Financial audit

“information”-- CPAs’ traditional stock in trade. CPAs can enhance quality by assuring users about the reliability and relevance of information, and these two features are closely related to the familiar credibility-lending products of attestation and audit services. “Context” is relevance in a different light. For assurance services, improving the context of information refers to improving its usefulness when targeted to particular decision makers in the surroundings of particular decision problems.

The Collapse of HIH – Solvency and Audit Risk Following the collapse of HIH, considerable debate, comment and speculation have arisen regarding whether and at what point HIH became insolvent. When a company is close to insolvency, the risk associated with auditing that company is considerably higher than for one that is solvent. This report investigates methods of determining insolvency, the roles of directors and auditors, and the level of audit risk associated with HIH prior to its collapse.

collection of audit evidence? The risk assessment process happens at the very beginning of the engagement and is to determine the level of risk present in the company. The risk assessment phase is when the auditor assess the client’s situation, conducts an independence threat analysis and decides whether to accept the client or not. The risk assessment is influenced by various factors such as the degree to which external users will rely on the audited statements, the company’s financial position (liquidity)

In general, auditor responsibility is to express opinion on whether the financial statements are free of material misstatements and presented truth and fairness in all material respect. Auditor will first understand of the entity and its environment, and continue with the planning and perform risk assessment procedure, and also all necessary audit procedure to obtain sufficient appropriate evidence before concludes the audit opinion. ISA 315 Identifying and assessing the risk of material misstatement

Lack of good faith. C) Gross negligence, but not ordinary negligence. D) Either ordinary or gross negligence. Answer: D Difficulty: Hard 16. An auditor knew that the purpose of her audit was to render reasonable assurance on financial statements that were to be used for the application for a loan; the auditor did not know the identity of the bank that would eventually give the loan. Under the foreseeable third party approach the auditor is generally liable

Ernst & Whinney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for the three months ended July 31, 1986. How does a review differ from an audit, particularly in terms of assurance implied by the auditor’s report? A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered

Internal Control Audit Standards a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit? An auditors’ understanding of the internal control components should be used for 3 reasons: a) To identify the potential misstatement that might occurs b) To identify the factors that affect the risk of material misstatement c) To influence the design of substantive procedures b. What is required for an audit team to assess

W.R. Grace & Co. Audit W.R. Grace & Co. (The Company) is a company that makes some of the materials that are used in the production of products ranging from medicine to gasoline. The Company was audited by an accounting firm (The Firm) that is recognized as one of the Big Four Accounting firms in the world. The Firm found that the company was participating in a practice known as “profit management”. Profit management occurs when a company defers some of its revenues from the current period

Essentials - you must achieve all nine. | | | Performance Objective | Activity | Performance indicator | 1 Demonstrate the application of professional ethics, value and judgement | Example of relevant activities Keep up-to-date with all codes of conduct and professional standards. Provide a description of how you have dealt with situations where your professional ethics, values or judgement were challenged Discuss with others (e.g. your manager) how you would deal with situations which could

on Quality Control Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements International Auditing and Assurance Standards Board International Federation of Accountants 545 Fifth Avenue, 14th Floor New York, New York 10017 USA This International Standard on Quality Control (ISQC) 1, “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements”