Assurence

All businesses and organisations have to check to see that the information they have stored is accurate. For example, the money coming in and going out have to be correctly recorded otherwise it will look as if the company has not made much profit and it can affect the share prices of the company, affect the employees as the company might not be able to pay the employees and will have to cut down on staff, lenders will not agree to lend money, etc.

Q1. What is the link between audit risk and engagement risk? How does the audit risk model allow the auditor to deal with these risks in the most cost effective manner?

The main purpose of the financial statements is to provide creditors and investors with a summary of a business financial activity. All statements are prepared at certain times throughout the year. The balance sheet reports liabilities, assets, and owner equity of the company. The income statement matches incurred expenses during a period of generated revenue. The statement of retained earnings reports retained earnings from net loss and net incomes from

Compare the primary auditor objectives in auditing historical financial statements to auditing internal controls over financial reporting. Identify at least two (2) objectives that are the most significant in reducing the risk of reporting errors or misstatements in financial statements. Provide a rationale for your response.

The auditor needs to state explicitly whether the financial statements are fairly presented in accordance with the applicable financial reporting framework, and this may be GAAP or IFRS.

Analytical procedures are performed to assess whether there is any material modifications that need to be made to the financial statements. The accountant must obtain knowledge of the industry and entity in order to better understand the financials. The focus of the procedures and review should be in the areas where there are increased risks of material misstatements. The auditor should compare the financial statements to prior periods and inquire about any significant changes and/or discrepancies. Financial statements are reviewed to ensure they are prepared in accordance with GAAP, and that proper accounting principles and procedures are applied.

The auditor’s responsibilities are to audit annual financial statements and internal controls over financial reporting, and reports from the 10-Q quarterly reports. The auditor must also advice on new accounting pronouncements, and consolidating financial statements. (Intel Proxy Statement 2011, 48)

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

Abernethy and Chapman’s engagement team comprises of a partner-in-charge, a manager, a senior auditor, and one or more staff auditors. The partner-in-charge leads the engagement team and is responsible for all final decisions made while conducting the audit. The manager, senior auditor, and staff auditors are to perform the actual audit examination. The engagement team’s responsibility is to complete the audit with competency and objectivity.

The main purpose of financial accounting is to prepare financial reports that provide information about a firm’s performance to external parties such as investors, creditors, and tax authorities. Must be performed according to GAAP (Generally Accepted Accounting Principles) guidelines.

The objective is to ensure that auditors obtain sufficient knowledge of the business of the entity to enable them to identify and understand the events, transactions or practice that may have a significant effect on the financial statements or the audit. This knowledge of the business helps to assess the levels of control and inherent risk and to determine audit procedures.

A company prepares financial statement to provide information about its financial position and performance. This information is in turn used by a wide range of stakeholders (such as investors, banks, customers, suppliers etc) in making economic decisions with respect to respective economic interest in the company. Typically, in terms of ownership by investment in shares of the company, shareholders though own the company but do not manage it. Therefore, the shareholder and other such stakeholders to get comfort in taking sound decision need independent assurance from the auditors that the financial statements reflect true and fair view of the company affairs in all material respects. Hence, in order to enhance the level of

Assurance- deals wth objective examination of independent assessment on governance risk management and so forth. Checking to see if everything is going well within the company.

1 The primary purpose of accounting is to determine whether the business entity is profitable or unprofitable in its operations.

The purpose of an audit is to enhance of confidence in the financial statements. An auditors opinion validates this purpose.