Professional Conduct: Seminar 2
Fundamental principles: Integrity, Objectivity, Professional Competence and Due care, Confidentiality, Professional Behaviour (don’t exaggerate your skill or compare with others)
Threats: ( framework to identify, evaluate & address threats)
Self Interest, Self-review , Advocacy, Familiarity, Intimidation
Firm-wide Safe guards: Disciplinary actions, Chinese walls, leadership that enforces compliance, documented policies to QC and to check independence and threats, code of ethic Engagement- wide Safe Guards: Rotating personnel, independent review, disclosure of work done and fees.
Ethical Conflict Resolution framework:
Identify ethical issues, determine affected parties and their rights, determine most imp rights, develop alternative courses of action, determine and access the consequences, take action
Under statute law: Negligent statements, breach of trust, refusal for access to information.
Elements necessary for action against tort: owe duty of carenegligenceeconomic losscausation btw 2 and 3.
Defences: client was contributory negligent, no causation, was not negligent.
Breach of contract: Contract law only. Negligence: All except 1934 act. For third party under common law, must see what test used. Gross negligence: All except 1934 unclear. Fraud: All can. Defences: Disclaimer, LLP, indemnity.
Financial statement Audit overview: Seminar 3
Accounting Cycles: Recording and processing transactions that affect a group of related accounts, begins when a transaction occurs and ends when it is recorded in FS, break into manageable sections of related accounts.
Why are they imp? Helps auditor determine specific characteristics of the items in FS that are wrong. Identifies points where misstatements can occur and controls designed and implemented to mitigate those risks. And thus determining specific audit procedures to be used.
Assertions (to consider the different types of misstatements that can occur):
Balance sheet: Completeness, Rights and obligation, valuation and allocation, existence
I/S: Occurrence, cut-off, accuracy, classification, completeness.
Presentation and disclosure: Accuracy, classification, completeness, occurrence, rights and obligation, understandibility, valuation and allocation. Audit Risk Model: IR X CR X DR= AR
* To make DR low, materiality has to be low too.
*CR= design and operating effectiveness
Materiality: when a misstatement or aggregate of more than one is significant enough to influence the economic decisions of users of FS.
Audit Evidence: To ensure sufficient appropriate audit evidence, need to consider the nature timing and extent of audit procedures.
Nature: Purpose (Test of controls/substantive testing) and type (Inspection of documentation and assets, inquiry, observation, recalculation, re-performance, analytical procedures, external confirmation, scanning)
Test of Controls: evaluate operating effectiveness ( more for IS)
Only use when the auditor has determined that they are designed and implemented appropriately.
-Materiality does not apply/whether control works or not (yes or no)
Substantive Testing: detecting misstatements at assertion level, directed towards the actual dollar value (TOD and SAP)- More for BS
Audit Documentation- record of audit procedures performed and evidence obtained, conclusions reached. Submitted 60 days after auditors report.
Why are they important? Planning and performing the work, review audit work, future audits and inspections.
Examples: Minutes, engagement letters, audit strategy, analysis of the RMM, description of IC,
Phase 1: Making Client Acceptance
Management’s use of an acceptable financial reporting framework,…