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Audit Steps
- 1. Plan the Audit
- 2. Understand Entity & IC
- 3. Assess Risk
- 4. Perform Tests of Controls & Substantive Tests
- 5. Complete the Audit
- 6. Issue the Report
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TIPPICANOE
- Training & Proficiency
- Independence
- (Due) Professional Care (critical review/skill/ skepticism)
- Planning & Supervision
- Internal Control understanding
- Corroborative- sufficient appropriate audit evidence
- Accordance w/ GAAP
- No new principals or
- Omitted disclosures none
- Express an opinion
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Accepting the Engagement
2 Considerations
RID-C
- Auditability of the FS
- Management integrity
- Reasons for the change
- Integrity of Management
- Disagreements
- Communications about fraud, illegal acts & IC
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Reqd Communications with those charged with governance
- Disagreements during the audit
- Illegal acts (all), Fraud involving mgmt, and material fraud
- Significant acctng principle changes
- Aje's & Rje's
- Prior discussions with mgmt (prior to engagement)
- Problems with obtaining evidence & ee cooperation
- Responsibilities (reasonable assurance)
- Other responsibilities
- Views of other accountants contacted
- Estimates used & methods
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Written communication to gain an understanding
ie: Engagement Letter - RECOMMENDED
1 of 2
1. Objective to express opinion on FS
- 2. Mgmt Responsibilities
- - maintain IC
- - compliance w/ laws & regs
- - make evidence available
- - adjust for material errors
- - agree there are no aggregate material errors
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Written communication to gain an understanding
ie: Engagement Letter - RECOMMENDED
2 of 2
- 3. Auditor responsibilities
- - conduct in accordance w/ GAAS
- - communicate SDMW to audit committe
- 4. Limitations
- - may choose not to express an opinion
- - material misstatement may go undetected
- - reasonable assurance (not absolute)
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Steps in Planning
BRAINSTOPS
- Basic discussions / engagement letter
- Review Saly & predecessor work
- Ask about recent developments
- Interim FS review & ANALYTICAL REQD
- Non audit personnel discussions (ie: tax prep)
- Staffing, time budget, AUDIT PLAN
- Timing of procedures
- Outside consultants considered
- Prounouncements reviewed
- Scheduling w/ client
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Quality Control Standards (SQCS)
HEAL-ME
- Human Resources
- Ethical Reqmts
- Acceptance/continuing clients
- Leadership responsibilities
- Monitoring
- Engagement Performance
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Elements of internal control
CRIME
- Control Environment
- Risk Assessment
- Control Activities
- Information System
- Monitoring
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Control Environment Elements
CHOPPER
- Commitment to competence
- Human Resournces
- Organizational structure
- Participation by those charged w/ governance
- Philosophy of Mgmt
- Ethical values
- Responsibility assignment
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Control Activities
PIPS-ARCC
- Performance Eval (PY vs CY, budget vs actual)
- Info processing
- Physical security of assets
- Segregation of Duties
- Authorization
- Recording
- Custody
- Comparison
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Understanding Internal Control
Vs. Testing Internal Control
Understanding: Prev audits, inquiry, inspection, observation
Testing: RIIO- Reperformance, inquiry, inspection, observation
Implementation IS NOT operating effectiveness. Implementation = observation, inquiry, inspection, maybe tracing.
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How to document IC
FIND
- Flow charts
- ICQ
- Narrative
- Decision Tree
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IC limitations
COCO
- Collusion
- Mgmt Override
- Competency
- Obsolescence
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Financial Statement Assertions
U-PERCV
- Understanding & Classification
- Presentation & Disclosure
- Existence & Occurence
- Rights & Obligations
- Completeness & Cutoff
- Valuation, Allocation, Accuracy
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