chapter 9 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Chapter 9 PowerPoint Presentation
Download Presentation
Chapter 9

Loading in 2 Seconds...

play fullscreen
1 / 65

Chapter 9 - PowerPoint PPT Presentation


  • 124 Views
  • Uploaded on

Chapter 9. Materiality and Audit Risk. Kevin K. Under what conditions are we required to obtain an understanding of the internal controls?. Aida. What is the second standard of field work?. Tavian.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Chapter 9' - tayten


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 9
Chapter 9

Materiality and Audit Risk

kevin k
Kevin K

Under what conditions are we required to obtain an understanding of the internal controls?

slide3
Aida

What is the second standard of field work?

tavian
Tavian

Why are we always required to obtain an understanding regardless of the types of tests we will perform?

planning phase
planning phase

we are always required to obtain an understanding of the Internal Control

The auditor must obtain a sufficient understanding of the entity, its environment, including its internal control, to assess the risk of materialmisstatement and to design the nature, timing, and extent of the audit procedures

slide6

December 2006

Statement

on Auditing

Standards

109

AICPA

Understanding the

Entity and its

Environment and

Assessing the

Risks of Material

Misstatement

david
David

Under what conditions are we required to obtain sufficient appropriate audit evidence?

slide8
Erin

How do we obtain audit evidence?

nicholas m
Nicholas M

What is the definition of Materiality?

megan
Megan

What is the definition of

Tolerable Misstatement?

belen
Belen

Describe a Significant Class of Transactions ?

Describe a Transaction Cycle?

slide16
Class of Transactions

Accounts receivable xxx.xx

Sales xxx.xx

Revenue & Collection Cycle

Accounts receivable xxx.xx

Sales xxx.xx

Cash xxx.xx

Accounts receivable xxx.xx

slide19
Josh

What are the elements of the “Audit Risk Model”?

materiality and risk
Materiality and Risk

the Audit Risk Model

AAR = IR * CR * PDR

page 221

materiality and risk1

Page 221

Materiality and Risk

the Audit Risk Model

AAR = IR * CR * PDR

Risk of Material Misstatement

RoMM = combines IR * CR

danielle
Danielle

Which Component(s) of Audit Risk do you think the auditor might be able to reduce?

Which Component(s) of Audit Risk do you think the auditor would be unable to reduce?

slide24

environmental

client

auditor

slide25
Obtain engagement

1) Analytical procedures 1st Std of FW

Understand the client 2nd Std of FW

Understand the internal controls

Risk assessment

2) Tests of controls (transactions) 3rd Std of FW

3) Substantive tests of transactions

4) Substantive Analytical procedures

5) Substantive tests of details of balances

Reporting reportingStds

melissa o
Melissa O

Describe the relationship between Control Risk and the planned level of Detection Risk?

The mathematical relationship

erynn
Erynn

What is the definition of Control Risk

fabiola
Fabiola

What is the definition of

Planned Detection Risk

andrew k
Andrew K

If we assess CR = Low, what does that tell us about the level of PDR …. ?

If we assess CR = High, what does that tell us about the level of PDR …. ?

julian
Julian

If we assess CR = Max, what does that imply about the effectiveness of the Internal Controls?

slide38
Ali

If we assess CR = Low, what does that imply about the effectiveness of the Internal Controls?

lyndsay
Lyndsay

If we assess Control Risk as Low, what will the evidence provided by our audit procedures need to demonstrate?

rodney
Rodney

If PDR = High, what does that tell us about Control Risk …. ?

If PDR = Low, what does that tell us about Control Risk …. ?

preliminary control risk assessment significant classes of transactions
preliminary Control Risk assessmentsignificant classes of Transactions

preliminary Control Risk assessment

slide44

1. Related Party Transactions

  • 2. Non Routine Transactions
  • 3. Judgement -Actg Estimates
  • 4. Complex Transactions
related party transactions
Related Party Transactions

high risk - page 180 & 228

One of the parties is in a position to exert significant influence over another party

Related parties can structure transactions to conceal problems in the financial statements

katie
Katie

Please describe Professional Skepticism ?

slide48
Professional Skepticism

.07 Due professional care requires the auditor to exercise professional skepticism. Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. .....

.09 The auditor neither assumes that management is dishonest nor assumes unquestioned honesty. In exercising professional skepticism, the auditor should not be satisfied with less than persuasive evidence because of a belief that management is honest.

See page 143

auditing accounting estimates
Auditing accounting estimates

high risk

p. 228

Keep track of differences

auditing accounting estimates1
Auditing accounting estimates

With estimates, there often is no right answer

  • Keep track of differences between the estimate and what auditor finds reasonable
  • Evaluate differences taken together
4 complex transactions
4. Complex Transactions

high risk

page 171 - ENRON

slide56
Evan

In your statistics class, why does a larger sample increase your level of confidence?

How does evidence reduce risk?

accounts receivable project
Accounts Receivable Project

Sample Results Tolerable Misstatement

    • Known misstatement
    • Projection of sample results to the population
    • Allowance for sampling risk
  • Estimates
    • Difference between auditor’s estimate
    • Book Value (management’s estimate
mariana
Mariana

Given the definition of Audit Risk

what is the relationship between

Materiality and Audit Risk?