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Download The Audit Process: Principles, Practice and Cases Free by 22office - Issuu
Download Free PDF. Download Free PDF. The Audit Process 4 th Edition Principles, Practice and Cases ISA Edition Students' self‐assessment solutions. Monica Rosa. Download PDF. Download Full PDF Package. This paper. A short summary of this paper. 24 Full PDFs related to this paper. READ PAPER. The Audit Process 4 th Edition Principles The audit process: principles, practice and cases Item Preview remove-circle Share or Embed This Item. Share to Twitter. The audit process: principles, practice and cases by Gray, Iain, Publication date DOWNLOAD OPTIONSPages: Striking a careful balance between theory and practice, the book describes and explains, in non-technical language, the nature of the audit function and the principles of the audit process. The book covers international auditing and accounting standards and relevant statute and case law
The audit process principles practice and cases free download
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Although the Wirtschaftsprüfer would be a competent auditor he or she might not possess the knowledge of local conditions to enable him or her to carry out the job properly. The ACCA member who is chief accountant of the company lacks independence and would, therefore, be rejected. The ICAS member is employed by the audit process principles practice and cases free download Building Society, does not appear to be in practice and may therefore lack recent audit experience.
On the whole the best person of the qualified accountants to be the auditor would seem to be the member of ICAEW, a partner in the firm of Chartered Accountants. All the other people even if they were competent to carry out the audit process principles practice and cases free download work of an auditor would seem to have an interest in the company in one way or another and would not be suitable. Let us go through the list one by one and justify this answer: a The shareholders are the providers of capital and they are entitled to know how successfully the directors have been running the company.
The accounts should also aid them to some extent in the decision to hold onto or to sell their shares, although in practice they would be wise to seek further advice before doing so. b The employees are intimately connected through their employment and rate of pay is likely to be dependent on the success of the company. It would seem, therefore, that they too have an interest in properly prepared accounts, the audit process principles practice and cases free download.
c These people are potential shareholders and they want to make a decision as to whether to buy shares or not. One of the sources of information available to them will be the company's accounts so they are clearly interested in those accounts being properly prepared. Again, it would be wise to seek further information about the company before doing so.
d The starting point of the tax computation the audit process principles practice and cases free download taxable income is the accounting profit before taxation. The inspector is clearly interested in properly prepared accounts. e British Telecommunications plc is an important UK company, the audit process principles practice and cases free download. Its success or failure has a vital bearing on the success of the UK economy and in view of this, all residents of the UK are concerned in the proper preparation of accounts by the company.
If you are not a resident of the UK, take an example from important companies in your own economy. f Suppliers of goods to a company are interested in the health of that company; in the short term they wish to be paid for goods supplied; in the longer term to know if the customer is a valuable long-term business partner.
The same kind of considerations apply to customers and to competitors, all members of what the Corporate Report refers to as 'the business contact group'. g The Government of any country is concerned the audit process principles practice and cases free download the success or failure of the component parts of the economy.
In addition, in so far as governmental statistics are often based on accounting information, it will also be interested in the validity of that information. h BT is a public limited company and as published accounting information has a direct bearing on the quoted price of shares, the stock exchange has a very clear interest in valid accounting information.
Students should refer to the Corporate Report published by the Accounting Standards Steering Committee in for a discussion of these matters. Andrew has stated that the motor expenses amount to £4,; the duty of the auditor would be to prove that the assertion was a valid one.
The first step would be to consider the types of expenditure that would be included under this heading. Suggestions are: a Vehicle licence fee b Insurance c Petrol d Servicing Vehicle licence fee and insurance would be quite easily dealt with.
An inspection of the relevant invoice, policy or tax disc would readily provide information about the charge to the profit and loss account and the amount of prepayment, if any. If there has been servicing of the lorry during the six-month period, an inspection of invoices would reveal the amount. It is to be hoped that Andrew has kept the invoices, although his system for recording income would not give us much reason to suppose that he has done this in all instances.
This may be particularly the case with regards to petrol. We would have to question Andrew about distances travelled and miles per gallon. Experienced auditors would probably be able to determine whether the figure appeared reasonable or not, although, without more information, it is difficult to say whether they would be able to report that the motor expenses figure was acceptable. However, the above suggestions do give an idea as to how auditors might proceed.
In this case the audit helps to ensure compliance with the law and identifies hazards that aid the protection of employees. Audit objectives would include: - ensuring that the company has proper rules concerning the use of the dangerous machinery - ensuring that the company has training schemes for employees in the operation of the machinery and in the understanding of safety measures, the audit process principles practice and cases free download, such as protective screens - ensuring that staff are aware of the procedures to be adopted in the case of accident - being satisfied that the incidence of accidents is at a minimum.
However, there are many implied assertions made by management when they include balances or figures in the financial statements. Thus, management is implying in relation to trade debtors that: a Balances are genuine, that is, they represent amounts legally due to the company for goods in respect of which property has passed or for services rendered before the balance sheet date.
b The amounts stated as due to the company in respect of trade debtors will be received in full, the implied assertion here being that full provision for bad and doubtful debts has been made, the audit process principles practice and cases free download.
c All debtors' balances are reflected in the debtors figure in the financial statements. The value to the auditor of identifying the assertions is that the evidence search can be conducted with specific objectives in mind.
Thus, in respect of a above, the auditors will direct their attention to proving that credit sales are completely and accurately recorded. This work would include obtaining assurance that sales and stock cut-off is accurate to ensure that debtors represent amounts due at the balance sheet date. Specific tests would include a debtors' circularisation. The evidence search in respect of collectability would start from the assumption that amounts recorded are legally receivable.
