Audit Fee

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1. Audit Fee
The current issue and full text archive of this journal is available at www.emeraldinsight.com/0268–
6902.htm Past control risk and current audit fees
Past control risk
Thomas G. Calderon, Li Wang and Thomas Klenotic
George W. Daverio School of Accountancy, The University of Akron,
Akron, Ohio, USA
693
Abstract
Purpose – The authors posit that audit fees are driven by historical risk factors and risk encountered
in the current period. The purpose of this paper is to focus on historical risk by examining the
incremental effect of material weakness in internal control (MW) identified in prior periods on
current audit fees, after current risk factors are controlled for.
Design/methodology/approach – The paper uses ... Show more content on Helpwriting.net ...
Increased engagement effort due to high risk in ICFR can be passed along to clients through audit
fees. In addition, audit tests cannot uncover all possible material misstatements; as a result, auditors
may add a risk premium to audit fees for risky clients.
Such risk premiums, which compensate the auditors for potential losses associated with high–risk
clients, go beyond the incremental fees the auditors may charge for increased audit effort.
Although studies prior to SOX yield mixed results (O'Keefe et al., 1994; Felix et al.,
2001), recent studies have found supporting evidence of a contemporaneous positive relationship
between current control risk and current audit fees by using ICDs disclosures under SOX
(Raghunadan and Rama, 2006; Hoitash et al., 2008; Hogan and
Wilkins, 2008; Bedard et al., 2008). Nevertheless, prior studies have not addressed whether control
risk identified in prior periods affects current period audit fees. This is an important question as
generally accepted auditing standards require the auditor to assess the effects of prior ICFR
deficiencies on current period audit procedures and risk assessment. In practice, auditors rely
heavily on past audit results in audit planning for the current period. Thus, past
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3. Audit Analysis : Audit And Audit
Introduction In the early days of independence the audit, audit methods are for the detailed audit
approach which is using the accounting books of the audited entity to verify case by case basis, and
for the purpose of exposing the wrong check fraud; With the expansion of enterprise scale and
complex business activities, audit sampling appears that, according to accounting statements balance
and accounting data sample extraction section, and then inferring the overall result of the review.
This approach will be inevitably sweeping; recently, there was not only reveals the compliance of
accounting standards and disclosure errors and fraud dual audit mode, which means gradually
expanding the scope of responsibility of the audit, but also ... Show more content on Helpwriting.net
...
Each set of risk is multifactorial, and as a part of any mistakes will increase the final audit risk.
Ethics Analysis Corporate governance is a key factor, which must maintain a high degree of
independence in order to effectively monitor managers. However, due to fragmentation and
instability in equity, the general shareholders could not unite on the implementation of effective
public reading to enable shareholders to senior management for monitoring efforts greatly reduced
the formation of a "weak shareholders, strong management" phenomenon. In many cases, the board
of management was influenced and controlled by the corporate governance. The lack of
independence of the board and directors are not independent both become a problem in a number of
listed companies in the United States at present. To be more specific, serious Fraud audit units were
illegal but also a source of aggravation of audit risk. AICPA under the "auditor responsibilities of the
Committee" recommends: "Independent auditors should consider measures to prevent customer
fraud control the appropriateness of, and has the responsibility to look for fraud and asked to reveal
who usually practice with due care can be fraud uncovered. "This shows that the responsibility of
the audit have been from a single violation of public disclosure of accounting standards evolved into
both reveal errors and fraud, and breach of public
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5. The Audit Of Financial Statements
Introduction and Motivation
The audit of financial statements is mandatory for publically listed entities throughout the world.
The auditor conducts various tests and based on the results forms an opinion on the truthfulness and
fairness of the financial statements of the company and whether or not they are prepared in
accordance with the financial reporting standards and are free from any material misstatement
(Freedman, 2013). The purpose of auditing is to enhance the confidence of investors and to add
credibility to the truthfulness of company 's true financial performance. However, there are some
dos ' and don 'ts that an auditor must take care of. For instance, anything that threatens the
independence of the auditor must be avoided as it adversely affects the truthfulness and objectivity
of the opinion formed.
History raised questions about Australian rules concerning the independence of auditors and its role
in contributing to the corporate collapse and the collapse of HIH insurance ltd (Ramsay, 2001). It is
believed that if auditors had been objective in formulating their opinion on the statements or
highlighted the risk of going concern of the firms, situation could have been handled better. Possible
reason for auditor being unable to detect future threats here might be lack of independence from the
auditing client.
Independence of the auditor from the client means independence of mind and appearance. The five
major threats to independence of an auditor include
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7. An Investigation Of An Audit
An audit can be described as an official inspection of an organization 's accounts and is typically
conducted by an independent body. Companies often hire external auditors in addition to auditing
themselves. External auditors are accountants who work independently of a particular company.
They examine company records and operations to ensure financial statements are accurate. External
auditors are important to establishing your small business ' credibility and to ensuring compliance
with tax laws. There are many reasons for an external audit to take place, such as that information
becomes more reliable and useful as a result of the audit. This is known as an information
hypothesis. Another justification for an audit ... Show more content on Helpwriting.net ...
The Sarbanes–Oxley Act (the "Act") included a number of significant provisions designed to bolster
the auditor 's independence from the company under audit. For example, for listed companies, the
Act puts the audit committee–rather than management–in charge of hiring the auditor and
overseeing the engagement. It also prohibits auditors from providing certain nonaudit services to
clients and imposes mandatory audit partner rotation. In 2002, Congress considered requiring audit
firms to rotate off an audit engagement after a set number of years during the debates that led to the
Act. Instead, it decided that the idea required more study and directed the General Accounting
Office ("GAO") to prepare a report. That report was issued the following year and concluded that
"mandatory audit firm rotation may not be the most efficient way to enhance auditor independence
and audit quality. First, the main argument in favour of mandatory audit firm rotation is an increase
in auditor 'independence in fact', ultimately leading to higher audit quality. In other words, long
tenure of the auditor might lead to excessive familiarity between auditor and client. By minimising
the maximum length of tenure, it is argued that auditors will be forced to pay closer attention to the
details and be more sceptical in their audit approach. Most analytical research also confirms a
positive effect of rotation on independence, especially in cases of high market concentration
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9. Project Audit : The Audit
As noted by Meredith and Mantel (2012) "The audit life cycle includes audit initiation, project
baseline definition, establishing a database, preliminary project analysis, report preparation, and
termination" (p. 539). We are going to define what happens in each stage of the audit life cycle:
1. Project audit initiation: This step defines the purpose and the scope of the audit, determines the
proper audit methodology to use.
2. Project baseline definition: This step will determine which areas of the project will be audited. It
will establish the standards for which to measure the area on. Verify that the performance
established by management is meeting expectations.
3. Establishing an audit database: After the audit has started and the ... Show more content on
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Before the report is released to other members, the auditor will present the findings to the PM so
they can be prepared and not blindsided during the presentation. As the authors mentioned this audit
is to help improve the process in the project not to find someone to blame for faults.
5. Audit report preparation: This stage of the audit life cycle will take the information from the
preliminary analysis and prepare the audit report. The report will be made to whatever format the
organization agreed upon. Besides the findings in the audit, there will be recommendations and a
plan to implement the recommendations in the report to use on the project. Before the
recommendations are published they will need to be verified an approved by management.
6. Project audit termination: When the project ends, the audit process itself will end after it has
finished the last task. There will be a final report generated and a review of the audit process will be
done. The review of the audit process is to look for improvements in the audit and how it was
conducted for future use.
