The document discusses the objectives and scope of a financial statement audit. It explains that the objectives of an audit are to enable the auditor to express an opinion on whether the financial statements are prepared in accordance with the reporting framework and to provide reasonable assurance that the financial statements are free from material misstatement. The document also discusses management assertions, which are implied or expressed representations by management about classes of transactions and account balances in the financial statements. There are seven categories of management assertions: existence, occurrence, completeness, rights and obligations, valuation, allocation, and presentation and disclosure.
THERE ARE SO MANY STANDARDS OF AUDITING, HERE IN THIS PDF, I HAVE EXPLAINED ANY 10 STANDARDS ON AUDITING WITH FLOWCHARTS, PICTURES FOR BETTER REFERENCE OF THE TOPIC
The Auditors Responsibilities Relating to Fraud in an Audit of Financial Stat...Dr. Soheli Ghose Banerjee
This presentation is an overview of SA 240 (R). Prepared with Prof. S. Sircar.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
Learn with SAZZAD - ISA 315 (Revised)
Identifying and Assessing The Risks of Material Misstatement Through
Understanding the Entity and its Environment
Audit Evidence is one of the International Standards on Auditing. -It serves to expect the auditor to obtain audit evidence from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
THERE ARE SO MANY STANDARDS OF AUDITING, HERE IN THIS PDF, I HAVE EXPLAINED ANY 10 STANDARDS ON AUDITING WITH FLOWCHARTS, PICTURES FOR BETTER REFERENCE OF THE TOPIC
The Auditors Responsibilities Relating to Fraud in an Audit of Financial Stat...Dr. Soheli Ghose Banerjee
This presentation is an overview of SA 240 (R). Prepared with Prof. S. Sircar.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
Learn with SAZZAD - ISA 315 (Revised)
Identifying and Assessing The Risks of Material Misstatement Through
Understanding the Entity and its Environment
Audit Evidence is one of the International Standards on Auditing. -It serves to expect the auditor to obtain audit evidence from an appropriate mix of tests of control systems and substantive tests of transaction and balances.
In general, the objective of an audit is to assess the risk of mater.pdfanjanacottonmills
In general, the objective of an audit is to assess the risk of material misstatements in the financial
statements. Material misstatements can arise from inadequacies in internal controls and from
inaccurate management assertions. Thus, testing the validity of the various implicit managerial
assertions is a key objective of an auditor.
Existence and Completeness
Auditing standards require that auditors test basic underlying management assertions implicit in
the financial statements. Key among these various assertions are existence or occurrence, which
describe a singular concept: Journal entries are not fiction. As the name implies, an auditor will
conduct various procedures to verify that assets do in fact exist and that recorded transactions did
in fact occur. Additionally, an auditor will seek evidence of completeness, so that the financial
statements include all material transactions that occurred, and so the records do not omit material
transactions for any reason.
Rights and Obligations
The various rights and obligations of the company are important management assertions inherent
in the financial statements. Thus, an auditor will obtain evidence regarding a company\'s rights,
such as proper title to assets and status of intellectual property. An auditor will be concerned
with assertions relating to the company\'s obligations, such as accounts payable balances, long-
term debts and tax liabilities. Thus, the audit objectives will be fulfilled upon validating these
specific assertions.
Valuation or Allocation
Valuation or allocation are managerial assertions which are often material to the financial
statements; thus, an auditor will diligently conduct audit procedures relating to these objectives.
Generally accepted accounting principles, or GAAP, require that certain balance sheet items be
presented using different valuation methodologies. Meeting these standards is a key audit
objective, as the risk of material misstatement is low in probability, but high in magnitude. Thus,
among other things, the historical cost of assets is verified, depreciation methods are scrutinized
and the fair value of investments are calculated to satisfy this objective.
Presentation and Disclosure
Another specific audit objective is validating the presentation of the financial statements and the
adequacy of the disclosures therein. Financial statements should conform to certain requirements
and expectations, and should include the balance sheet, income statement, statement of cash
flows and the statement of owner\'s equity. Relating to disclosure, the auditor will consider the
sufficiency and clarity of footnotes and the transparency in management discussion and analysis,
so he can assess the risk of material misstatement and fulfill the audit objective.
Specific audit objectives are the application of the general audit objectives to a given class of
transactions, account balance, or presentation and disclosure. There must be at least one specific
audit object.
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June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
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2. Audit Objectives & Basic Principles Governing An
Audit
Auditor’s Responsibility For Detecting Fraud
Management Assertions
AUD390 AUDITING DIA
3. ISA200: …to enable the auditor to express an
opinion whether the FS are prepared, in all
material respects in accordance with an
identified reporting framework
AUD390 AUDITING DIA
4. Statutory requirement under CA Act
Checking on the reliability of FS
Provides assurance to the users as to the truth &
fairness of FS
Help owners access how well managers have
discharge their stewardship duties
AUD390 AUDITING DIA
5. ISA200 that an audit is accordance with ISAs
is designed to provide reasonable assurance
that the financial statements taken as whole
are free from material misstatements.
