB) establishes accounting standards and financial reporting. The FASB is in the private sector to govern preparation of financial reports by entities that are not government. The FASB are also under the authority of the Securities and Exchange Commission (SEC). The standards set by the FASB are executed to serve the public. The FASB sets the characteristics, objectives, and other concepts of economy to determine the information that is to be included in financial statements and how to communicate the information to the interested individuals. The FASB regulates sound accounting principles and the appropriate content that should be included in a financial statement. The International Accounting Standards Board (IASB) establishes accounting standards internationally. The IASB is based in London and is a group of 15 experts with experience in preparing, auditing, financial reporting, and accounting education. Its duties include the process of publicizing consultative documents for the public...
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...NextCard, Inc. 1. No, it is not the job of the auditor to evaluate the soundness of the business. The auditor is not concerned with how successful the business is run or if it is run efficiently. The auditor is responsible for planning and performing an audit to obtain reasonable assurance that the financials are presented fairly, and are free from material misstatement, whether by error or fraud. 2. There are definitely fraud risk factors present in the 2000 NextCard audit including: rapid growth compared to competitors, lack of an internal audit team, and pressures to report a profitable quarter. NextCard was able to obtain growth so fast because, they were offering rather generous credit policies which attracted many people who could not get credit elsewhere. As a result, NextCard ended up loaning out over one billion dollars and their customers’ average balance was around $2,000. The executives at NextCard also continued to promise profits to the public, even after they sold a large amount of their shares. After posting more losses, they started to understate the allowance for doubtful accounts in order to improve financials. With these risks present, it should have given the audit team an indication that fraud was present. Since accounts receivable is such a large account in a credit card business, more substantive work should have been done. This would help accurately calculate the allowance for doubtful accounts. There should have also been more evidence gathered...
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...Lifeson and Lee, CPAs to audit its 2010 financial statement. Neil, Inc. has never been audited in prior years. Neil, Inc. is a manufacturing company that uses the periodic inventory system and has no controls in its purchasing process. Neil, Inc. is not a public company. Lifeson and Lee conclude the audit of Neil, Inc.’s financial statements and found no material deviations from GAAP and no other scope limitations. The subsequent discussion will be regarding the opinion that Lifeson and Lee should issue based upon the facts of the case. Issues Examined Upon examining the facts and circumstances of the case several issues arose: - First Year Audits - Not a Public Company - Internal Controls Each issue can greatly influence the appropriate opinion that should be issued by Lifeson and Lee. First Year Audits Neil, Inc. has never been audited. This presents a difficult situation for Lifeson and Lee since they are relying on past financial statements to determine the validity of 2010 financials. According to AU section 420.24, “When the independent auditor has not audited the financial statements of a company for the preceding year, he should adopt procedures that are practicable and reasonable in the circumstances to assure himself that the accounting principles employed are consistent between the current and the preceding.” In order for Lifeson and Lee to gain confidence of consistency and accuracy they would have to expand their audit to financial records...
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...Assurance on sustainability reports: An International Comparison (1) Archival study ! global compustat I. Abstract Identify the factors associated with: Decision to voluntary purchase assurance The choice of the assurance provider A company needs to enhance credibility through assurance and choice of assurance provider will be a function of company, industry and country related factors. Findings: Companies seeking to enhance the credibility of their reports and build their corporate reputation are more likely to have their sustainability reports assured, although it doesn’t matter whether the assurance provider comes from the auditing profession. Companies domiciled in more stakeholder-oriented countries are more likely to choose a member of the auditing profession II. Introduction Purpose ! understand emerging assurance market and the role of assurance in establishing corporate credibility Why buy assurance? Increased stakeholder or user confidence in the quality of the sustainability information provided Increased stakeholder trust in the level of organizational commitment to sustainability agendas III. Literature review on voluntary assurance Why report? Informing stakeholders ! reducing information asymmetry Reporting also attests to organizational commitment, risk management, and a desire to build a corporate reputation Demand for assurance stems from the need to mitigate information asymmetry with institutional creditors. The auditing profession has well developed global...
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...Auditing Fall 2015 ACCT 412A – MWF 1:00 – OLIN 220 Instructor: Diane Slider Farley Office: Olin 110 Email: farleyds@wofford.edu Phone: 597-4530 Course Description and Goals This course is an introduction to auditing and assurance services. We will learn why there is a demand for audits and the basic steps involved in performing an audit. We will apply auditing concepts to cases throughout the semester. Although many concepts must be committed to memory, our focus will be on understanding why certain standards exist, rather than rote memorization of auditing guidance. By the end of the course, students will be able to: 1. Understand the basic concept of assurance services and describe a financial statement audit 2. Explain basic auditing concepts, including audit planning, audit tests, materiality, audit evidence, and audit documentation 3. Prepare a risk assessment 4. Understand the impact of internal controls on financial reporting 5. Describe an audit of the revenue process 6. Exercise professional judgment 7. Explain the steps involved in completing an engagement and issuing an audit report Textbook Auditing and Assurance Services: A Systematic Approach, 9th edition, Messier, Glover and Prawitt, McGraw-Hill/Irwin, 2014. Office Hours I will hold the following office hours each week: • Monday 9:30 – 10:20 and 2:00 – 3:00 • Tuesday 9:30 – 10:20 and 1:00 – 2:00 • Wednesday 9:30 – 10:20 and 2:00...
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...the form of a depository receipt created by Domestic Depository in India against the underlying equity shares of issuing company. “Domestic Depository” means custodian of securities registered with SEBI and authorised by the issuing company to issue Indian Depository Receipts. Overseas Custodian Bank means a banking company which is established in a country outside India and has a place of business in India and acts as custodian for the equity shares of issuing company against which IDRs are proposed to be issued by having a custodial arrangement or agreement with the Domestic Depository or by establishing a place of business in India. Process involved in issue of India Depository Receipts (IDRs) The following flowchart describes the IDRs process : Issuing Company (company incorporated outside India delivers equity shares to Overseas Custodian) Overseas Custodian Bank (instructs Domestic Depository to issue depository receipts in respect of shares held) Domestic Depository (issues Depository Receipts to Indians against the equity shares of the company incorporated outside India) Indians (i.e. investors of IDR issue) Foreign shares being traded in Indian Exchanges in IDR form ADVANTAGES OF THE IDR Benefits to the Issuing Company • It provides access to a large pool of capital to the issuing capita. • It gives brand recognition in India to the issuing company. • It facilitates acquisitions in India. • Provides an exit route for existing shareholders. Benefits...
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