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Cards In This Set
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5 phases of an audit that relate to audit planning
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1. client acceptance
2. establish an understanding with the client 3. preliminary engagement activities 4. assess risks and establish materiality 5. plan the audit |
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Successor auditor's communications with predecessor auditor include questions like......
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1. integrity mngt
2. disagreements with mngt over acct and audit issues 3. communication with audit committee 4. and predecessor understanding of reason fro change in auditor |
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Why successor ask questions to predecessor auditor
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Determine to accept engagement
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If client refuse to permit the predecessor to respond...
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Auditor should not accept client
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Why establish understanding with client?
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Reduce risk that either party may misinterpret what is expected or required of other party
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Terms of engagement, documented in enggement letter, includes(4) things
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1. obj of engagement
2. mngt responsibilities 3. auditors responsibilities 4. limitations of engagement |
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In establishing understanding with client, 3 topics discussed
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1. engagement letter
2. internal auditors 3. audit committee |
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The engagement letter may include 4 additional items
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1. arrangements involving the use of specialist or internal auditors
2. any limitation of liability of auditor or client (misreps from mngt) 3. additional services provided relating to regulatory requirements 4. arrangements regarding other services (assurance, tax, consulting) |
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Major issue with public accounting firm working with internal auditors
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1. competence and objectivity of internal auditors and effect of their work on audit
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Why use internal auditor? What factors determines how much independence auditor can rely on internal auditors work?
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1. use auditor to reduce amount of audit work
2. materiality of account balances and transactions and related audit risk |
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Who is audit committee and what they are responsible for?
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Subcommittee of BOD that is responsible for financial reporting and disclosure process
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SOX 5 requirements of audit commmittee
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1. each member must be member of BOD and be independent
2. they are responsible for appointment, compensation and oversight of the work of any registered public accounting firm employed by the company 3. must pre-approve all audit and nonaudit services provided by its auditor 4. establish procedures for the receipt, retention and treatment of complaints received by the company regarding accounting, internal control and auditing 5. must have authority to engage independent counsel or other advisers as it determines necessary to carry out its duties |
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2 preliminary engagement activities
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1. determining the audit engagement team requirements
2. ensuring that audit team and audit firm are in compliance with ethical requirements, including independence |
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Factors considering in determining staffing requirements include ....
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1. engagement size/complexity
2. level of risk 3. special expertise 4. personnel availability 5. timing of work to be performed |
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Specialist during audit do what kinds of work...
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1. assist auditor with valuation issues
2. determination of physical quantities, amts derived from specialized techniques 3. interpretation of regulations or agreements |