32. List and briefly describe the ways projects may be terminated.
There were four different methods of termination described by Meredith and Mantel (2012).
Termination by extinction, addition, integration, and starvation. We are going to briefly describe
each of the termination methods.
1. Termination by Extinction: This
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11. Audit Committee
Accounting Horizons Vol. 21, No. 2 June 2007 pp. 165–187
Auditor Communications with the Audit Committee and the Board of Directors: Policy
Recommendations and Opportunities for Future Research
Jeffrey Cohen, Lisa Milici Gaynor, Ganesh Krishnamoorthy, and Arnold M. Wright
SYNOPSIS: To contribute to the Public Company Accounting Oversight Board (PCAOB) project on
auditor communications with audit committees and boards of directors, we present in this paper a
review of relevant academic literature. We also identify promising future research opportunities for
the academic community. We specifically focus on how the communication process may affect
overall financial reporting quality, internal controls, control environments, and external ... Show
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We present a summary of these implications in Table 1. The literature review primarily features
research published in academic accounting and auditing journals. In an effort to capture the latest
research available–as well as research on emerging topics, such as many of those precipitated by the
passage of SOX–we also include working papers submitted to major archiving services. We
searched electronic databases such as Ingenta, ABI/Inform, and American Accounting Association
(AAA) Electronic Publications using keywords or combinations of keywords related to the various
topics and subtopics discussed in this paper. We also searched Social Science Research Network
(SSRN) and scholar.google.com to identify relevant working papers. Working papers were included
on the basis of the relevance of the research to the audit communication process and on the assessed
reliability of the results and implications. The overall objective is to ensure that the information
provided is as relevant, complete, and reliable as possible.
I
1
2
For example, Section 202 of SOX requires that the audit committee pre–approve all services that the
external auditor will provide, while Section 204, among other things, requires that the external
auditor communicate to the audit committee on a timely basis such matters as critical accounting
policies and practices. To facilitate the development of
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13. audit proposal
Audit Proposal
Brenda Pina, Rachel Foster, Maria Kight, Christine Twiford, and Clorissa Willie
ACC/542
July 14, 2014
Professor Thomas Cappels
Audit Proposal
There are many different types of audits including internal, external, and information technology.
Companies should be familiar with the types of audits that may possibly be used on an Accounting
Information System (AIS). Knowing the different types of audits and where they are used will help a
company be ready for an audit and make the process much smoother. There are some circumstances
where auditing through a computer is not always beneficial. Auditors want to make sure they are
completing their audits fully and appropriately to the best of their abilities. ... Show more content on
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Access controls protect data from being released to non–authorized users, hackers, and other
intruders.
How the audits are conducted
Kudler will conduct an information system audit by examining and evaluating their present
hardware and software. They will also examine their IT controls, systems security, risk management,
and the adequacy of their current systems. They can carry out their marketing audit by evaluating
the effectiveness of their marketing program and examining its capabilities. It will evaluate their
functions in respect to their goals, mission, vision, and their values of Kudler, which is done
externally. Kudler will examine their faculty, and their deficiencies will be identified. Another
suggestion is equipment be audited, the maintenance, and an examination to determine if it's being
operated at the designed levels, safety set–up, security, and access issues. Their audit will be done
by an external auditor who will examine their accounts, vouchers to support, financial information
tests, evaluation of their financial statements, and also examine the internal control and make
comments for improvements.
Events that prevent reliance on auditing through the computer
Using computer–based accounting systems does have its disadvantages, such as certain laws
pertaining to confidentiality, the requirement to protect against the loss of data through power
failures, the
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15. The Financial Audit Of The World 's Financial Audits
The majority of the world's financial audits are dominated by four major audit firms, which are
known as the "Big 4" (PricewaterhouseCoopers, Ernst & Young, KPMG, and Deloitte). Prior studies
suggest that these firms, on average, provide higher quality audit services and also exhibit a fee
premium in comparison with their non–Big 4 audit firms; however, it is questionable that whether
all these Big 4 audit firms are the same and that whether there are differences in audit quality within
the Big 4.
In term of total audit fee dollars, PwC maintains its leadership position among the Big 4 (Appendix
A, table 1), followed by Deloitte, Ernst & Young and KPMG. In 2014, PwC generated $15 billion
from its audit service – 44% more than those earned by KPMG. PwC also ranked as the most
prestigious accounting firm (Appendix A, table 2) in 2015 according to the Vault's annual
Accounting Survey as reported in table 2, followed by Ernst & Young, Deloitte and KPMG.
Following qualitative responses are also taken during the Vault's survey to describe their perception
of firms other than their own: "Most prestigious of the Big 4" "Very aggressive firm but over–
promises in the marketplace" "Doesn't seem to care about audit anymore" "Overworking employees
beyond every other firm" "Not a good work/life balance" "Big 3's kid brother" "Least prestigious of
the Big 4". These responses indicate potential variations within the Big 4 firms based on the outside
perception of a firm.
In this study, I
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17. Audit Report On Audit Cycle Performance Essay
Introduction
Audit cycle performance consists of several stages and the basic first stages are planning and
preliminary survey in order to obtain general information on all areas and aspects of the audited
company as well as the company 's activities and strategies that can be obtained in a short period of
time. To accomplish these stages, some important points is needed including the understanding of
the entity, identifying the key areas (key control), set the objectives and scope of the audit,
determine the criteria of the audit, identify the audit evidence, prepare the preliminary survey,
organize the preparation of the detailed test program, collect and test the audit evidence, and lastly
generate the audit working papers.
Up to this point, the internal auditor has completed the work of collecting, testing, and documenting
the data and information in the form of audit working papers. The next step is to manage this data in
order in the form of audit findings. The findings of this test need to be easily and quickly understood
by the reader to then communicate with the audited entity. Preparing audit findings activity is the
final stage of conducting the exam (detailed audit examination) before entering the stage of
reporting.
The findings of the audit can be defined as an area of potential control weakness, policy violation, or
another issue that has been identified during the audit. The findings generally outline a problem that
exists, a particular situation that
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19. Critique Paper on Completing the Audit and Post-Audit...
2013
Antonio, Mark Earl Angelo P.
ACT162 – B74
3/3/2013
2013
Antonio, Mark Earl Angelo P.
ACT162 – B74
3/3/2013
Critique Paper #03: Completing the Audit and Post–Audit Responsibilities
Critique Paper #03: Completing the Audit and Post–Audit Responsibilities
Summary The first article of Moez Bennouri, entitled "Does Auditors' Reputation 'Discourage'
Related Party Transactions? The French Case" studies the relationship between the frequency of
RPTs and the external auditors' reputation. Regulators, standard setters and market participants
consider related party transactions a major problem in financial markets. The quality of external
auditing may be proposed as an important governance mechanism to alleviate the propensity of ...
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However, for someone is not having this study as their major subject, it would be hard to
comprehend. The author might want to use a language that will be understood by the general
audience. There are a lot of articles which are able to discuss their points well, though difficult,
because they are using words that are of common parlance. Nevertheless, the arguments are well
said. Each argument raised by the auditor is supplemented by findings from prior researches which
enhances the reliability of such.
This study has attempted to examine the linkages among corporate governance components by
taking the case of external auditors' reliance on internal audit work in developing country's setting of
Ethiopia. It aimed to determine the level of external auditors' reliance on internal audit work and
identify key factors that determine the extent of this reliance. The author used a purposive sampling
in determining the sample to interview for this study. Questionnaires were distributed to two groups
of external auditors in Ethiopia: those working in a corporate governance environment of private
companies and those in state–owned enterprises' corporate governance settings. The results showed
that internal–external audit interactions in Ethiopia may not be driven by external audit efficiency
motives. External auditors' perceptions of internal auditors' work performance are significantly
associated with external auditors' level of reliance on internal
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21. A Critical View of the Audit Expectation Gap and Audit...
Audit Expectation Gap & Audit Rotation
A Critical View
Auditing is one of the most critical fields where the external auditors are always subjected to
criticism and legal regulations which are mostly directed against them. Mostly this criticism arises
because of lack of sufficient understanding of how the company law and auditing standards work
and also due to related misconception about the actual role of an auditor (Porter, 1993). This lack of
understanding is called expectation gap where the outcomes of the audit expected and its actual
purpose varies. One solution to this fundamental issue is to reduce this expectation gap by providing
a clear definition of auditor's role and also the audit function that is required to be performed by
him. However, during this defining phase, it is necessary to consider whether an audit rotation
would reduce this audit expectation gap.
This term, 'Audit Expectation Gap' was coined by Liggio in 1974. It was established as the
perceived difference between the desired performance levels as observed by the independent auditor
and by the user of financial statements (Liggio, 1974, p.2). Tweedie further elaborated this
predicament by saying, 'The public appears to require (1) a burglar alarm system (protection against
fraud).....(2) a radar station (early warning of future insolvency).....(3) a safety net (general re–
assurance of financial well–being).....(4) an independent auditor (safeguards for auditor
independence).....and (5)
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23. Audit And Investigation Essay
Audit & Investigation
AQ002–3.5–2–AINV–T
15–Jun–12
WASEED AHMED
LECTURER: MR. MEGAT ABDULLAH MEGA T MAHMUD
Table of Contents Different roles of internal and external auditors. 4 Internal auditors: 4 External
auditors: 4 Identify the benefits in forming an audit committee. 6 Evaluate the strengths and
weaknesses of MPL's control environment: 7 Control Environment: 7 a. Integrity and Ethical
Values: 7 b. Participation of Board of Directors or Audit Committee: 7 c. Management Philosophies
and Operating Style: 7 d. Organisation Structure: 8 e. Assignment of Authority and Responsibility: 8
f. Human Resource Policies and ... Show more content on Helpwriting.net ...
These factors include: a. Integrity and Ethical Values:
The entity should ensure, honest, legal and ethical act. There should also be code of conduct
mentioning how to behave during work, not to cheat or steal but if it happens then strong action
would be taken.
b. Participation of Board of Directors or Audit Committee:
Top management should participate or involve in every case. Frequent meetings and discussions
with employees should be held. These meetings can be held with accounting officers, internal
auditors and even external auditors.
c. Management Philosophies and Operating Style:
Philosophy of management can be a nature of business in accepting risks. Operating style can be
shown by attitudes and actions toward financial reporting which include disputes over application of
accounting policies.
d. Organisation Structure:
The framework in which an organisation arranges its lines of authority and communications, and
allocates rights and duties is organisational structure. In this, the roles and power is divided among
management. Everyone in management should inform to their immediate senior level of
management so that the structure will work accordingly.
e. Assignment of Authority and Responsibility:

24. Responsibility and authority should be given to those who are capable, in respect to data processing
and accounting functions with the required skill levels relative to
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26. Audit Committee Characteristics
THE ASSOCIATION BETWEEN AUDIT COMMITTEE CHARACTERISTICS AND
FINANCIAL RESTATEMENTS
ABSTRACT:
The second section focuses on the background of corporate governance provisions such as the Blue
Ribbon Committee (BRC) and Sarbanes Oxley (SOX) that aim to improve the effectiveness of audit
committees. The composition of audit committees is heavily critiqued with an emphasis on
independence, financial expertise and frequency of meetings. This paper will examine each of these
characteristics in depth in section 3 and their effect on financial restatements. Furthermore, this
literature review will show that if audit committees can exhibit these behaviors and attributes the
risk of restatements and fraudulent financial reporting will be ... Show more content on
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Audit Committee Independence
The primary responsibility of the audit committee is to serve as an independent and objective body
to monitor a company's financial reporting process and internal control system (BRC, 1999). In
order to properly serve one's role as an independent audit committee member, one must be free from
all personal connections and/or material financial connections to the company or the company's key
executives (Persons, 2009, peer reviewed). A typical expectation of audit committee effectiveness is
that independent audit committee members or directors would warrant a lower likelihood of
financial restatements. This expectation is supported through prior investigation of empirical
evidence (Abbott et al., 2000, peer reviewed; Beasley et al., 2000, peer reviewed). Specifically,
Abbott et al (2004, peer reviewed) and Persons (2009, peer reviewed) both find a negative
correlation between audit committee independence and the likelihood of financial reporting
restatement. These studies support the idea that an independent audit committee contributes
positively to the quality of financial reporting and effective monitoring of internal controls.
Scholars such as Abbott, Beasley and Persons, support the solution that the presence of non–
independent inside directors on the board greatly increases the probability of accounting fraud.
Monas (2003,
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28. Taxpayer Audit Program
Examination techniques
A taxpayer audit program must embrace a range of methods and techniques for determining and
verifying a taxpayer's income if it is to be an effective component of a balanced compliance
management strategy. Detecting and deterring non–compliance requires biber (2010) more than a
mere examination of a taxpayer's books and records and necessitates an analysis of the taxpayer's
financial affairs to correctly assess tax liabilities.
Direct methods, often referred to as specific issue or specific item methods; rely upon verification of
income or expenses by direct reference to the books and records used to prepare the tax declaration.
Adjustments to declarations or assessments are supported by specific evidence in relation ... Show
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Using and sharing this information across the organization, tax administrations may better allocate
work and identify specialist resources or skills Improving competency and addressing capability
gaps: Responsibility and a accountability for improving auditors, audit managers and audit directors
commonly lies with the staff member in question and their direct manager and/or local management
team. Competency improvement should be integrated (not be seen as extra task) into normal
business activities. Together with tax auditing or training departments, human resource departments
(where applicable) often have joint responsibility and be significant contributors to the improvement
process
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30. Investigating The Pricing Of Audit
Researches about audit pricing started in the 1980s with the publishing of Simunic (1980)'s The
pricing of audit services: Theory and evidence. He set out the multiple regression model of audit
pricing and run the regression analysis using data from 397 listed companies in USA. Simunic took
the position that "audit fees are determined by the loss exposure of the client comlany, the
apportionment rate of loss between the audit firm and the client company, and the production
function and characteristics of the audit firm". The results of his study demonstrate that the scale of
an auditee is the most significant factor determining its audit fees, despite other factors, such as the
ratio of receivables to total assets of the client company and ... Show more content on
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All of the researches mentioned above focus on developed economies, where audit markets have
similar characteristics: audit markets are mature and oligopolistic; audit markets operate under
stable policy and regulation. However, things might be different in China, a developing economy,
due to the imperfect regulation and a highly competitive audit market, where top ten audit firms are
only in charge of 30% listed companies during 2005–2007, while big 8 audit firms dominated the
audit market in developed economies in the same period (Li et al., 2005; Wang et al., 2008).
