CPA-Exam-Review--Auditin课件(PPT 89页)

1、CPA Exam Review Auditing & AttestationPart III Module 3: Evidence第1页，共89页。Plan AuditObtain Understanding of Client and Its Environment Including Internal ControlAssess Risks of Misstatement and Design Further TestsPerform Substantive ProceduresComplete the AuditIssue Audit ReportPerform Tests of Con

2、trolsAudit Diagram2第2页，共89页。Module 3: Evidence Evidence-General1. Appropriate and Sufficient Evidence2. Types of Audit Evidence Study Program3第3页，共89页。 Module 3: EvidenceB.Evidence-Specific (Substantive Procedures)1. Types of Substantive Procedures2. Substantive Procedure Audit Programs3. Documentat

3、ionStudy Program4第4页，共89页。Other Specific Audit Evidence TopicsStudy Program51. Cash11. Expenses2. Receivables12. Client Representation Letters3. Inventory13. Using the Work a Specialist4. Investment Securities14. Inquiry of a Clients Lawyer5. Property, Plant and Equipment15. Fair Values6. Prepaid As

4、sets16. Related-Party Transactions7. Payables (Current)17. Going Concern Consideration8. Long-term Debt18. Subsequent Events9. Owners Equity19. Omitted Procedures10. Revenue20. Audit of the Statement of Cash Flows Module 3: Evidence第5页，共89页。E.Compilation and Review Procedures1. Compilation Procedure

5、s2. Review Procedures3. Review of Public Company Interim Financial Information4. Overall CommentsF . Other Related Topics: Operational AuditingStudy Program6 Module 3: Evidence第6页，共89页。Pertaining SAS Standards Study Program7326Auditing Evidence328Auditing Fair Value Measurements and Disclosures329An

6、alytical Procedures330The Confirmation Process331Inventories332Auditing Derivative Instruments, Hedging Activities, and Investments in Securities333Client Representations334Related-Party transactions336Using the Work of a Specialist337Inquiry of a Clients Lawyer Concerning Litigation, Claims, and As

7、sessments341Auditing Accounting Estimates342Auditing Accounting Estimates390Consideration of Omitted Procedures After the Report Date558Supplementary Information Required by FASB560Subsequent Events561Subsequent Discovery of Facts Existing at the Date of the Auditors Report722Review of Interim Finan

8、cial Information801Compliance Auditing Applicable to Governmental Entities and Other recipients of Governmental Financial Assistance Module 3: Evidence第7页，共89页。Auditors are required to collect sufficient evidence to provide a reasonable basis for the conclusion in the audit report.AU326 identifies t

9、he assertions which underline the preparation of financial statements which are GAAP compliance.Presentation and disclosure: accounts are described and classified in accordance with generally accepted accounting principles, and financial statement disclosures are complete, appropriate, and clearly e

10、xpressed.Existence and Occurrence: assets, liabilities, and equity interests exist, and recorded transactions and events have occurred.Rights and obligations: the company holds rights to the assets, and liabilities and are the obligations of the company.Completeness and cutoff: all assets, liabiliti

11、es, and equity interests, and transactions that should have been recorded have been recorded, and all transactions and events are recorded in the appropriate accounting period.Valuation, allocation and accuracy: all transactions, assets, liabilities, and equity interests are included in the financia

12、l statements at proper amounts.A. Evidence-General8 Module 3: Evidence第8页，共89页。Completeness vs. existence.The Statement on Attestation Standards suggests two basic types of evidence collection procedures1) Search and Verification: includes procedures such as inspecting assets, confirming receivables

13、 and observing the courting of inventory. 2) Internal inquiries and comparison: include discussions with firm representatives and analytical procedures such as ratio analysis.The level of audit evidence required depends on the type of engagement the auditor is engaged to perform.A. Evidence-General9

14、 Module 3: Evidence第9页，共89页。Examinations: offers the highest level of assurance. Accountants select from all available procedures to determine whether the appropriate assertions have been met.Reviews: limited or negative assurance with respect to information. Consists of internal inquiries and compa

