Download - Audit Chapter 6 Slides
![Page 1: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/1.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Chapter 6
6-1
![Page 2: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/2.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-2
Explain the objective of conducting an audit of financial statements and an audit of internal controls.
Distinguish management’s responsibility for the financial statements and internal control from the auditor’s responsibility for verifying the financial statements and effectiveness if internal control.
![Page 3: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/3.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-3
Explain the auditor’s responsibility for discovering material misstatements due to fraud or error, and the need to maintain professional skepticism when conducting the audit.
Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit.
![Page 4: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/4.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-4
Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts, including presentation and disclosure.
Distinguish among the three categories of management assertions about financial information.
List the six general transaction-related audit objectives to management assertions for classes of transactions.
![Page 5: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/5.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-5
Link the eight general balance-related audit objectives to management assertions for account balances.
Link the four presentation and disclosure-related audit objectives to management assertions for presentation and disclosure.
Explain the relationship between audit objectives and the accumulation of audit evidence.
![Page 6: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/6.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Explain the objective of conducting an audit of financial statements and an audit of internal
controls.
6-6
![Page 7: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/7.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-7
The purpose of an audit is to provide financialstatement users with an opinion by the auditoron whether the financial statements are presented fairly, in all material respects, inaccordance with applicable financial accounting framework.
![Page 8: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/8.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-8
![Page 9: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/9.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Distinguish management’s responsibility for the financial statements and internal control
from the auditor’s responsibility for verifying the financial statements and effectiveness of
internal control.
6-9
22
![Page 10: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/10.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-10
Financial statements and internal controls.
Sarbanes-Oxley increases management’sresponsibility for the financial statements.
CEO and CFO must certify quarterly and annualfinancial statements submitted to the SEC.
![Page 11: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/11.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-11
![Page 12: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/12.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-12
The Sarbanes-Oxley Act provides for criminalpenalties for anyone who knowingly falselycertifies the statements.
![Page 13: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/13.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Explain the auditor’s responsibility for discovering material misstatements due to
fraud or error, and the need to maintain professional skepticism when conducting the
audit.
6-13
33
![Page 14: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/14.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-14
Obtain reasonable assurance
Opine
Report
Financial statements
Free from material
misstatements
Financial statements
Applicable reporting framework
Financial statements
Communicate per audit standards
![Page 15: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/15.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-15
Material misstatements
Reasonable Assurance
Professional Skepticism
Errors vs. Fraud
Fraudulent reporting
vs. theft of assets
![Page 16: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/16.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-16
Type Responsibility
Direct-Effect Same for errors and
fraud
Indirect-Effect No Assurance
![Page 17: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/17.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-17
Auditor suspects Inquire of managementConsult client’s counsel or specialistConsider accumulating evidence
Auditor knowsConsider effects on financial statementsConsider effect on relationship with managementCommunicate with audit committee or equivalent
![Page 18: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/18.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Classify transactions and account balances into financial statement cycles and identify
benefits of a cycle approach to segmenting the audit.
6-18
44
![Page 19: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/19.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-19
Audits are performed by dividing the financialstatements into smaller segments or components.
![Page 20: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/20.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-20
![Page 21: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/21.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-21
Generalcash
Capital acquisitionand repayment cycle
Sales andcollection
cycle
Acquisitionand payment
cycle
Payroll andpersonnel
cycle
Inventory andwarehousing
cycle
![Page 22: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/22.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Describe why the auditor obtains a combination of assurance by auditing classes
of transactions and ending balances in accounts, including presentation and
disclosure.
6-22
55
![Page 23: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/23.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-23
![Page 24: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/24.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Distinguish among the three categories of management assertions about financial
information.
6-24
66
![Page 25: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/25.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-25
1. Assertions about classes of transactions andevents for the period under audit
2. Assertions about account balances at period end
3. Assertions about presentation and disclosure
![Page 26: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/26.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-26
OccurrenceTransactions and Events
Account Balances
Presentation and Disclosure
Existence Occurrence and rightsand obligations
Completeness
Accuracy
Classification
Cutoff
Completeness Completeness
Valuation andallocation
Accuracy andvaluation
Classification andunderstandability
Rights andobligations
![Page 27: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/27.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-27
Existence or Occurrence
Completeness
Valuation orallocation
Rights and obligations
Presentation and disclosure
Similar to AICPA auditing standards as the first three assertions are applicable to balances and transactions. Presentation is treated as a single assertion.
![Page 28: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/28.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Link the six general transaction-related audit objectives to management assertions for
classes of transactions.
6-28
77
![Page 29: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/29.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-29
Occurrence
Completeness
Accuracy
Recorded transactionsexist
Existing transactionsare recorded
Recorded transactionsare stated at thecorrect amounts
![Page 30: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/30.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-30
Posting andsummarization
Classification
Timing
Transactions are includedin the master files andare correctly summarized.
Transactions are properlyclassified.
Transactions are recordedon the correct dates.
![Page 31: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/31.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-31
(Applied to Sales Transactions)
![Page 32: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/32.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Link the eight general balance-related audit objectives to management assertions for
account balances.
6-32
88
![Page 33: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/33.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-33
Existence
Completeness
Accuracy
Amounts included exist
Existing amounts areincluded
Amounts included arestated at the correctamounts
![Page 34: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/34.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-34
Classification
Cutoff
Detail tie-in
Amounts are properlyclassified
Transactions are recordedin the proper period
Account balances agreewith master file amounts,and with the general ledger
![Page 35: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/35.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-35
Realizablevalue
Rights andobligations
Assets are included atestimated realizable value
Assets must be owned
![Page 36: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/36.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Hillsburg Hardware Co. ..
6-36
(Applied to Inventory)
![Page 37: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/37.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Link the four presentation- and disclosure-related audit objectives to management
assertions for presentation and disclosure.
6-37
99
![Page 38: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/38.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-38
(Applied to Notes Payable)
![Page 39: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/39.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Explain the relationship between audit objectives and the accumulation of audit
evidence.
6-39
1010
![Page 40: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/40.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-40
The auditor must obtain sufficient appropriateaudit evidence to support all managementassertions in the financial statements.
An audit process has four specific phases
![Page 41: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/41.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-41
![Page 42: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/42.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.6-42
![Page 43: Audit Chapter 6 Slides](https://reader036.vdocuments.us/reader036/viewer/2022062323/563dbb9e550346aa9aaec1d7/html5/thumbnails/43.jpg)
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
6-43