Most empirical studies of audit fees have come out due to government's requirement of Chinese
listed companies to disclose audit fees in their financial reports, since 2001. Some works investigate
the determinants of audit fees directly. Wang (2002) became the first researcher to study audit
pricing determinants of Chinese listed companies. He concludes that the scale of client firm and
auditor, the complexity of client firm, audit opinion, audit risk, and the industry of client firms are of
statistically significance in determining audit fees. Liu et al. (2003)'s research further concludes that
the location of client firm is significantly related to audit fees. Wu (2003)'s contribution is that there
is a positive relationship between the changing of audit opinions (basically from unqualified opinion
to qualified
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32. Audit Planning And The Audit
Audit planning is a process that entails designing a road map to be followed when conducting an
audit. It also extends to identifying the specific guidelines to be adhered to direct the audit direction
in the most professionally way. It can be established that are various guidelines that guide the audit
depending on whether it is internal or external. Notably, external audit is guided by various
standards, which require financial information to be prepared in a specific way as stipulated by
various standard setting bodies. Therefore, in audit planning each body has distinct guidelines to be
followed in accordance to the jurisdiction's accepted accounting principles. An analysis of three
audit–planning standards: AICPA (American Institute of Certified Public Accountants), PCAOB
(Public Company Accounting Oversight Board) and IAASB (International Auditing and Assurance
Standards Board)reveals characteristic similarities and differences, which have an overall impact on
the performance of the audit. Audit planning is carried in accordance with the guidelines of the
specific accounting body. Therefore, in doing so, the Auditor need to identify the jurisdiction under
which a firm falls under to establish which standards to adopt. According to PCAOB, an audit
planning should be done in accordance to PCAOB standards (Auditing Standard No. 9).
Furthermore, the standard also expressly defines the how the overall audit plan should be done and
the risk assessment guidelines to be
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34. Information Technology Audit
INFORMATION SYSTEMS AUDIT
Introduction An information technology audit, or information systems audit, is an examination of
the controls within an Information technology (IT) infrastructure. IT auditing is a branch of general
auditing concerned with governance (control) of information and communications technologies
(computers). IT auditors primarily study computer systems and networks from the point of view of
examining the effectiveness of their technical and procedural controls to minimise risks. IT audits
are also known as automated data processing (ADP) audits and computer audits or IS, IT or ICT
auditing and systems auditing. They were formerly called electronic data processing (EDP) audits
History of IS Audit The concept of IT ... Show more content on Helpwriting.net ...
Some industry bodies define their own generic information security related standards too e.g. SAS
70 and PCI DSS for financial services
2 Compiled by: Mr.Avadh Yadav,Bos,Noida
INFORMATION SYSTEMS AUDIT
Governments and legislatures define standards in the forms of laws and regulations e.g. for
electronic signatures, copyright, privacy & governance. Steps in Information Technology Audit
Different audit organizations go about IT auditing in different ways and individual auditors have
their own favourite ways of working. It can be categorized into six stages:
3
Compiled by: Mr.Avadh Yadav,Bos,Noida
INFORMATION SYSTEMS AUDIT
1. Scoping and pre–audit survey – the auditors determine the main area/s of focus and any areas that
are explicitly out–of–scope, based normally on some form of risk–based assessment. Information
sources at this stage include background reading and web browsing, previous audit reports, pre audit
interview, observations and, sometimes, subjective impressions that simply deserve further
investigation. 2. Planning and preparation – during which the scope is broken down into greater
levels of detail, usually involving the generation of an audit work plan or risk–control–matrix. 3.
Fieldwork – gathering evidence by interviewing staff and

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37. Audit Methodology For A Audit Essay
Audit methodology
The audit methodology will be used as a step by step guideline that will be used by the auditors to
keep track of their progress and enable them to ensure that quality standards are maintained during
the auditing phase.
To audit the International Bank of Africa information system we will go through five phases or
steps.
Step one: Planning
The first phase will determine the sort of audit team that will be assembled. The team selected will
be best placed to handle all obstacles and perform a detailed audit of the system as accurately as
possible. Apart from this the team of experts will go through all the banking operations, operations,
policies, practices and the information system and internal controls. The system to be audited is
fairly big as it is an ERP and performs various operations like financial transactions, customer
relationship management, risk management and human resource management. Therefore the team
will consist of finance experts, accountants, and other IT and technical staff. We'll then construct an
audit timetable that meets your requirements.
Step two: Risk assessment
The purpose of the risk assessment is to:
Understand the risks that the organisation face in achieving its strategic objectives
Identify the banks keys processes that mitigate risks
The Risk assessment will be carried out to determine that the Bank and its information system are
protected from any event that would exploit them and have a negative impact on the
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39. Planning An Audit And Audit Essay
1. Planning an audit is one the most important phase in an audit because without enough planning
programme, the auditor risks taking the work blindly which increases audit risks which will lead to
forming an informed opinion on the financial statements. There are many areas in audit planning
that will themselves lead to misunderstanding or misrepresentation and many auditors have fallen
under criticism for lack of proper planning documentation. It is from the filed documentation that
inspectors can conclude that file documentation reflects the real amount of planning done.
The auditor will be able to have abroad view of the business at this initial stage, planning. It is from
this understanding or knowledge that enables the auditor to work out a work plan. This
understanding gives direction in areas to focus on which in turn influence the opinion given
depending on the fair presentation of the areas focused. The information at the planning stage is also
important in determining the level of cooperation by the client.
In audit of Elementary Plc group, the audit risks from the information provided will be on gathering
substantial information on the entire company considering it has subsidiaries. The main challenge is
that audits of the subsidiaries are carried out by other independent auditors. Establishing the amount
of work that the subsidiary auditors have done will mean inspecting all their work. While Tomos, the
chief financial officer has resigned on personal grounds,
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41. Audit Activity, Audit, And Agency Theory
Abstract
Based on a number of researches conducted by the prior papers about audit activity, audit price and
agency theory. This short paper will provide a brief review focus on whether agency theory provides
a general framework for audit pricing majorly refer to the study by Nikkinen and Sahlstron (2004).
Furthermore, this is short paper also try to make further discussion from personal perspective.
Literature review
The purpose of Nikkinen and Sahlstron (2004) study is to 'investigate whether agency theory
provides a general framework for audit pricing.' Through analysing audit price in seven countries
representing entirely different accounting and economics environment, they try to verify the
hypothesis that audit fees are determined by agency theory (Nikkinen and Sahlstron, 2004). As
suggested by the regression analysis, it confirms that there is a negative relationship between audit
fees and manager ownership and a positive relationship between audit fees and free cash flow in
several countries (Nikkinen and Sahlstron, 2004). As the overall R2is 0.78, which is suggested that
agency theory can be used, at least to some extent, to explain audit fee (Nikkinen and Sahlstron,
2004)
Discussion
According to Jensen and Meckling (1976), agency theory derives from the financial economics
literature, which postulate that firm consist of a nexus of contracts between the owners of the
entities (the principles) and manager (the agents) who are charged with using and controlling
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43. Audit And It Audit Industry Terms
Spring 2016 CIS 584 ISHAN FAFADIA
Prof. Wasley HW 1: AUDIT AND IT AUDIT INDUSTRY TERMS 04/13/2016
1. Financial (Substantive) Audit: A financial audit is an independent, objective assessment of an
organization 's financial reports and financial reporting forms. The primary purpose for financial
audits is to give regulators, stakeholders, administrators, and managers rational assurance that
financial statements are precise and complete. The purpose of a financial statement audit is to add
believability to the reported budgetary position and execution of a business. The Securities and
Exchange Commission ... Show more content on Helpwriting.net ...
