CPA-Exam-Review--Auditin課件

1、CPA Exam Review Auditing & AttestationPart III Module 3: EvidencePlan 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 ControlsAudi

2、t Diagram2Module 3: Evidence Evidence-General1. Appropriate and Sufficient Evidence2. Types of Audit Evidence Study Program3 Module 3: EvidenceB.Evidence-Specific (Substantive Procedures)1. Types of Substantive Procedures2. Substantive Procedure Audit Programs3. DocumentationStudy Program4Other Spec

3、ific 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 Assets16. Related-Party Transactions7.

4、 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: EvidenceE.Compilation and Review Procedures1. Compilation Procedures2. Review Procedures3. Review of Public Comp

5、any Interim Financial Information4. Overall CommentsF . Other Related Topics: Operational AuditingStudy Program6 Module 3: EvidencePertaining SAS Standards Study Program7326Auditing Evidence328Auditing Fair Value Measurements and Disclosures329Analytical Procedures330The Confirmation Process331Inven

6、tories332Auditing Derivative Instruments, Hedging Activities, and Investments in Securities333Client Representations334Related-Party transactions336Using the Work of a Specialist337Inquiry of a Clients Lawyer Concerning Litigation, Claims, and Assessments341Auditing Accounting Estimates342Auditing A

7、ccounting 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 Financial Information801Compliance Auditing Applicable to G

8、overnmental Entities and Other recipients of Governmental Financial Assistance Module 3: EvidenceAuditors are required to collect sufficient evidence to provide a reasonable basis for the conclusion in the audit report.AU326 identifies the assertions which underline the preparation of financial stat

9、ements 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 expressed.Existence and Occurrence: assets, liabilities, and equ

10、ity 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, liabilities, and equity interests, and transactions that should have bee

11、n 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 financial statements at proper amounts.A. Evidence-General8 Module 3: E

12、videnceCompleteness 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 and observing the courting of inventory. 2) Internal inquiries and comp

13、arison: 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 Module 3: EvidenceExaminations: offers the highest level of assurance.

14、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 comparisons.Agreed-upon procedures: issuance of a report in which a summary of finding

15、s 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 information. Accountant is required to read the information to aid understanding, bu

16、t no requirement to inquiry or perform any other verification procedures.A. Evidence-General10 Module 3: EvidenceThree presumptions relate to the validity of evidence* independent evidence provides more assurance than evidence solely from within the company* Information from direct personal knowledg

17、e 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 Appropriate Audit EvidenceSufficiency is the measure of the quantity of audit evidence that must be

18、 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 addressed Module 3: Evidence1.Sufficient Appropriate Audit Evidence- Audit evidence is more rel

19、iable 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 ineffective controlsObtained directly by the auditor rather than indirectly or by inferenceDocumentary

20、 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 exercising professional judgment, and consider both the materiality of the item in question as well a

21、s the inherent risk of the item.A. Evidence-General12 Module 3: EvidenceModule 2: Internal Control1.Sufficient Appropriate Audit EvidenceIn relation to auditing accounting estimates, AU342 suggests that auditors to determine that all estimates 1) have been developed 2) are reasonable and 3) follow G

22、AAP. 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 expectation of the accounting estimate and compare it to managements and 3) review subsequent events or transaction

23、s occurring prior to the completion of fieldwork.A. Evidence-General13Module 2: Internal Control2.Types of Audit EvidenceAt the account level, audit risk= inherent risk*control detection risk. The procedures used in an audit are:* Risk assessment procedures: used to obtain an understanding of the en

24、tity 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.* Substantive procedures: used to detect material misstatements in transactions, account balances and disclosures. Proce

25、dures include substantive analytical procedures and test of details of account balances, transactions, and disclosures. The increased assurance arising from decrease of accepted detection risk level may be obtained by modifying the nature, timing and or extent of substantive procedures:Nature: Use m

26、ore effective proceduresTiming: Perform tests at year-end rather than an interim dateExtent: Use a larger sample size.A. Evidence-General14Module 2: Internal Control2.Types of Audit EvidenceAudit evidence includes the information contained in the accounting records underlying the financial statement

27、s and other information. * Accounting records include:1) documents, including checks and records of electronic fund transfers, invoices, contracts; 2) General and subsidiary ledgers, journal entries, and other adjustments to the financial statements that are not reflected in journal entries; 3) Reco

28、rds such as worksheets and spreadsheets supporting cost allocations, computations, reconciliations, and disclosures.* Other information includes:1) minutes of meetings2) Confirmations from third parties 3) Industry analysts reports 4) Comparable data about competitors 5) Control manuals 6) Informati

29、on 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 the auditor to reach conclusions through valid reasoning.A. Evidence-General152.Types of Audit EvidenceAudit ProceduresInspection o

30、f records/documents/tangible assetsObservation InquiryConfirmationRecalculationRe-performanceAnalytical ProceduresAgree (schedule balances to general ledger)Analyze (account transactions)Count (cash, inventory, etc.)Examine (authoritative documents)Foot (totals)Prove (totals)Read (minutes of directo

31、rs meetings)Reconcile (cash balance)Review (disclosure, legal documents)Scan (for unusual balances)Trace (from support to recorded entry)Vouch (from recorded entry to support) A. Evidence-General16 Module 3: EvidenceModule 2: Internal ControlTypes of Substantive ProceduresAnalytical procedures: cons

32、ists of evaluations of financial information made by a study of plausible relationships among financial and nonfinancial data. GAAS requires the use of analytical procedures during the planning stage and the final review stage, but not in substantive procedure.The approach is: Develop an expectation

