MGAD20H3 Lecture Notes - External Auditor, Financial Audit, Internal Audit
ProfessorJulie Mc Donald
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Assurance Service – Attestation Services:
Audit – (F/S)
Review - provide some assurance level that don’t require an audit
Review can also be completed for other financial information
(i.e. verifying sales for lease agreements)
Procedures Suggested for reviews:
• Obtain knowledge of the client’s business.
• Make enquiries of client personnel.
• Perform analytical procedures.
Have discussions with management concerning information received and the information being
Types of Reviews
• Financial statements
• Financial information other than financial statements
Compliance with agreements and regulations
1. Internal Control over Financial Reporting
2. Attestation Services on Information Technology and other attestation services
Compilations – no assurance – but enable accountant to prepare financial statements or tax
returns, or compile other types of financial information
Procedures Conducted During a Compilation Engagement
• The accountant assembles the information.
• Ensures that it is arithmetically correct.
Although the accountant should not be associated with false or misleading financial statements, it may be
difficult to make this determination because of the limited involvement.
Engagement letter – contract – P23-6
– P23-7– Review/ P23-10 – Compilation
Representation letter – We represent client to contact related parties, on behalf of clients
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Professional Standards for Compilation Engagements
• Should have adequate technical training and proficiency in accounting.
• Complete with due care.
• Work should be adequately planned and properly executed.
• If assistants are employed, they should be properly supervised.
Interim Financial Information
May be audited, reviewed, or compiled.
Estimates may be required to prepare the information on a timely basis.
This means the information may not be as reliable as year-end financial information.
Future – Oriented Professional Standards
With respect to the examination of future-oriented information, it is important that the accountant:
Have adequate technical training and proficiency in auditing
Requires due care
Work adequately planned and assistants properly supervised
Sufficient evidence obtained for report issued
Prior to Accepting a Future-Oriented Engagement
Public accountant needs to ensure that:
– There is adequate support for the assumptions used to prepare the financial information
– Any hypotheses do not significantly impair the quality of the financial information
– Management is willing to disclose all significant assumptions
– The period to be covered by the forecast or projection does not extend beyond the point
where future results can be reasonably estimated
– Any hypotheses are not false or misleading
Employed by entities to help improve the organization’s operations
Typically use a risk-based approach in consultation with the audit committee to determine work
to be completed.
Includes: operational auditing, systems development auditing, fraud auditing, providing
assistance with the external audit, and management consulting
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