The essential destinations of an IT review include:
Assess the frameworks and procedures set up that safe organization information.
Decide dangers to an organization 's data resources, and recognize techniques to minimize those
dangers.
Guarantee data administration procedures are in consistence with IT–particular laws, approaches
and models.
Decide inefficiencies in IT frameworks and related administration.
3. Audit Scope: The scope and objectives for every audit are determined through discussion with the
division 's management and a department specific risk evaluation. While each audit is exclusive,
there are some common objectives applied to maximum audits. Some of the common objectives are:
Review action for the most current twelve–month period.
Review flexible, self–financing, restricted and organization account expenditures and determine if
they are usable, reasonable and in compliance with Academy policies and donor restrictions
Determine if gifts are placed into proper accounts, properly restricted and advanced to the Office of
Institutional Advancement.
4. SAS 1: This statement portrays the obligations and elements of the free inspector. The area
likewise incorporates refinement between the obligations of the evaluator and administration and the
expert capabilities required by
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45. External Audit And Non Audit Services Essay
External Audit and Non–Audit Services
Introduction
An external auditor carry out the audit work，according to particular rules or laws of the financial
statement corporation, government agencies, other juridical entity, as well as the independent
implementation of the audit commissioned. External audit is actually an important systematic
inspection, which aim at false behavior within the enterprise and deceptive behavior. The advantage
of external audit is to ensure the fairness and independence of the audit. However, the external
auditors do not understand the internal organizational structure, production processes and operating
characteristics, So difficulties may arise in the audit of the specific business. Non–audit services
refer to other authentication services, consulting services and other services other than audit
services. This essay will discuss whether the provision of non–audit services by external audit firms
is advantageous or disadvantageous, and explain how regulators can reduce the threat posed by such
regulations.
Disadvantage and disadvantage There are some advantages of using external audit firm for some
non–audit services. The external audit firm can develop expertise which used in some business areas
and specific industries that other form of consultants could not match(Quick and Warming–
Rasmussen, 2009). To provide non–audit services, such as management consulting, can make the
firm does not improve the audit resources investment(Habib, 2012).
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47. Audit Report
Independent Auditor 's Report
To the Stockholders
Apollo Shoes, Inc.
1235 Winner 's Road
Write City, IN 12354
LCC has conducted an audit of Apollo Shoes, Inc. balance sheets, the retained earnings, cash flows,
and other related statements of income for the year ended December 31, 2006/2007. Apollo Shoes
Inc management is responsible for maintaining the effective internal controls that goes along with
the financial statements and how well the accuracy is going to be. LLC has evaluated the
effectiveness of the said controls and with everything to see the relevance in the timing, the
substantive in quality, and the comprehensive in nature. The responsibility of our firm is to express
an opinion that is supported by audit evidence in ... Show more content on Helpwriting.net ...
1235 Winner 's Road Write City, IN 12354 DONALDSON AND LUCIER, LCC has conducted an
audit of Apollo Shoes, Inc. balance sheets, the retained earnings, cash flows, and other related
statements of income for the year ended December 31, 2006/2007. Apollo Shoes Inc management is
responsible for maintaining the effective internal controls that goes along with the financial
statements and how well the accuracy is going to be. Donaldson and lucier, LLC has evaluated the
effectiveness of the said controls and with everything to see the relevance in the timing, the
substantive in quality, and the comprehensive in nature. The responsibility of our firm is to express
an opinion that is supported by audit evidence in regards to the accuracy of the Apollo Shoes, Inc.
financial statements. Our firm has conducted all audit related services that is accepted by the United
States and the generally accepted auditing standards. The planning and performance done ensures
that the audit was done to execute and obtain reasonable assurance that the financial statements
published by Apollo Shoes, Inc. are free and clear of material misstatement. It is going to include the
examination of the evidence and/or the supporting documentation for the amounts that are disclosed
and included
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49. Audit Plan- Glaxosmithkline
Audit Plan– GlaxoSmithKline (GSK)
Key business and audit risk:
In order to make the report more efficient we must identify the key areas of business risk and
auditing risk. Business risk can be defined as the risk, which could affect an organization's ability to
achieve its objectives (Gray and Manson, 2007).
Audit risk is defined as the risk that the auditor gives an inappropriate audit opinion when the
financial statements are materially misstated (Soltani, 2007). In Gray and Manson (2007)'s book
Audit Risk can be split into three separate elements :
1– Inherent risk reflects the auditor's opinion on the possibility of material misstatement on financial
statement.
2– Control risk is the risk that internal control policies and ... Show more content on Helpwriting.net
...
Firstly, misstatement via the means of non–existent sales or sales which have been realised in the
incorrect period. Secondly sales may not be recorded in order to lower sales so provide evidence in
further periods of higher growth than is actually correct. Thirdly sales could be incorrectly entered
into the system providing incorrect figures. Therefore one would need to verify the sales books, and
the controls in place to prevent errors either intentional or unintentional.
Debts
The level of debt that a company holds and their ability to repay this debt is an important risk factor
for GSK. There is a higher risk for GSK than for some of its competitors, as GSK has a higher
leverage than the likes of Pfizer and J&J (Financial Times, 2010). However this in itself can in some
cases be more efficient as long as the entity has the cash flow in order to repay these debts.
Therefore one has to ensure during the audit that GSK will have sufficient cash flows to meet its
repayments for the year.
Cash management
Sufficient liquid cash in a company is important to defend against economic uncertainty. A small
cash reserve/ cash flow, can be a control and detection risk, which may result profitable projects
having to be scrapped or assets sold to increase cash flow
Also one has to ensure that the book values for GSK's debtor and creditors are correct and verified
as they make up large sections of the balance sheet and a misstatement of these values would
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51. The Role of Audit
The Role of Audit An audit is 'an independent examination of, and the subsequent expression of
opinion on, the financial statements of an organization' (Hussey, 1999, p. 33). The audit can be
viewed as an integral part of corporate financial reporting, where the assurance it provides stems
from the trust placed in the judgement of the auditor. The audit is designed to demonstrate 'the
completeness, accuracy and validity of transactions which, when aggregated, make up the financial
statements' (Power, 1997, p. 24).
An audit is 'an independent examination of, and the subsequent expression of opinion on the
financial statements of an organization'. (Hussey 1999). "There has to be an explanation of why
auditors do what they do ,what ... Show more content on Helpwriting.net ...
The auditors work should also be free from fraud and error and exists through proper and exists
through recognized concepts and frameworks so that there is a consistency in the reporting which
ultimately leads to a fair presentation.
It could be said that the postulates and concepts are ideas to guide the performance of the audit
function rather than the theory of its existence.
There are also other theories for example the market based approach which suggests that auditing is
a n economic function. The market based approach of auditing uses the agency theory, information
theory and the financial economic concept which provides a theoretical framework for viewing an
audit function. The market based theory also suggest that the audits are not only demanded by
consumers but also valued (i.e. the perceived benefit > perceived costs) if not the resources used for
the audits would be shifted towards other products.
There are also 3 complementary hypothesis's namely the stewardship(monitoring ) hypothesis ,
information hypothesis and the insurance hypothesis.