15、risons.Agreed-upon procedures: issuance of a report in which a summary of findings is provided. The extent of the procedure is specified by the user but must be beyond reading!Compilation: Accounting other than attestation service, resulting in a report that provides no explicit assurance on the inf

16、ormation. Accountant is required to read the information to aid understanding, but no requirement to inquiry or perform any other verification procedures.A. Evidence-General10 Module 3: Evidence第10页，共89页。Three presumptions relate to the validity of evidence* independent evidence provides more assura

17、nce than evidence solely from within the company* Information from direct personal knowledge is more persuasive than information obtained indirectly and* assertions developed under effective internal control are more reliable than those developed in the absence of internal controlSufficient Appropri

18、ate Audit EvidenceSufficiency is the measure of the quantity of audit evidence that must be obtained;Appropriateness is the measure of the quality of that audit evidence, both its relevance and reliability in providing support for, or detecting misstatements.A. Evidence-General11Assertion being addr

19、essed Module 3: Evidence第11页，共89页。1.Sufficient Appropriate Audit Evidence- Audit evidence is more reliable when it is:Obtained from knowledgeable independent sources outside the client company rather than on independent sourcesGenerated internally through a system of effective controls rather than i

20、neffective controlsObtained directly by the auditor rather than indirectly or by inferenceDocumentary in form rather than an oral representationProvided by original documents rather than copies or facsimiles- Auditors must form an opinion within a reasonable period of time, at a reasonable cost, by

21、exercising professional judgment, and consider both the materiality of the item in question as well as the inherent risk of the item.A. Evidence-General12 Module 3: Evidence第12页，共89页。Module 2: Internal Control1.Sufficient Appropriate Audit EvidenceIn relation to auditing accounting estimates, AU342

22、suggests that auditors to determine that all estimates 1) have been developed 2) are reasonable and 3) follow GAAP. This means the three basic approaches for evaluating the reasonableness of the estimates are 1) to review and test managements process of deriving the estimate 2) develop ones own expe

23、ctation of the accounting estimate and compare it to managements and 3) review subsequent events or transactions occurring prior to the completion of fieldwork.A. Evidence-General13第13页，共89页。Module 2: Internal Control2.Types of Audit EvidenceAt the account level, audit risk= inherent risk*control de

24、tection risk. The procedures used in an audit are:* Risk assessment procedures: used to obtain an understanding of the entity and its environment, including its internal control.* Tests of controls: when determined, used to test the operating effectiveness of controls at the relevant assertion level

25、.* Substantive procedures: used to detect material misstatements in transactions, account balances and disclosures. Procedures include substantive analytical procedures and test of details of account balances, transactions, and disclosures. The increased assurance arising from decrease of accepted d

26、etection risk level may be obtained by modifying the nature, timing and or extent of substantive procedures:Nature: Use more effective proceduresTiming: Perform tests at year-end rather than an interim dateExtent: Use a larger sample size.A. Evidence-General14第14页，共89页。Module 2: Internal Control2.Ty

27、pes of Audit EvidenceAudit evidence includes the information contained in the accounting records underlying the financial statements and other information. * Accounting records include:1) documents, including checks and records of electronic fund transfers, invoices, contracts; 2) General and subsid

28、iary ledgers, journal entries, and other adjustments to the financial statements that are not reflected in journal entries; 3) Records such as worksheets and spreadsheets supporting cost allocations, computations, reconciliations, and disclosures.* Other information includes:1) minutes of meetings2)

29、 Confirmations from third parties 3) Industry analysts reports 4) Comparable data about competitors 5) Control manuals 6) Information obtained by the auditor from such audit procedures as inquiry, observation and inspection. 7) Other information developed by or available to the auditor that permits

30、the auditor to reach conclusions through valid reasoning.A. Evidence-General15第15页，共89页。2.Types of Audit EvidenceAudit ProceduresInspection of records/documents/tangible assetsObservation InquiryConfirmationRecalculationRe-performanceAnalytical ProceduresAgree (schedule balances to general ledger)An

