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Date Submitted: 04/05/2014 01:43 PM
Auditing Review:
Topics to be sure to review for midterm exam in Acct 5237:
Details of:
Objective of an audit:
Is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with applicable financial accounting framework.
Management’s responsibilities and Auditor’s Responsibilities
Management: Financial statements and internal controls, Sarbanes-Oxley increases responsibility, CEO and CFO must certify quarterly and annual financial statements submitted to the SEC.
Auditor: verifying the financial statements and effectiveness of internal control.
Material misstatements, reasonable assurance, professional skepticism, Errors vs. Fraud, Fraudulent reporting vs. theft of assets.
Components of professional skepticism:
Is an attitude that includes a questioning mind and a critical assessment of the appropriateness and sufficiency of audit evidence and comprises 3 elements attributes, mindset, and actions.
Auditor’s response to illegal acts
Suspects: inquire of management, consult client’s counsel or specialist, and consider accumulating evidence.
Knows illegal acts occurred: Consider effects on financial statements, relationship with management and communicate with audit committee or equivalent.
Financial Statement cycles and accounts included in each
-analyzing financial statements by dividing them into segments.
Relationships among transaction cycles
General cash
Capital acquisition and repayment cycle
Sales and collection cycle Acquisition and payment cycle Payroll and personnel cycle
Inventory and warehousing cycle
Management’s assertions about transactions and account balances
Occurrence: assertion concerns whether the recorded transactions included in the financial statements actually occurred during the period....