The stewardship hypothesis delves into the agency relationship rational expectations. Under this
hypothesis it expects asymmetric information as a result of the separation of ownership and control
and it also could be said that the principals and the agents interest to diverge from each other. As a
result it could be said that the audit provides the stewardship between the principal and the agent
and provides the
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53. Questions And Questions On Audit
Summary
I am in agreement with the facts that Carly presented in her case. I believe that Carly she did a good
job on her case study and presented this case with most of the relevant facts. However, I did skim
the case in order to develop a better understanding of a couple of the elements presented. I added
those elements to my critique of this case.
Questions and Answers
1. What factors likely contributed to the oversights made by Ernst & Young auditors during the 2004
AA Capital engagement? Identify measures that audit firms can implement to minimize the
likelihood of such oversights on audit engagements.
The fact that Oprins and McNeely were unfamiliar with the company likely contributed to the
oversights that were made by the Ernst & Young auditors. In the case, it states that McNeely asked
the CFO for all documentation that pertained to the tax advances (Knapp, 2015). That request was
never fulfilled. This documentation surely held information that would have allowed for a more
realistic audit opinion to be issued. I agree that a long term relationship can minimize the likelihood
of such oversights on audit engagements. As you mentioned, knowledge of the internal control
system is also pertinent. Another measure that would assist in minimizing oversights on audit
engagements would be to refrain from a time allowance when discrepancies are found. The case
states that the auditors did exceed the budgeted audit hours (Knapp, 2015). Although, the auditors
did go over by
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55. Audit Approach
risk
The approach adopted by an audit firm to a specified audit assignment will be a key factor in
determining the outcome of the audit. If auditors fail to adopt the correct audit approach then the
likelihood of audit failure increases, failure which could lead to a damaged reputation and
potentially costly litigation against the firm. This article is the first of a series on risk‑based auditing
and audit evidence. AUDIT APPROACHES Essentially there are four different audit approaches:
the substantive procedures approach the balance sheet approach the systems–based approach the
risk–based approach. The substantive procedures approach This is also referred to as the vouching
approach or the direct verification approach. In this approach, ... Show more content on
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When adopting this approach, in order to
technical
facilitate the identification of risks and the assessment of their effect on the financial statements,
risks are categorised as: financial risks – such as cash flow risks compliance risks – such as
breaching of laws and regulations risk operational risks – such as loss of key employee risk and loss
of data risk. Specific use of the business risk approach to an audit will be covered in the second
article of this series. The ultimate objective of adopting the business risk approach is to reduce audit
risk – the risk that the auditor will give an inappropriate opinion on the financial statements.
Students should therefore appreciate how business risk is linked to audit risk and how the business
risk approach is integral to the use of the audit risk model when planning audit work. FINANCIAL
STATEMENT/DETECTION RISK Students should be aware that audit risk is a function of
financial statement risk (the risk that the financial statements are materially misstated), and detection
risk (the risk that the auditor will not detect such misstatements). Financial statement risk This has
two components – inherent risk and control risk. Inherent risk is the susceptibility of an assertion to
a misstatement which could be material (individually or when aggregated with other misstatements),
assuming that there were no related internal controls. It is limited either to the nature of the item in
the
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57. Audit
Q1 – What is the relationship between the risk assessment process and the 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), the
nature of operations, competence of management and their integiryt, if it is a first time client or not,
etc. The riskier the company seems, the lower ... Show more content on Helpwriting.net ...
There are several ways the profession can reduce its legal liability.
1– The accounting profession as a whole may conduct research in auditing in order to come up with
better ways to uncover material misstatements, fraud, errors, etc. Research is very important to keep
the profession up to date with the fast changing business world.
2– The CICA set standards and rules and revise them to fit the constantly changing need of auditing.
3– Professional accounting associations can help protect public accountants by setting requirements.
4– The periodic examination of a firm's practices and procedures is a way to educate practitioners
and identify firms not meeting the standards of the profession.
5– Defend unjustified lawsuit. It is important that public accounting firms continue to oppose
unwarranted lawsuits even if in the short run the costs of winning exceeds the cost of settling.
6– Educate users. It is important that users understand that the auditor's opinion is not a 100%
guarantee of the accuracy of the financial statements.
7– Sanction members for improper conduct and performance. The profession is responsible for
policing its own membership.
8– Lobby for changes in law to protect the risk exposure and keep insurance. (Arens et al. p.89)
Q5
a) What number is the CAS for audit documentation?
CAS 230
b) How many sections are there to each CAS, name them?
5 – Introduction, Objective, Definitions, Requirements,
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59. Audit Program
ABCD 1234 AND COMPANY WLL Corporate Office | To: Head – Procurement & StoresCC: |
From : Head – Internal Audit | Report No | Date : |
* Subject: Audit Report on Operations of ABCD 1234 AND COMPANY WLL.
We have done general operations audit of ABCD 1234 AND company WLL from 1.11.2012 to
20.11.2012 and submitting the draft audit report below..
Executive Summary: * There is no ABC analysis of the suppliers have been done by the company (
Refer finding # 1).
The Purchasing Department has not carried out an ABC analysis for suppliers and articles. As a
result purchasing activities are not focusing its activities on the right suppliers and articles. Local
purchases are done with only one supplier and overseas purchases are ... Show more content on
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This usually translates for the volume into: A–suppliers = 10% of purchasing volume; B–suppliers =
15% of purchasing volume and C–suppliers = 75% of purchasing volume.
ABC Analysis for ABCD 1234 and company WLL
The following table shows the segregation of suppliers in ABC categories as defined above:
Table 6: ABC analysis per supplier (2010–11) (RO '000s) | A–suppliers | B–suppliers | C–suppliers |
Total | InternalSuppliers | Number of suppliers | Total | | | | | | | In % | | | | | | Purchasing value | Total | |
| | | | | In % | | | | | ExternalSuppliers | Number of suppliers | Total | | | | | | | In % | | | | | | Purchasing
value | Total | | | | | | | In % | | | | | Total | Number of suppliers | Total | | | | | | | In % | | | | | | Purchasing
value | Total | | | | | | | In % | | | | |
Finding – There is no ABC analysis of the suppliers have been done by the company.
The Purchasing Department has not carried out an ABC analysis for suppliers and articles. As a
result
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61. Audit
Fraud Auditing and Different type of fraud
Introduction
Over the years, the role of auditors become increasingly important especially in a capitalist economy
as the process of wealth creation and political stability depends heavily upon confidence in
processes of accountability and how well the expected roles are being fulfilled. An auditor has the
responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one
of the most controversial issues in auditing. The most frequently debated areas amongst auditors,
politicians, media, regulators and the public is where the fraud is coming from and by whom. This
disagreement has been especially tinted by the collapse of big corporations like Enron and ... Show
more content on Helpwriting.net ...
First, there is an incentive or pressure that provides a reason to commit fraud. Second, there is an
opportunity for fraud to be perpetrated (e.g. absence of controls, ineffective controls, or the ability of
management to override controls.) Third, the individuals committing the fraud possess an attitude
that enables them to rationalize the fraud. (http://en.wikipedia.org/wiki/SAS_99)
As we know fraud is more likely to be committed by a single individual, without a prior history of
fraud, who often raises a red flag because they are living beyond their means and are experiencing
financial difficulties. The reasons for fraud are not always obvious to the business owner or even
their attorneys. However, what is obvious is that it is often overlooked, ignored, and even
undetected.
