Management and Organizational Studies 3363A/B Chapter Notes - Chapter 5: Income Statement, Historical Cost, Engagement Letter
2 May 2017
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Impartiality: assume that management is neither dishonest nor honest (professional skepticism, consider a broad set of information. Including fraud risk factors, to identify and respond to fraud risk: ca (cid:1006)(cid:1005)(cid:1004) sets out (cid:373)a(cid:374)age(cid:373)e(cid:374)t"s respo(cid:374)si(cid:271)ilities, adopt accounting policies in accordance with a framework. Implement and maintain adequate internal controls: represent financial statements fairly. Illegal acts: violation of laws or regulations, one of two categories, direct-effect illegal act has a direct effect on the statements, ex: violating tax standards to lower your tax payable. If a business is well-run and ethical, there is less of a risk of fraud: control environment includes policies and procedures, assess risks of fraud. Information collected is combined and assessed to reach an overall conclusion. Cycles: 5 basic cycles, sales and collection, acquisition and payment, payroll and personnel, capital acquisition and repayment. Inventory and warehousing: transaction cycles are very important in conducting an audit, although cycles may be inter-related, auditors must treat the cycles (somewhat) independently.