33、 for the account balance and expectation may derive from:Determine the amount of difference from the expectation that can be accepted without investigationCompare the companys account balance (or ratio) with the expected account balanceinvestigate significant differences from the expected account ba

34、lanceB. Evidence-Specific (Substantive Procedures)17Module 2: Internal ControlTypes of Substantive Procedures3 rules governing prediction of a relationship: 1) relationships in a dynamic or unstable environment are less predictable than those in a stable environment; 2) relationships involving balan

35、ce sheet accounts are less predictable than income statement accounts (because one point in time reflection) and 3) relationships involving management discretion are sometimes less predictable.Analytical procedures limitation: 1）The guidelines for evaluation may be inadequate;2) It is difficult to d

36、etermine whether a change is due to a misstatement or is the result of a random change in the account; 3) Cost-based accounting records hinder comparisons between firms of different ages and/or asset compositions;4)Accounting differences hinder comparisons between firms5) Analytical procedures prese

37、nt only circumstantial evidence in that a significant difference will lead to additional audit procedures as opposed to direct detection of a misstatement.B. Evidence-Specific (Substantive Procedures)18Module 2: Internal ControlTypes of Substantive ProceduresTests of details of transactions balances

38、 and disclosureTests are used to exam the actual details marking up the various account balances and disclosures.Considering an accounts 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 appropri

39、ate audit evidence, auditors seek an efficient and effective combination of 1) tests of controls, 2) analytical procedures and 3) tests of details to afford a reasonable basis for an opinion.B. Evidence-Specific (Substantive Procedures)192.Substantive Procedure Audit ProgramsAudit program is a list

40、of detailed procedures to be performed during an audit.How a developed audit program relates to an audit!B. Evidence-Specific (Substantive Procedures)20Financial StatementsAudit ObjectivesAssertionsAudit ProceduresAudit Program Module 3: Evidence2.Substantive Procedure Audit ProgramsTwo approaches f

41、or auditing an accountDirect test of ending balance (“test of balance”): used to test high volume accounts, e.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

42、for lower turnover accounts, e.g. fixed assets and long term debts.- A combination of approaches with an emphasis of one approach over other is generally used in an audit.B. Evidence-Specific (Substantive Procedures)21 Module 3: Evidence2.Substantive Procedure Audit ProgramsOverall: typical procedur

43、es included in a substantive audit programPresentation and disclosures: Review disclosure / Inquires about disclosuresExistence or Occurrence: Confirmation/observation/trace*vouch transactionRights and Obligations: AuthorizationCompleteness and Cutoff: Analytical procedures/Omissions/CutoffValuation

44、, allocation and Accuracy: Foot schedules/agree schedules balances to general ledger balances/agree 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 onwa

45、rds provide summary audit procedures for financial statement accounts!B. Evidence-Specific (Substantive Procedures)22 Module 3: Evidence2.Substantive Procedure Audit ProgramsAudit Objectives relating to a financials statement account： Long term debt:Determine whether long-term debt disclosures compl

46、y with GAAP;Determine whether recorded long-term debt exists as year-end;Determine whether 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 ye

47、ar-end.Which assertions do the above objectives relate to?B. Evidence-Specific (Substantive Procedures)23 Module 3: Evidence2.Substantive Procedure Audit ProgramsAreas in which a SAS prescribes procedures.B. Evidence-Specific (Substantive Procedures)24Specific types of transactionsIllegal ActsAU317R

48、elated PartiesAU334Litigation (Loss Contingencies)AU337Information with which “l(fā)imited” procedures are requiredOther information in documents containing audited statementsAU550Interim ReviewsAU722CompilationsAR100ReviewsAR100 Module 3: EvidenceSubstantive Procedure Audit Programs*Do not attempt to m

49、emorize the procedures for each of the areas!B. Evidence-Specific (Substantive Procedures)25Supplemental information required by FASBGeneral ProceduresAU558Areas in which “audit” procedures are requiredReceivablesAU330InventoriesAU331Investment SecuritiesAU332Subsequent EventsAU560OthersOther Audito

50、rs InvolvedAU543WarehousesAU901, AU331 Module 3: EvidenceSubstantive 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: EvidenceDocumentation (AU339 and

51、 PCAOB3)AU339 requirements:*Adequate level of documentation 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 audi

52、t;*Documentation of instances of contradicting information 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 &

53、specific reasons for changes and the effect if any, 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 a

54、udit documentation;*The retention period should not 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: EvidenceDocumentation (AU339 and PCAOB3)PC

55、AOB Stanrdard 3*The documentation should 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 FilesPerm

56、anent Working paper FilesB. Evidence-Specific (Substantive Procedures)28 Module 3: Evidence29CashSpecial considerations:KitingFloat periodBank transfer scheduleDetect KitingBank reconciliationOutstanding checks and deposit in transitBank cut-off statementsVerify items in the bank reconciliationStand

57、ard confirmation formDeposit 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: Evidence30ReceivablesLappingConfirmationRequired by GAAS unless:Balance is immaterialConfirmation

58、is ineffective Low 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 Topics31Receivables (contd)Alternative

59、proceduresExamination 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 Topics32InventoryObservationRequired by GA

60、ASStatistical methodKey items and a sampleInventory before and after year endGood internal controlsOpening balanceIf adequate evidence (acceptable predecessor wp) is available, no report modificationOtherwise, qualify report due to scope limitationTypical proceduresNote: refer to Wiley CPA exam revi