Term
| Audit procedure set up (4 step approach) |
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Definition
| 1) heading (what procedure will be performed) 2) case fact 3) tell the marker what this indicates (what is the risk and how does it tie to the assertion ? increase risk of o/s around revenue) 4)tell the marker how you are going to perform the procedure |
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Term
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Definition
1) overall risk of MM at FS level
2) overall control environment risk
3) conlude on the OFSLR
4) fraud risk assesment at overall FS level
5) planned response to fraud risk factors
6) fraud risk assesement for significant / elevated risk accounts (RP's- business combinations)
7)planned response to fraud risk
8) identify audit apporach
9) materiality
10) FS analysis and significant risks (if necessary)
11) audit procedures and assertions |
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Term
| AM specifics - Factors that increase overall FS risk |
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Definition
| rapid growth, high competition, constraint level of resources, decreasing margins, limited financing, conflicts of interest between users, many users, public company, potentail going concern, economic dependence, managment bias, high risk industry, new personnel, changes to systems, environment/ accounting/ structure |
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Term
| AM specifics - Factors that decrease overall FS risk |
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Definition
| strong reputation (products, owners, co), tone at the top, minimal users, private company |
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Term
| AM specifics - Factors that increae risk around the control environment |
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Definition
| accounting system dosent meet needs, no formal policies, lacking of employees understanding of co objectives, lack of mgmt implementation of formalized policies |
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Term
| AM specifics - Factors that decrease risk around the control environment |
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Definition
| tine at the top, owners demonstrate ethical standardss and values to employees, owner actively involved in business |
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Term
| AM specifics - fraud risk assessment details |
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Definition
1- fraud incentives
2- fraud opportunites
3- fraud attitudes |
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Term
| AM specifics- materiality considerations |
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Definition
-based on users of FS
-consider conflicting user objectives
-normalize net income before tax or other benchmark amount
-benchmark based on sensitivity of users
-consider need for specific materiality
- OM based on reasonable haircut as per prior year knowledge of errors, etc. |
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Term
| Am specifics - FS analysis |
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Definition
- current ratio (CA/CL)
- AR turnover (sales/avg AR)
- AR days outstanding (ar / cogs) *365
-inventory turnover (cogs / avg inv)
-gross margin ( GM/ revenue)
-quick ratio ( cash and cash eq, ar / CL)
-debt to equity ratio ( liabilites/ total SHE) |
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Term
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Definition
R-right and obligations
E-existence
V-valuation
C-completness |
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Term
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Definition
C- cutoff
C- completness
C- classification
A- accuracy
A- authorization (R&O)
O- occurence |
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Term
| Assertions Presentation and Disclosure |
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Definition
C- classification
C- completness
A- accuracy
O- occurence
R- right and obligations |
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Term
| Indication of Going Concern: |
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Definition
1- cash flow issues
2- debt covenant incompliances |
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Term
| If doubt about going concern exists: (procedures to perform)7 |
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Definition
1- request mgmt make an assessment
2- evaluate mgmt's plans for future action
3- assess any cash flow forecasts
4- consider additional information since the assumption was made
5- request written representation from managment
6-consider whether FS disclosure is appropriae or wheather a qualified or adverse opinion is required
7- prepare communication for those charged with goverance |
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Term
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Definition
| CAS 320 requires us to determine an overall PM for the engagment. PM is a set amount to reduce the risk that the aggregate uncorrected and undetected misstatments will exceed materiaility . PM wil be internal to our audit and is will be 75% of OM based on professional judegment of risk assesement and prior history of company. |
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Term
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Definition
I- inspect - examine
I - inquire
C- confirmation
O- observe
R- reperform
R- recalculate
A- analytics |
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