Positive Confirmation
low level of detection risk is achieved
Inventory
examining shipping docs and receiving reports several days before and after year end
Not a strong system of IC
auditor received confirmation from external third party
Adverse and Disclaimer
- Adverse = departure from GAAP
- Disclaimer = departure from GAAS
Increase in Tolerable Misstatement
Decrease Sample Size
Increase in Assessed Control Risk
Increase Sample Size
In accordance with GAAS
- the auditor may make suggestions about the form or content of the financial statements or assist management by drafting them, in whole or in part, based on information from management during the performance of the audit
- the financial statements are the management’s responsibility.
Communicate with those charged with governance
- overview of planned scope and timing
- auditor’s responsibility to complete the audit in accordance with GAAS
- any significant findings
Analytical Procedures
use standard cost system that procedures variance report
Internal Control - the concept of reasonable assurance
IC policies and procedures may be ineffective due to mistakes in judgement and personal carelessness
Identify going concern issues
confirm with third parties the details of arrangements to maintain financial support
Going Concern Issues - Financial difficulties
- uneconomic long-term commitments
- arrearages in dividends
- uninsured or underinsured catastrophe
Reliability of data - Substantive analytical procedures
- whether there was control over the preparation of the data
- whether the data used was comparable
- data obtained from independent source (outside the entity)
General Controls
- procedures to ensure appropriate system software acquisition
Detect whether payroll data were altered during processing
- use test data (auditor can readily compare actual results to anticipated results)
Computer systems
audit specifications
