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Chapter 3

MGAD10 Auditing - Chapter #3.docx

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Financial Accounting
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Kevin Ha

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MGAD10 AuditingChapter 3Stages of an Audit1PlanningaUnderstanding the clientbRisk identification and Strategydevelop an audit strategycRisk and materiality assessmentsignificant error of fraud 2PerformingaExecutiondetailed testing of controls and substantive testing of transactions and accounts3ReportingaConclusion bReporting311 Planning an AuditCAS 300Efficiency amount of time spent gathering audit evidenceEffectiveness refers to the minimization of audit riskSufficient Appropriate Evidence the quantity and quality of the evidence that has been gatheredPreliminary Risk IdentificationoUnderstand the clientoIdentify related parties CAS 550 Related PartiesoFraud Riskintentional act through the use of deception to obtain an unjust or illegal advantageoGoing Concern Riskthe viability of a company to remain in business for the foreseeable futureoCorporate Governancethe rules systems and processes within companies used to guide and controloUnderstand internal controls CAS 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its EnvironmentoUnderstand IT environment CAS 315oSignificant accountsoSignificant classes of transactionsoClosing proceduresprocesses used by a client when finalizing the books for an accounting periodoMateriality 32 Gaining an Understanding of the ClientAssess potential risk fromoThe nature of the clients businessoIndustry in which the client operatesoLevel of competition within that industryoClients customers and suppliersoRegulatory environment in which the client operates
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