An Analysis of the Fraud Triangle Abstract
The concept of a "Fraud Triangle" is introduced to the professional literature in SAS No. 99,
Consideration of Fraud in a Financial Statement Audit. The Fraud Triangle consists of three
conditions generally present when fraud occurs: Incentive/Pressure, Opportunity, and Attitude/
Rationalizations. Input from forensic experts, academics and others consistently show that
evaluation of information about fraud is enhanced when auditors evaluate in the context of these
three conditions. To examine the impact of the fraud triangle on the audit process, this paper
develops an evidential
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63. Audit Proposal
Audit Proposal
By: Catherine Chase
Instructor: Khatrina Higgs, CPA
ACC/542
Audit Proposal
Abstract
Understanding the audit process and how auditors operate is vital since it informs IT managers how
to develop an environment that is compliant. More importantly, this brief will discuss the role of the
auditor and its responsibilities as well as expand on the role and responsibilities of management
during and after the audit. This brief will also focus on the methodologies of how auditors conduct
the IT audit process and the specifics that are involved in performing an audit as well as the
responsibilities of management.
Financial Audit vs. IT Audit
The primary objective of a financial statement audit is to ensure that ... Show more content on
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Additionally, AICPA issued SAS No. 90, which requires Auditors conduct open and frank
discussions with management and the audit committee relating to the quality and the acceptability of
the organization 's accounting principles as it pertains to its financial statements. These discussion
should generally also include matters relating to the consistency and application of the accounting
policies as well as the clarity and completeness of the financial statements (Reinstein & Houston,
n.d.).
The new rules by the SEC 's require audit committees to include a report in the company 's proxy
statement that informs shareholders of the committee 's financial oversight responsibilities.
Auditing Around The Computer
The auditing around the computer approach is pragmatic when computer applications are simplex.
Moreover, SAS No. 94 doesn't eliminate the use of this technique, rather, this approach may be well
suited for firms using a variety of accounting software that process applications periodically, or
where the audit trail generated is extensive and allows outputs to be referenced back to inputs.
However, one of the primary weaknesses of auditing around the computer is that it is unable to
determine whether the program logic is correct, nor does this approach reveal how the automated

64. controls respond to a wide variety of transactions that contain errors. Therefore, in a complex IT
environment, this approach may potentially overlook significant errors rendering it
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66. Case Study Audit
Case Study 3 a) What events or condition above may cause substantial doubt about the entity's
ability to continue as a going concern?
Events or condition that may cause substantial doubt about the entity's ability to continue as a going
concern are the first one, because of the high competition in the industry, it has affected the sales of
the Fast Go. The effect of vigorous competition in the markets has makes it difficult for Fast Go to
attract and retain customers and to grow their customer base and revenue. Furthermore, many
competitors of Fast Go's are larger and have greater financial resources, less average, and their
coverage are more extensive.
Furthermore, Fast Go also suffer high turnover of staff of the company. It is ... Show more content
on Helpwriting.net ...
f) What types of audit report will you issue for Fast Go.
Types of audit report that will be issue for Fast Go is unmodified audit report which have to prepare
by the management on the going basis after considering all the mitigating factors that arise.
Case Study 4
i) Explain the factors that contribute to the success of Mazlan's fraudulent scheme. You may explain
from the perspective of fraud diamond.
Based on the fraud diamond, the factors that contribute to the success of Mazlan's fraudulent scheme
are: a) An incentive – It is an incentive for Mazlan to commit fraud when he need to bear the limit
credit card and he was on the verge of declaring bankruptcy. Because of this he decided to "borrow"
money from IOPSB. b) Rationalization – Mazlan think what he did is rational because he will try to
keep track of the money so he could pay it back later to the company. c) Opportunity– Mazlan has
an opportunity to commit fraud when Zairi, the Chief Executive Officer did not play his duty as an
officer. He just signed whatever cheques without check the payment is made for whom. d)
Capability– Mazlan was also capable to commit fraud because he is Account Executive in that
company. So that, it easier for Mazlan to "borrow" the money from IOPSB.
ii) Based on what Mazlan told you about his fraudulent scheme, describe
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68. Audit
AUDITING THEORY
8. Which of the following should an auditor do when control risk is assessed at the maximum level?
A. Perform fewer substantive tests of details.
B. Perform more tests of controls.
C. Document the assessment.
D. Document the internal control system more extensively.
9. Which of the following is least likely to be a test of a control?
A. Inquiries of appropriate personnel.
B. Inspection of management's engagement letter.
C. Observation of the application of a policy.
D. Reperformance of the application of a policy.
10. Which of the following controls may prevent the failure to bill customers for some shipments?
A. Each shipment should be supported by a prenumbered sales invoice that is accounted for.
B. Each ... Show more content on Helpwriting.net ...
D. Audit evidence provided by original documents is more reliable than audit evidence generated
through a system of effective controls.
20. Which of the following statements relating to the appropriateness of audit evidence is always
true?
A. Audit evidence gathered by an auditor from outside an enterprise is reliable.
B. Accounting data developed under satisfactory conditions of internal control are more relevant
than data developed under unsatisfactory internal control conditions.
C. Oral representations made by management are not valid evidence.
D. Evidence gathered by auditors must be both valid and relevant to be considered appropriate.
21. An auditor may achieve audit objectives related to particular assertions by
A. Performing analytical procedures.
B. Adhering to a system of quality control.
C. Preparing auditor working papers.
D. Increasing the level of detection risk.
22. Which of the following is the best example of a substantive test?

69. A. Examining a sample of cash disbursements to test whether expenses have been properly
approved.
B. Confirmation of balances of accounts receivable.
C. Comparison of signatures on checks to a list of authorized signers.
D. Flowcharting of the client's cash receipts system.
23. To reduce the risks associated with accepting fax responses to requests for confirmations of
accounts receivable, an auditor most likely would
A. Examine the shipping
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71. Internal Audit Report On The Audit
1. The internal auditors report directly to the CEO and the CEO is the one who decides on the audit
plan.
Control Weakness: The CEO sets up all the meetings that take place between the internal auditors
and the audit committee and the director of the internal audit department doesn't have outside access
to the audit committee. Although the internal audit department is in charge of giving a presentation
to the audit committee, the CEO must filter everything that is reported (including all
documentation). Also, whenever there tends to be questions in regards to the receiving, processing
or manufacturing functions, the CEO just refers the auditors to the Human Resources department,
instead of going into detail on the issues that are raised. ... Show more content on Helpwriting.net ...
This organizational structure is useless and does not allow for effective internal control over
financial reporting. The CEO can easily steer the internal auditors away from key issues. Objectivity
of information is compromised because the internal auditors can simply be under pressure to
misstate financial statement account balances.
Recommendation: The internal auditors need to report directly to the Audit Committee, and not the
CEO. By doing so, the internal auditors will be able to work independently outside of management
control. This will allow for the internal auditors to exercise due care about issues raised that can be
conflicting with the CEO's agenda. Internal auditors must have direct access to the audit committee
so that they are able to report on significant deficiencies that arise and to be able to address these
deficiencies with management. Furthermore, the overall control environment can be improved and
risk assessment can decrease if there is that open communication between the auditors and
management. 2.The machine operator's pay is contingent on the number of spheres that go through
helixination.
Fraud Risk: This is a fraud risk because the machine operator's economic incentives can have a
drastic influence on the production process. The operator can push green spheres through the
helixination process and still can get paid
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73. System Audit
BIT 2318 Information System Audit Outline:
1) Introduction to IT audit, purpose Types of IT audits, history of IT audit, major events that have
prompted the use of and been solved using IT audit techniques. IT Audit process outline; process
and phases. Planning the audit, materiality, risk assessment. 2) Effective information system audit.
