The Audit Report Was Timely, but at What Cost?

This course is the first in a two-part series that deals with auditing a company 's financial reports, internal controls, and

CAS 300 requires auditors to their audit using a risk based model where the nature, timing and extent of audit procedures are based on the assessed risk of material misstatement. Pickett (2006) argues that for audits to be effective and efficient, much of the audit effort should be focused on areas that are considered to pose the highest audit risk. Additional audit procedures should be linked to individual audit assertions whereas other audit procedures need to be performed as and when needed. Thus, for an audit plan to be put in place, it is necessary for an auditor to come up with a risk profile of the client comprising an understanding of the business operating by the audit client, assess business risk and also perform its preliminary analytical review.

Furthermore, when the internal control is fixed, the outside auditor can rely on the clients system and less audit testing can be conducted. When everything is improved, the management letter is given to the organization’s top management and not disclosed to the public, (Finkler, S. A., Ward, D. M., & Calabrese, T. D., 2013). Next, is the auditor’s report that entails the opinion letter usually written in three paragraphs and given to the board of trustees. Then, the opinion paragraph is added on to state the organizations financial statements are in accordance of the financial position and followed through with (GAAP). The clean opinion addresses the opinion of the auditor and the overall exercising of professionalism. Also, the complete opinion of the financial statements is to give a representation of the organization. All other opinions may be included and can be addressed by adverse opinions if (GAAP) was not in accordance. A qualified opinion can be added if a specific area wasn’t included in the financial statement when needed. Finally, the management reports are conducted by the management team and not the auditors. The management report is the annual report the topics included in the report are the internal control system and the responsibility of the audit committee.

3. In the auditor 's report the financial statements on which the opinion is being expressed

To illustrate the linkage of management assertions to audit evidence in the context of auditing Notes Payable.

Auditing planning is important because it helps the auditor determine his/her approach to the audit. There are two considerations that affect the approach: 1). Sufficient appropriate evidence must be accumulated to meet the auditor’s professional responsibility and 2). The cost of accumulating the evidence should be minimized. Concern for sufficient appropriate evidence and cost necessitates planning the engagement. The plan should result in an effective audit approach at a reasonable cost.

a business decision to follow a different financing method for to have use of delivery trucks, which is adequately disclosed. There is no change of accounting principle.

A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered a “sniff” of an audit, which comparatively provides reasonable assurance that no material misstatements occurred. Since a review deals with a limited scope, it does not provide the basis for expressing an opinion on the presentation of the

The audit evidence should include test on controls and inquiry for how these issues are handled, and possible external confirmation of the firm’s lawyers as to the potential settlement and court costs as well as possible duration of the

But they have significant differences. First, the auditor provides reasonable assurance about whether the financial statements are free from material misstatement due to error or fraud in an audit report, but provides limited assurance about whether the financial statements are free from material modifications in a review report. A review engagement is substantially less intensive in scope than an audit, and just a few procedures are performed. (4) Second, review report is conducted according to the American Institute of Certified Public Accountants (AICPA), while audit report is conducted according to the Standards of PCAOB. Moreover, review service is less cost than audit

When assessing an internal auditor’s competence, an auditor ordinarily obtains information about all of the following except

Boynton, W. C. (2006). Modern Auditing (8th ed.). Danvers, MA: John Wiley & Sons, Inc.

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

The objective of any audit is to acquire sufficient and appropriate audit evidence to support an opinion. Sufficient evidence refers to the quantity of evidence, while appropriate evidence refers to the quality of the evidence. In developing an audit opinion an auditor must accumulate both sufficient and appropriate evidence, however, the evolution of the risk-based audit approach has created obstacles in acquiring sufficient and appropriate audit evidence. Therefore, the audit process must adapt to these technological changes, in order for the profession to maintain its credibility as gate-keepers. Data analytics is a technological tool that can assist auditor’s in combating the limitations mentioned-above. One important advantage is the ability of data analytics to provide more persuasive audit evidence to enhance audit quality. Data analytics can be applied at different stages of an audit, beginning with risk assessment procedures, test of controls, journal entry testing, and even substantive testing. Employing data analytic techniques allows audit teams to perform analyses on an entire population of transactions, rather than physically vouching a limited number of samples, which minimizes sampling risk in an audit engagement. Additionally, data analytics can help

Audit cycle performance consists of several stages and the basic first stages are planning and preliminary survey in order to obtain general information on all areas and aspects of the audited company as well as the company 's activities and strategies that can be obtained in a short period of time. To accomplish these stages, some important points is needed including the understanding of the entity, identifying the key areas (key control), set the objectives and scope of the audit, determine the criteria of the audit, identify the audit evidence, prepare the preliminary survey, organize the preparation of the detailed test program, collect and test the audit evidence, and lastly generate the audit working papers.