31、alyze (account transactions)Count (cash, inventory, etc.)Examine (authoritative documents)Foot (totals)Prove (totals)Read (minutes of directors meetings)Reconcile (cash balance)Review (disclosure, legal documents)Scan (for unusual balances)Trace (from support to recorded entry)Vouch (from recorded e

32、ntry to support) A. Evidence-General16 Module 3: Evidence第16页，共89页。Module 2: Internal ControlTypes of Substantive ProceduresAnalytical procedures: consists of evaluations of financial information made by a study of plausible relationships among financial and nonfinancial data. GAAS requires the use

33、of analytical procedures during the planning stage and the final review stage, but not in substantive procedure.The approach is: Develop an expectation for the account balance and expectation may derive from:Determine the amount of difference from the expectation that can be accepted without investi

34、gationCompare the companys account balance (or ratio) with the expected account balanceinvestigate significant differences from the expected account balanceB. Evidence-Specific (Substantive Procedures)17第17页，共89页。Module 2: Internal ControlTypes of Substantive Procedures3 rules governing prediction o

35、f a relationship: 1) relationships in a dynamic or unstable environment are less predictable than those in a stable environment; 2) relationships involving balance sheet accounts are less predictable than income statement accounts (because one point in time reflection) and 3) relationships involving

36、 management discretion are sometimes less predictable.Analytical procedures limitation: 1）The guidelines for evaluation may be inadequate;2) It is difficult to determine whether a change is due to a misstatement or is the result of a random change in the account; 3) Cost-based accounting records hin

37、der comparisons between firms of different ages and/or asset compositions;4)Accounting differences hinder comparisons between firms5) Analytical procedures present only circumstantial evidence in that a significant difference will lead to additional audit procedures as opposed to direct detection of

38、 a misstatement.B. Evidence-Specific (Substantive Procedures)18第18页，共89页。Module 2: Internal ControlTypes of Substantive ProceduresTests of details of transactions balances and disclosureTests are used to exam the actual details marking up the various account balances and disclosures.Considering an a

39、ccounts receivable ledger of $2,000,000, can be made up of 1,000 debtors accounts with balances ranging from $1m as little as $10!Remember in gathering sufficient appropriate audit evidence, auditors seek an efficient and effective combination of 1) tests of controls, 2) analytical procedures and 3)

40、 tests of details to afford a reasonable basis for an opinion.B. Evidence-Specific (Substantive Procedures)19第19页，共89页。2.Substantive Procedure Audit ProgramsAudit program is a list of detailed procedures to be performed during an audit.How a developed audit program relates to an audit!B. Evidence-Sp

41、ecific (Substantive Procedures)20Financial StatementsAudit ObjectivesAssertionsAudit ProceduresAudit Program Module 3: Evidence第20页，共89页。2.Substantive Procedure Audit ProgramsTwo approaches for auditing an accountDirect test of ending balance (“test of balance”): used to test high volume accounts, e

42、.g. cash, accounts receivables and accounts payables (e.g. confirming year-end balance)Tests of inputs and outputs during the year (“tests of details of transactions”): most extensively used for lower turnover accounts, e.g. fixed assets and long term debts.- A combination of approaches with an emph

43、asis of one approach over other is generally used in an audit.B. Evidence-Specific (Substantive Procedures)21 Module 3: Evidence第21页，共89页。2.Substantive Procedure Audit ProgramsOverall: typical procedures included in a substantive audit programPresentation and disclosures: Review disclosure / Inquire

44、s about disclosuresExistence or Occurrence: Confirmation/observation/trace*vouch transactionRights and Obligations: AuthorizationCompleteness and Cutoff: Analytical procedures/Omissions/CutoffValuation, allocation and Accuracy: Foot schedules/agree schedules balances to general ledger balances/agree

45、 financial statement balance to schedules/consider valuation method of account/consider related accountCutoffs also apply directly to the existence/occurrence and completeness assertions. Page 201 onwards provide summary audit procedures for financial statement accounts!B. Evidence-Specific (Substan

46、tive Procedures)22 Module 3: Evidence第22页，共89页。2.Substantive Procedure Audit ProgramsAudit Objectives relating to a financials statement account： Long term debt:Determine whether long-term debt disclosures comply with GAAP;Determine whether recorded long-term debt exists as year-end;Determine whethe

