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Arens14e Ch06 PPT Ge
Arens14e Ch06 PPT Ge
and Objectives
Chapter 6
6-1
Learning Objective 1
Explain the objective of conducting an
audit of financial statements and an
audit of internal controls.
6-2
Objective of Conducting an
Audit of Financial
Statements
6-3
6-4
Learning Objective 2
Distinguish managements
responsibility for the financial
statements and internal control from
the auditors responsibility for
verifying the financial statements
and effectiveness of internal control.
6-5
Managements
Responsibilities
Financial statements and internal controls.
Sarbanes-Oxley increases managements
responsibility for the financial statements.
CEO and CFO must certify quarterly and annual
financial statements submitted to the SEC.
2012 Pearson Education, Auditing 14/e, Arens/Elder/Beasley
6-6
Managements
Responsibilities
6-7
Managements
Responsibilities
The Sarbanes-Oxley Act provides for criminal
penalties for anyone who knowingly falsely
certifies the statements.
6-8
Learning Objective 3
Explain the auditors responsibility for
discovering material misstatements.
6-9
Report
Financial
statements
Free from
material
misstatements
Financial
statements
Applicable
reporting
framework
Financial
statements
Communicate
per audit
standards
6 - 10
Auditors Responsibilities
Material
misstatements
Professional
Skepticism
Reasonable
Assurance
6 - 11
Responsibility
Direct-Effect
Same for
errors and
fraud
Indirect-Effect
No Assurance
6 - 12
6 - 13
Learning Objective 4
Classify transactions and account
balances into financial statement
cycles and identify benefits of a cycle
approach to segmenting the audit.
6 - 14
6 - 15
6 - 16
Relationships Among
Transaction Cycles
General
cash
Capital acquisition
and repayment cycle
Sales and
collection
cycle
Acquisition
and payment
cycle
Payroll and
personnel
cycle
Inventory and
warehousing
cycle
2012 Pearson Education, Auditing 14/e, Arens/Elder/Beasley
6 - 17
Learning Objective 5
Describe why the auditor obtains a
combination of assurance by auditing
classes of transactions and ending
balances in accounts, including
presentation and disclosure.
6 - 18
6 - 19
Learning Objective 6
Distinguish among the three
categories of management
assertions about financial
information.
6 - 20
Management Assertions
1. Assertions about classes of transactions and
events for the period under audit
6 - 21
Occurrence
Completeness
Accuracy
Existence
Classification
Accuracy and
valuation
Classification and
understandability
Cutoff
Rights and
obligations
2012 Pearson Education, Auditing 14/e, Arens/Elder/Beasley
6 - 22
PCAOB Assertions
Existence or Occurrence
Completeness
Valuation or
allocation
Rights and obligations
Presentation and
disclosure
6 - 23
Learning Objective 7
Link the six general transaction-related
audit objectives to management
assertions for classes of transactions.
6 - 24
General Transaction-related
Audit Objectives
Occurrence
Completeness
Accuracy
Recorded transactions
exist
Existing transactions
are recorded
Recorded transactions
are stated at the
correct amounts
6 - 25
General Transaction-related
Audit Objectives
Posting and
summarization
Classification
Timing
6 - 26
6 - 27
Learning Objective 8
Link the eight general balance-related
audit objectives to management
assertions for account balances.
6 - 28
General Balance-related
Audit Objectives
Existence
Completeness
Accuracy
6 - 29
General Balance-related
Audit Objectives
Classification
Cutoff
Detail tie-in
6 - 30
General Balance-related
Audit Objectives
Realizable
value
Rights and
obligations
6 - 31
6 - 32
Learning Objective 9
Link the four presentation- and
disclosure-related audit objectives to
management assertions for
presentation and disclosure.
6 - 33
6 - 34
Learning Objective 10
Explain the relationship between audit
objectives and the accumulation of
audit evidence.
6 - 35
6 - 36
6 - 37
End of Chapter 6
6 - 38