assurance Flashcards
what is the objective of an assurance
must have one by law
allow the auditor to express an opinion whether the financial statements prepared in all material respects and applicable financial reporting framework
how to reduce the expectation gap
issue engagement letter
regularly review the form and content of assurance reports
what are the acceptance procedures once accepted client
ensure professionally qualified ensure existing resources adequate management integrity and obtain references communicate with present auditors --> high low risk
how to assess when a client is a high or low risk
published information
company lawyers or other advisors
management team
what are the after acceptance procedures
ensure outgoing auditors removal or resignation properly conducted with material legislation
ensure new auditor appointment is valid
to send and receive back engagement letter from company directors
perform money laundering checks and procedures
what are the objectives of audit planning
appropriate attention devoted to important areas
to identify potential problems and solve on a timely basis
ensures audit properly organized and managed
assign work to engagement team members
facilitate directions and supervision of engagement team members
facilitate review of work
what is audit risk made up of
inherent risk - the risk of misstatement due to the nature of the entity
control risk - the risk material misstatement will not be prevented detected or corrected
detection risk - procedures performed to detect audit risk will not detect a misstatement that exists. made up of sampling and nonsampling
what are caat examples
test of detail - used to test the integrity of clients system
audit software - used to access auditor to perform substantive audit procedures
what are factors that would effect audit samples
auditors assessment of the risk of material misstatement
auditors desired level of assurance
misstatements auditor expects to find
the use of analytical procedures to test some balance
what are some control activities
authorization performance review information processing segregation of duties physical controls
explain information processing
type of control activities
controls check accuracy, completeness, and authorization of processes
manual procedures
- application controls; controls check over input accuracy + completeness, input authorization, over processing of inputs
-general controls; development of and changes computer application presentation or detection unauthorized changes ensure continuing of operations
explain factors of internal audit
improve operational effectiveness and efficiency
report to the board, audit committee, head of the department
the varied scope of work; internal controls, specific projects, compliance, efficiency/effectiveness
no requirement for professional qualification but many are
employees or external to the company - but have some independence
explain the factors of an external audit
give an opinion on the truth and fairness of financial statements
report to shareholders
gather sufficient and appropriate evidence to support an opinion on financial statements
must be professionally qualified
must be independent cant be employees
functions of an internal audit
examine financial and operative information
review compliance with laws regulations and other external requirements
review of economic efficiency and effectiveness of operations
monitor effectiveness of internal controls
special investigations
why do we have audit documentation
provide evidence basis of conclusion about achieving the overall objective
evidence audit well performed and planned accordance applicable legal and regulatory
assists the audit team to plan and perform
assists the relevant team to direct and supervise work
holds individuals members accountable for work
record of matters of the continuing significance of future audits
enable the experienced auditor to carry out quality control reviews