The objective in this case would be to prove that the valuation of debtors is valid. To this end, the auditor will examine debtors' ageing statements and look at the past record of payment by debtors. Other procedures would include examining payments by debtors after the balance sheet date and testing for adherence to properly determined credit limits, the audit process principles practice and cases free download.
The above argument leads to the conclusion that the statement is valid. Basically, identification of assertions is important from the point of view of both the effectiveness and efficiency of the audit process. The problem with words like integrity, honesty, fairness, candour, courage and confidentiality is that they are all intangible qualities and therefore difficult to assess.
In practice, the only way that we can assess whether, for instance, people are honest and fair is to observe their behaviour. We might conclude that some circumstances hinder honesty in the performance of an auditor's duties.
Such circumstances might include the holding of shares in the company or being a personal friend of the managing director. This means that apart from highlighting integrity as an important personal quality of the auditor, it is necessary to back up the principle by giving guidance to auditors on how integrity can be achieved.
The question of appearance is a very important one and the profession has recognised for some time that being seen to be independent is just as important as being independent. The same applies to integrity. It can be argued, of course, that auditor reputation is so important that auditors will strive to maintain their integrity and independence as a matter of course.
Integrity is certainly a quality that a profession would expect to see in its members and it could be argued that by publishing the principle of integrity APB is merely emphasising a general professional requirement.
The word 'critically' is in fact the important word in helping us to understand what is meant by professional scepticism. The expression does not mean that auditors should approach their work with undue suspicion, but that they should not accept statements by management or documentation at face value.
By way of example, let us assume that you are auditing a publishing company and that you have noted that the warehouse contains 20, unbound copies of one particular book. You raise the matter with management and they inform you that 15, copies have been sold to wholesalers after the balance sheet date, showing you orders from the wholesalers to support their assertion.
You should not assume that management is misrepresenting the position to you, but as auditor you would need to look for evidence to prove their assertion. One important point to emphasise is that audit work does not take place in a vacuum. If you have already concluded that management quality and trustworthiness is high and that there are no indications that the company might be in financial trouble, the audit work would be carried out in a different context than if you had not formed these conclusions.
The directors appear, on the face of it, to be misleading the readers of the Directors' Report and there certainly the audit process principles practice and cases free download to be conflict between the profit shown in that report and the loss shown in the Financial Statements.
The readers would probably be very confused in the case cited and this might cause them to form the opinion that the auditor has not been competent. The auditors would ask the directors to change the Directors' Report, and if they refuse they would have to refer to the matter in the Audit Report, probably as an emphasis of matter.
ES4 certainly suggests that this situation might threaten independence. You might feel yourself that you are professional person and could maintain your independence, but you should remember that it is the perception of independence that is just as important as actual independence. There are two important matters in relation to the scenario outlined, namely, that the audit client is not a small entity, but your firm has less than three partners and cannot fulfil the requirement that an ethics partner should perform a hot review of the audit procedures, documentation and conclusions before the audit report is finalized.
However, you should certainly discuss the key issues affecting the audit of your client with your fellow-partner, and perhaps even ask an outside firm to perform the hot review for you. The threat to your independence would be particularly grave if your remuneration was based, at least to some extent, on the fees generated by your office. This is clearly a situation where the matter should be referred to the ethics partner. However, as your remuneration is based to some extent on the fees of this client this looks as if your firm might have to consider resigning from the audit of this client, unless your firm can assign this client to another part of the firm.
See paragraph 25 of ES4 in this connection. c You are clearly spending a great deal of time with the client in question, and your objectivity might be threatened because of the closeness of the relationship, that is, there may well be a familiarity threat.
Although the fee income is below the limits specified in ES4 and though your own remuneration is not affected specifically by the fees received from this client, your firm would have to have policies and procedures in force to ensure that the familiarity threat was countered. The matter should be referred to the ethics partner, who might perform a hot review of the audit procedures, documentation and conclusions, considering in particular the key inherent and control risks facing the client.
Consideration should also be given to the period of time that you have been involved with the client and in the circumstances it might be wise to consider rotation even if your period of engagement does not exceed the limits specified in ES3 5 years for a listed company client and 10 years for a non-listed client.
Since then, there has been considerable academic interest in auditing and we have introduced you to some of their work in this chapter, that of Goldman and Barlev and of Shockley in particular. These writers identified some years ago the risks to independence that find a place in the Statement. Shockley even went so far as to say that his work would be an aid to legislators.
By legislators we include not merely legislators in parliament but those members of the profession and others who are responsible for issuing guidance to members of the auditing profession, including the IFAC Code and the APB Ethical Standards. However, holding of shares in the auditee company is one particular risk to integrity, the audit process principles practice and cases free download, objectivity and independence that ES2 regards as an insurmountable self-interest threat.
You might regard yourself as a fairly lowly member of staff and that, as your work is reviewed and controlled by others, there would be no threat as far as your audit firm is concerned. However, being senior in charge, you are likely to have an influence on the conduct and outcome of the audit and you should inform the audit partner of your holding.
Topic 4: the audit process part 1
, time: 10:33The audit process principles practice and cases free download
Download Free PDF. Download Free PDF. The Audit Process 4 th Edition Principles, Practice and Cases ISA Edition Students' self‐assessment solutions. Monica Rosa. Download PDF. Download Full PDF Package. This paper. A short summary of this paper. 24 Full PDFs related to this paper. READ PAPER. The Audit Process 4 th Edition Principles The audit process: principles, practice and cases Item Preview remove-circle Share or Embed This Item. Share to Twitter. The audit process: principles, practice and cases by Gray, Iain, Publication date DOWNLOAD OPTIONSPages: Striking a careful balance between theory and practice, the book describes and explains, in non-technical language, the nature of the audit function and the principles of the audit process. The book covers international auditing and accounting standards and relevant statute and case law
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