AUD390 AUDITING DIA
6. Information is material if its omission or
misstatement could influence the economic
decision of users taken on the basis of the
financial statements. Materiality depends on
the size of the item or error judged in the
particular circumstances of its omission or
misstatements. Thus, materiality provides a
threshold or cut-off point rather than being a
primary qualitative characteristic which
information must have if it is to be useful.
ISA320
AUD390 AUDITING DIA
7. Materiality
Information is material if its omission or
misstatement could influence the economic
decision of users taken on the basis of the FS
Misstatement
A mistake in financial information which
would arise from errors and fraud
AUD390 AUDITING DIA
8. 2 types of misstatements are errors & fraud
Error
o Unintentional misstatement of the FS
o For e.g.
1. Mistake in extending prices times
quantity on sales invoice
2. Overlooking older raw materials in
determining the lower of cost or
market for inventory
AUD390 AUDITING DIA
9. Fraud
o Intentional misstatement of the FS
o 2 types:
1. Misappropriation of assets, often
called as defalcation or employee
fraud
E.g. a clerk taking cash at the time
a sale is made
AUD390 AUDITING DIA
10. 2. Fraudulent financial reporting, often
called as management fraud
E.g. intentional overstatement of sales
near the balance sheet date to
increase reported earnings
AUD390 AUDITING DIA
11. Reasonable Assurance
Assurance ~ the level of certainty that the
auditor has obtained at the completion of the
audit
Reasonable, but not absolute assurance ~ the
auditor is not an insurer or guarantor of the
correctness of the FS
AUD390 AUDITING DIA
12. Reasons why the auditor is responsible for
reasonable but not absolute assurance:
1. Most audit evidence results from testing a
sample of population
2. Accounting presentation contain complex
estimates, which involve uncertainty & can
be affected by future events
3. Fraudulent prepared financial statements
are difficult for the auditor to detect
AUD390 AUDITING DIA
14. Preparation of financial statements
Maintaining adequate accounting records and
internal control
Apply appropriate accounting policies
Safeguard of company’s assets
Management’s responsibility for the fairness of
the representations (assertion) in the FS carries
with it the privilege of determining which
disclosures it considers necessary
AUD390 AUDITING DIA
15. AUD390 AUDITING DIA
In Malaysia, it is become a practice
for many public companies to
include a statement about
management responsibilities and
relationship with the CA firms
17. Implied or expressed representations by
management about classes of transactions and
related accounts in the financial statements
Act as criteria that management uses to record
and disclose accounting information in financial
statements
Refer to the definition of auditing … a
comparison of information (financial statements)
to established criteria (assertions established
according to approved accounting standards)
AUD390 AUDITING DIA
18. ISA500 Audit Evidence classifies assertion into
7 categories:
1. Existence
2. Occurrence
3. Rights and obligations
4. Completeness
5. Valuation or allocation
6. Measurement
7. Presentation and disclosure
AUD390 AUDITING DIA
19. Concern whether assets, obligations and equities
included in the balance sheet actually existed on
the balance sheet date
AUD390 AUDITING DIA
20. Concern whether recorded transactions included
in the FS actually occurred during the accounting
period
E.g. management asserts that recorded sales
transactions represent exchanges of goods or
services that actually took place
AUD390 AUDITING DIA
21. Concern whether assets are the rights of the
entity & liabilities are the obligations of the
entity at a given date
E.g. management assets that assets owned by
the company or that amounts capitalized or
leases in the balance sheet represent the cost of
the entity’s rights to leased property
AUD390 AUDITING DIA
22. Concern whether all transactions and accounts
that should be presented in the FS are included
E.g. management asserts that all sales of goods
and services are recorded and included in the FS
AUD390 AUDITING DIA
23. Concern that whether assets, liability, equity,
revenue and expense accounts have been
included in the FS at appropriate amount
E.g. management asserts that trade account
receivable included in the balance sheet are
stated at net realizable value
AUD390 AUDITING DIA
24. Concern whether a transaction or event is
recorded at that the proper amount & revenue
and expense are allocated to the proper period
E.g. management asserts that property is
recorded at historical cost and that such cost is
systematically allocated to the appropriate
accounting period through depreciation
AUD390 AUDITING DIA
25. Concern whether components of FS are properly
combined or separated, described and disclosed
E.g. management asserts that obligations
classified as long-term liabilities is the balance
sheet will not mature within 1 year
AUD390 AUDITING DIA
26. 1. Objectives of an audit
2. Why there is a need for audit?
3. State whether you agree or disagree with the following statements? Justify your reasons.
a) An auditor responsible to ensure the correctness of the financial statement of the
company.
b) An auditor’s job is to ensure the correctness of the accounting records of the
company.
c) An audited financial statements which has been given a “true and fair” opinion is
free from errors and misstatements.
4. Distinguish between management assertions of valuation and measurement
5. Match the situation to the management assertions
a) The account and transaction that should be included are included and the financial
statements are completed.
b) Assets’ liabilities, equity, revenues and expenses are appropriately valued and are
allocated to the proper accounting period.
c) Amount of assets shown in the financial statement are properly presented and
disclosed.
d) The assets are the right of the entity and the liabilities are its obligations.
e) The assets and liabilities exist and the recorded transactions have occurred.
AUD390 AUDITING DIA