47、r long-term debt represents an obligation to the firm at year-end;Determine whether all long-term debt has been completely recorded at year-end;Determine whether all long-term debt has been properly valued at year-end.Which assertions do the above objectives relate to?B. Evidence-Specific (Substanti

48、ve Procedures)23 Module 3: Evidence第23页，共89页。2.Substantive Procedure Audit ProgramsAreas in which a SAS prescribes procedures.B. Evidence-Specific (Substantive Procedures)24Specific types of transactionsIllegal ActsAU317Related PartiesAU334Litigation (Loss Contingencies)AU337Information with which “

49、limited” procedures are requiredOther information in documents containing audited statementsAU550Interim ReviewsAU722CompilationsAR100ReviewsAR100 Module 3: Evidence第24页，共89页。Substantive Procedure Audit Programs*Do not attempt to memorize the procedures for each of the areas!B. Evidence-Specific (Su

50、bstantive Procedures)25Supplemental information required by FASBGeneral ProceduresAU558Areas in which “audit” procedures are requiredReceivablesAU330InventoriesAU331Investment SecuritiesAU332Subsequent EventsAU560OthersOther Auditors InvolvedAU543WarehousesAU901, AU331 Module 3: Evidence第25页，共89页。Su

51、bstantive Procedure Audit ProgramsMaterial reading: 203. 15 minutes to have a general understanding. We will cover them in greater detail in section C.B. Evidence-Specific (Substantive Procedures)26 Module 3: Evidence第26页，共89页。Documentation (AU339 and PCAOB3)AU339 requirements:*Adequate level of doc

52、umentation to enable an experienced auditor without prior involvement in the audit to be able to re perform the tests and arrive at the same audit conclusion;*Oral explanations cant support the work done;*Should include an audit program for every audit;*Documentation of instances of contradicting in

53、formation identified and work performed, consultation sought and the resolution of differences.*Information added to the working paper file after the issuance of the audit report must be documented as to when, by whom changes were made and reviewed & specific reasons for changes and the effect if an

54、y, of the change son the auditors conclusion;*Documentation completion (assembling and completing the audit file) period is 60 days following the report issuance date;*After the documentation completion date, the auditor should not delete or discard audit documentation;*The retention period should n

55、ot be less than 5 years from the report release date or per statutory requirement;*Audit documentation is the property of the auditor and confidential.B. Evidence-Specific (Substantive Procedures)27 Module 3: Evidence第27页，共89页。Documentation (AU339 and PCAOB3)PCAOB Stanrdard 3*The documentation shoul

56、d demonstrate compliance with PCAOB standards;*The documentation completion period is 45 days following the report release date;*The retention period is 7 yearsTerms to know!Working Trail BalanceLead SchedulesIndexCross-ReferencesCurrent Working paper FilesPermanent Working paper FilesB. Evidence-Sp

57、ecific (Substantive Procedures)28 Module 3: Evidence第28页，共89页。29CashSpecial considerations:KitingFloat periodBank transfer scheduleDetect KitingBank reconciliationOutstanding checks and deposit in transitBank cut-off statementsVerify items in the bank reconciliationStandard confirmation formDeposit

58、and loansTypical audit proceduresNote: refer to Wiley CPA exam review page 206 for a detailed listing of procedures on cashC. Other Specific Audit Evidence Topics Module 3: Evidence第29页，共89页。30ReceivablesLappingConfirmationRequired by GAAS unless:Balance is immaterialConfirmation is ineffective Low

59、inherent and control risks with other proceduresPositive confirmationNegative confirmationLow inherent and control risksA large number of small balancesNo reason to doubt recipients response Module 3: EvidenceC. Other Specific Audit Evidence Topics第30页，共89页。31Receivables (contd)Alternative procedure

60、sExamination of shipping documentsSubsequent cash receiptsReview sales agreements Typical proceduresNote: refer to Wiley CPA exam review page 206 for a detailed listing of procedures on receivables Module 3: EvidenceC. Other Specific Audit Evidence Topics第31页，共89页。32InventoryObservationRequired by G