Evaluation of controls, types and tests of controls. Audit sampling, sampling methods, sample
evaluation. 3) Audit automation and system testing: Computer assisted audit techniques. Traditional
vs modern audit tools, Specialized audit software benefits and functions. Applications of CAATs. 4)
Production of audit programmes. Evidence, Issuing reports, types of ... Show more content on
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Technologies are characterized as being either "base", "key", "pacing", or "emerging".
Others describe the spectrum of IT audits with five categories of audits: Systems and Applications:
An audit used to verify that systems and applications are appropriate, are efficient, and are
adequately controlled to ensure valid, reliable, timely, and secure input, processing, and output at all
levels of a system 's activity. Information Processing Facilities: An audit used to verify that the
processing facility is controlled to ensure timely, accurate, and efficient processing of applications
under normal and potentially disruptive conditions. Systems Development: An audit used to verify
that the systems under development meet the objectives of the organization, and to ensure that the
systems are developed in accordance with generally accepted standards for systems development.
Management of IT and Enterprise Architecture: An audit used to verify that IT management has
developed an organizational structure and procedures to ensure a controlled and efficient
environment for information processing. Client/Server, Telecommunications, Intranets, and
Extranets: An audit to verify that controls are in place on the client (computer receiving services),
server, and on the network connecting the clients and servers.
And some lump all IT audits
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75. The Ethics Of The Audit
As the wide–ranging business environment goes down, the rate of auditor litigation has increased.
Lawsuits are a continuous threat to the auditing line of work. In this paper, we present evidence on
lawsuits having a positive effect on auditors audit liabilities. It is the auditors' responsibility to plan
and complete the audit to obtain practical guarantee about if the financial statements are free of
material misstatement or if they are caused by error or fraud. A mixture of court decisions and
economic state of affairs has shaped the legal setting for the auditing line of work and the resulting
lawsuits. Even though auditors are potentially legally responsible for both criminal and civil
offenses; lawsuits have encouraged auditors to reduce their risks of legal action by instituting sound
quality control and look at procedures. The majority of the time, for litigation to arise, the auditor
must have given an unqualified audit opinion to a set of financial statements that are afterward
revealed to have material misstatements or material omissions. According to the ACCA an auditor
liability is increasingly concerning, both in terms of audit quality and the reputation of the
profession but also in terms of the cost to the industry and the barriers this creates to competition
within the audit market.
Auditors are potentially liable for both criminal and civil offenses. Criminal offenses occur when
individuals or organizations violate a government imposed law. Auditors
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77. Corporate Audit Questions
INSTRUCTIONS:
1. Please read all instructions and questions carefully before responding. 2. There are ___ points
available on this exam, allocated as follows: ________ multiple choice/true–false questions (__
points), _____ short answer questions (__ points) and _____ essay questions (__ points). 3. Keep
track of the time remaining to complete the exam and allocate that time wisely. Do not devote
disproportionate time to any one question or section. 4. GOOD LUCK!
MULTIPLE CHOICE/TRUE–FALSE QUESTIONS
For each question, please select the best answer. Clearly mark your selection (A, B, C, D or E, as
applicable) on the accompanying Scantron form. If more than one letter (or no letter) is selected for
a particular ... Show more content on Helpwriting.net ...
sampling
C. substantive testing of account balances
D. interviews
12. A CPA firm is not considered independent when it performs which of the following services for
a publicly traded audit client?
A. tax return preparation as approved by the board of directors B. basic accounting recordkeeping
and financial statement preparation C. accounting information design and implementation D. Both B
and C
E. None of the above
13. *Which of the following statements regarding materiality is true?
A. It is more important as an audit planning tool than as an audit evaluation tool. B. Qualitative
considerations relating to an item's materiality are less important than quantitative considerations. C.
Quantitative considerations relating to an item's materiality are less important than qualitative
considerations. D. In determining materiality, an auditor should understand who the potential users
of the information are and the types of judgments made by those users when relying on financial
information.
14. *If control risk is 1.00, inherent risk is .50, and audit risk is .01, what is detection risk per the

78. audit risk model?
A. .005
B. .02
C. .01
D. .05
15. Positive assurance
A. is required for audit opinions.
B. requires that evidence be gathered and evaluated.
C. is always desired by clients and users of financial information. D. All of the above E. A and B
only
16. *A material weakness in internal control
A. may not
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80. Audit Checklist
Appendix D
Checklist for Review of Attestation Engagements Performed by the Office of Inspector General
This Appendix includes guidance for reviewing the Office of Inspector General's (OIG's) attestation
engagements conducted in accordance with Government Auditing Standards (GAS), Chapter 6, and
the American Institute of Certified Public Accountants' (AICPA's) Statements on Standards for
Attestation Engagements (SSAE). When an auditor conducts an attestation engagement under
generally accepted government auditing standards (GAGAS), the engagement must be conducted in
accordance with the SSAEs and additional GAGAS standards. This appendix is not intended to
replace auditor judgment, and while comprehensive, the peer review team may ... Show more
content on Helpwriting.net ...
(GAS, 3.09) | | | | |
|If specialists were used, did the attest team assess their | | | | |
|independence? If impairments were identified, did the attest team | | | | |
|decline to use their work? (GAS, 3.05) | | | | |
|Did the OIG determine that auditors assigned to the attest team are | | | | |
|free of impairments to external independence in both fact and | | | | |
|appearance? (GAS, 3.10) | | | | |
|Did the OIG determine that it is free of impairments to | | | | |
|organizational independence in both fact and appearance? (GAS, 3.12 –| | | | |
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82. Audit Engagment Letter
Running head: Beginning the Audit Report
Beginning the Audit Report
Gina Taylor Auditing ACC/546
Selina Ashworth
August 20, 2012
AUDIT ENGAGEMENT LETTER
August 20, 2012
Larry Lancaster
Apollo Shoes
10253 W. Higgins Rd. Ste 600
Rosemont, IL 60018
Dear Mr. Lancaster:
This letter is to confirm our understanding of the terms and objectives of our engagement and the
nature and limitations of the services we will provide.
Services
We will audit the financial statements of Apollo Shoes as of December 31, 2011, and for the year
then ending. We will also audit management's assertion about the effectiveness of internal control
over financial reporting at December 31, 2011. Upon completion of our audits, we will provide you
with our ... Show more content on Helpwriting.net ...
Our responsibility as an auditor is limited to the period covered by our audit and does not extend to
any later periods of which we are not engaged as auditors.
Our audit will include obtaining an understanding of your internal controls sufficient to plan the
audit and to determine the nature, timing, and extent of audit procedures to be performed. An audit
is not designed to provide assurance on internal controls or to identify reportable conditions, that is,
significant deficiencies or material weaknesses in the design or operation of internal control.
Accordingly, we have no responsibility to identify and communicate significant deficiencies or
material weaknesses in your internal controls as part of this engagement, and our engagement

83. cannot be relied upon to disclose the same. However, during the audit, if we become aware of such
reportable conditions, we will communicate them to you. Prior to preparation and execution of this
engagement letter, we discussed with you the fact that we provide clients with services specifically
focused on identifying and addressing weaknesses in internal controls, and on searching for the
existence of fraud within your company. We further explained the additional costs associated with
such different levels of service. After consideration of such services, you have informed us that you
wish to retain us to perform only the audit services described in this
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