Sppt chap017
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Transcript of Sppt chap017
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 17
Auditing and Evaluating the AIS
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Outline
• Learning objectives
• Types of audits
• Audit Clarity Project
• Generally accepted auditing standards
• Financial statement audit steps
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Learning objectives1. Describe the various
kinds of audits you might encounter in your accounting career.
2. Explain the purpose of the Audit Clarity Project and summarize its essential components.
3. Explain ten generally accepted auditing standards & their role in a financial statement audit.
4. Discuss the basic steps associated with a financial statement audit.
5. Explain the connection between auditing and accounting information systems.
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Types of audits
• Financial auditExpress an opinion on the fairness of a company’s financial statements
• Operational auditDetermine if a company’s business processes & policies “make sense”
• Systems auditAscertain whether information technology is producing expected results
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Types of audits
• Compliance auditExamine the AIS and financial statements of GNFP entities
• Management auditDetermines the way management decisions are supported
• Investigative auditInvestigates the AIS and related data to determine if fraud has occurred
• International auditApplies and combines one or more of the other types in international contexts
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Audit Clarity Project
Four main change areas to financial statement audit standards
– Format
– Terminology
– Additional requirements
– Audit report
The ACP’s goals
were to make audit
standards easier to
read and to
converge them with
international audit
standards.
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Audit Clarity Project
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Audit Clarity Project
• Terminology– Applicable financial
reporting framework• US GAAP• IFRS
– Emphasis of matter paragraph
Calls attention to something in the statements and / or the disclosures
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Audit Clarity Project
• Additional requirements– Ensure appropriateness of applicable financial
reporting framework if other than US GAAP– Obtain agreement from management
regarding their responsibilities for financial statements & internal control
– Adhere to quality control standards throughout the audit
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Audit Clarity Project
Table 17.1Elements of the unmodified auditor’s report
Element Explanation
Title Must include the phrase “independent auditor’s report”
Addressee May be the board of directors, management or other parties
Introductory paragraph Must identify the organization, the financial statements audited and related information
Management’s responsibilities Financial statements and internal controls
Auditor’s responsibilities Performing an audit according to generally accepted auditing standards (GAAS)
Auditor’s opinion States that, in the auditor’s opinion, the statements are fairly presented
Signature, address and date Audit firm’s information
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Generally Accepted Auditing Standards
Figure 17.3
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Financial statement audit stepsFigure 17.4
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