TOP AUDITING ISSUES FOR 2013 - CCH

More documents

Recommendations

Info

MODULE 2 — CHAPTER 7 — Current Implementation Issues for Auditing Standards 73 to the nature and extent of the further audit procedures. It would be difficult to tell if the actual audit procedures were either too extensive, or not extensive enough for the true assessed level of risk. This creates the danger that high-risk areas can be glossed over without adequate testing. Possible Solutions The systemic solution to any of these issues is usually to gain a better understanding of the objectives of the standards, and to apply them thoughtfully in performing the audit. In order to stimulate a thoughtful approach to risk assessment, consider performing a mental exercise as a part of the “brainstorming” session among the audit team during the planning phase of the engagement. In that exercise, the auditor is allowed as much time as would be normal to plan the audit and to conclude it. But the field work time allowed is set at an artificial and extremely low level, such as one hour for a small audit or one day for a large audit. Ask two questions: What is the one area that creates the most concern? What audit procedures should be done in the short time allowed to address that area? These questions will usually focus attention on the highest risk area and on the essential procedures for addressing it. Once those questions are answered, suppose that the audit is allowed one more hour, or one more day. What is the next biggest area of concern? Repeat this cycle a few more times. This will often provide a good basic roadmap for the audit. Then, flesh out the audit plan based on the standard time that would normally be budgeted. STUDY QUESTION 1. A poor correlation of the assessed risk of material misstatement to the design of further audit procedures may be indicated in all of the following circumstances except: a. The risk of material misstatement of revenue due to cutoff errors is assessed as high, and testing of revenues is limited to substantive analytical procedures. b. The risk of material misstatement of immaterial recorded accrued expenses due to incompleteness is assessed as low, and testing of accrued expenses is limited to substantive analytical procedures. c. The risk of material misstatement of accounts payable due to incompleteness is assessed as low, and an extensive search for unrecorded liabilities through inspection of subsequent disbursements is performed. d. The risk of material misstatement of occupancy expenses due to incorrect cutoff is assessed at low, and substantive tests of details include extensive vouching to vendors’ invoices.
74 TOP AUDITING ISSUES FOR 2013 CPE COURSE INTERNAL CONTROL The standards for internal control have likewise been effective for some time now. Implementation of these standards is closely related to both risk assessment and to auditor communications and, like risk assessment, has pervasive effects on the audit as whole. Documenting Consideration of Significant Deficiencies and Material Weaknesses It is important for auditors to document consideration of deficiencies in internal control and to evaluate whether they are significant deficiencies or material weaknesses. One of the reasons why this is important is the requirement to communicate significant deficiencies and material weaknesses to management in writing, as discussed under Auditor Communications, below. When an auditor proposes a material adjustment to the financial statements, this ordinarily raises the question of whether it represents a significant deficiency or material weakness. Audit documentation sometimes evidences material adjusting entries that would ordinarily be considered indicators of at least significant deficiencies, yet there is no communication of the matters in the management letter. This raises doubt as to whether the auditor evaluated its internal control implications. There can be many reasons why a material audit adjustment might not represent a control deficiency. These often occur in audits of small entities. EXAMPLE Vacation accruals. The client keeps an accurate memorandum control of accrued vacation pay within its payroll system. The client does not post interim accrual adjustments to the general ledger, and prefers as a matter of convenience to leave this to the auditor at year end. Most auditors would agree that this does not constitute a control deficiency because the client: Has an accurate record of the accrual Knows that the accrual needs to be made Would not allow the statements to be released without the adjustment Depreciation. The client keeps accurate fixed asset detail records, but chooses to leave the calculation and recording of depreciation to the auditor at year-end, because the audit firm has software that allows it to do this more efficiently. The client reviews the depreciation detail before the statements are released and agrees that service lives and depreciation methods are reasonable. Most auditors would agree that is not a control deficiency for reasons similar to those in the accrued vacation example above.
Page 1 and 2:
TOP AUDITING ISSUES FOR 2013 CPE CO
Page 3 and 4:
ii Contributors Technical Review ..
Page 5 and 6:
iv TOP AUDITING ISSUES FOR 2013 CPE
Page 7 and 8:
vi TOP AUDITING ISSUES FOR 2013 CPE
Page 9 and 10:
viii TOP AUDITING ISSUES FOR 2013 C
Page 11 and 12:
x TOP AUDITING ISSUES FOR 2013 CPE
Page 14 and 15:
1 MODULE 1: GOVERNMENT AUDITING STA
Page 16 and 17:
MODULE 1 — CHAPTER 1 — The Conc
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
15 MODULE 1: GOVERNMENT AUDITING ST
Page 30 and 31:
MODULE 1 — CHAPTER 2 — Financia
Page 32 and 33:
Page 34 and 35:
Page 36 and 37: MODULE 1 — CHAPTER 2 — Financia
Page 38 and 39: 25 MODULE 1: GOVERNMENT AUDITING ST
Page 40 and 41: MODULE 1 — CHAPTER 3 — Performa
Page 56: MODULE 1 — CHAPTER 3 — Performa
Page 59 and 60: 46 TOP AUDITING ISSUES FOR 2013 CPE
Page 82 and 83: 69 MODULE 2: IMPLEMENTATION ISSUES
Page 84 and 85: MODULE 2 — CHAPTER 7 — Current
Page 98: MODULE 2 — CHAPTER 7 — Current
Page 113 and 114: 100 TOP AUDITING ISSUES FOR 2013 CP
Page 122 and 123: 109 MODULE 3: AUDITING ISSUES: PART
Page 124 and 125: MODULE 3 — CHAPTER 10 — Interim
Page 136 and 137:
123 MODULE 4: AUDITING ISSUES: PART
Page 138 and 139:
MODULE 4 — CHAPTER 11 — Reporti
Page 140 and 141:
MODULE 4 — CHAPTER 11 — Reporti
Page 142 and 143:
129 MODULE 4: AUDITING ISSUES: PART
Page 144 and 145:
MODULE 4 — CHAPTER 12 — Working
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158:
Page 161 and 162:
148 TOP AUDITING ISSUES FOR 2013 CP
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 170 and 171:
Page 172 and 173:
ANSWERS TO STUDY QUESTIONS — Modu
Page 174 and 175:
Page 176 and 177:
Page 178 and 179:
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
INDEX 179 Auditor’s versus manage
Page 194 and 195:
INDEX 181 forming an opinion and re
Page 196 and 197:
INDEX 183 Management participation
Page 198 and 199:
INDEX 185 Review standards interpre
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
QUIZZER QUESTIONS — Module 1 191
Page 206 and 207:
Page 208 and 209:
Page 210 and 211:
Page 212 and 213:
Page 214 and 215:
Page 216:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 228 and 229:
Page 230 and 231:
Page 232 and 233:
Page 234:
Page 238:
Page 242:
Page 246:
Page 250:
Page 254 and 255:
NOTES
Page 256:
CCH LEARNING CENTER At CCH, we reco
show all

TOP AUDITING ISSUES FOR 2013 - CCH

Create successful ePaper yourself

Delete template?

Save as template?