Assignment 3

Man Fun Daniel Yeung

1/25/2011

Accy 405 Individual Assignment 3

Questions

3-2

Management assertions are what auditors decompose broad assertions into. In general, management assertions are often separate into three categories: Transactions, Accounts and Presentation and disclosure.

With respect to the accounts receivable account, the management assertions will apply to four stages: 1.Determine the assets, liabilities, and equity interests exist. 2. Determine the entity holds or controls the rights to assets, and liabilities are the obligations of the entity.3. All assets, liabilities, and equity interests that should have been recorded have been recorded. 4. Assets, liabilities, and equity interests are included in the financial statement at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.

3-4

Management assertions, audit procedures, audit evidence and auditor’s report are the key conceptual elements of the audit process. The process of the audit process represents the thought process that the auditor undertakes in each and every audit. The context, details, and requirements may change, but the logical process is essentially the same.

3-7

Risk exists in fundamental all auditing services performed because in the real world, an auditor can never be completely certain about the assertions he is auditing-regardless of whether they pertain to single accounts, the overall financial statements, or internal control over financial reporting-are free of omissions or misstatements.

Materiality is the term that describes the significance of financial statement information to decision makers. Information is material if it is probable that its omission or misstatement would influence or change a decision.

Audit evidence refers to any information that gives the auditor an indication whether an assertion is reasonable or not.

Those three concepts interact during the course of the audit to guide the...