BU477 Study Guide - Spring 2018, Comprehensive Midterm Notes - Audit, Financial Statement, Accounting
BU477
MIDTERM EXAM
STUDY GUIDE
Fall 2018
BU477- WEEK 1, LECTURE 1
Chapter 1- Demand for Audit & Other Assurance Services
• Audit= hek/erify iforatio suh as fiaials to esure that there’s
relationships with those statements and guidelines such as Accounting standards
• Report- typically the final stage in the audit process
o Communicates the audit findings to users
o Differ in nature, but in all cases must inform readers of the degree of
correspondence between information and established criteria
o Differ in form and can vary from the auditor’s stadard opiio usually
associated with financial statements to a customized report
• Accounting vs Audit
o Accounting is the creation, recording, classifying, recording of information of
economic events in a logical manner for decision-making
o Auditing concerns with evaluating whether recorded information reasonably
reflects what occurred during the accounting period
• Demand for Auditing
o Auditing can reduce information risk associated with financial statements
o Financial information is prepared by an entity’s aageet- leading to a
natural conflict of interest between managers and other parties
o Audit provides assurance to users with respect to the reliability of the
financial statements
• Causes of information risk
o Remoteness of information- information may be half way across the world
o Bias and motives of provider- management may have a bias to present
information in a positive light (show better performance, company going
public, personal incentives, etc.)
o Voluminous data- the more data there is, the ore hae there’ll e glithes
o Perceived cost/benefit- no matter how strong the people are, capable,
sometimes the cost of the processes may be more than the benefits (things
still may not be 100%)
o Complex exchange transactions- exchange rates, etc.
find more resources at oneclass.com
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• Reducing information risk
o User verifies information- low feasibility, low efficiency
o User shares information risk with management- user makes decisions based
on what management has said, and could suffer losses if that information is
inaccurate. Would then have to go through litigation to recoup some of those
losses due to information inaccuracy
o Provider submits audited financial statements- provides users with more
reliable information as it has gone through independent auditors
• Common types of audit
o Financial statement audit: conducted by public accountants to determine
whether overall financial statements are stated in accordance with specified
criteria (Big 4, Accounting firms)
o Compliance audit: determine whether the auditee complied with specific
laws, regulations, or provisions of contracts or grant agreements (CRA,
regulators, provincial and federal governments, banks regarding debt
covenants, etc.)
o Operatioal audit: Reie of ay part of a orgaizatio’s operatig
procedures and methods for the purpose of evaluating efficiency and
effectiveness (typically conducted by internal auditors)
• Types of Auditors
o Internal auditors
o Government auditors (auditing ministries, hospitals, making sure funding to
education systems is spent correctly)
o CRA auditors
o Forensic Accountants and Fraud Auditors (CFE)
o Public Accountants (PA)
▪ Only public accounting firms can conduct financial statement audits
or reviews
▪ Must get PA license in order to sign off on Assurance statements
• Assurance engagements
o Independent professional service in which the assurance provider expresses a
conclusion on the outcome of an evaluation/measurement of subject matter
o 3 parties
▪ Auditor, client, user
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 1- demand for audit & other assurance services. Inventory, receivables, sales, etc: audit (positive assurance, examining specific data, highest level of assurance, review (negative assurance, asking question, requiring information, inquiry analysis, moderate level of assurance, compilation (no assurance) Ha(cid:374)d(cid:271)ook(cid:863) i(cid:374) the cpa ca(cid:374)ada ha(cid:374)d(cid:271)ook: they are the standards for the financial statements audit, canadian auditing standards (cas) based on standards developed internationally (cas is a part of gaas). Must follow cas on each engagement: general requirements of f/s audit, purpose of the financial statement. It"s a(cid:271)out us (cid:271)ei(cid:374)g ale(cid:396)t, (cid:374)ot just discrediting everything we hear: auditors" perfor(cid:373)a(cid:374)(cid:272)e respo(cid:374)si(cid:271)ilities, adequate planning and supervision, determining and applying materiality levels. Identify and assess risks of material misstatement: obtaining sufficient and appropriate evidence, reporting. Toronto, kitchener, and spain: these methods include the organizational structure of the public accounting firm and the procedures the firm sets up, quality controls are used by the firm to make sure it meets canadian.
