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Audit Responsibilities and Objectives
Audit Responsibilities and Objectives
Audit Responsibilities and Objectives
and Objectives
Learning Objective 1
• Explain the objective of
• conducting an audit of
• financial statements and
• an audit of internal controls.
Objective of Conducting an Audit of
Financial Statements
The objective of the ordinary audit of financial
statements is the expression of an opinion of
the fairness with which they present fairly, in
all respects, financial position, result of
operations, and its cash flows in
conformity with GAAP.
Steps to Develop Audit Objectives
Steps to Develop Audit Objectives
Reasonable assurance
Professional skepticism
Capital acquisition
and repayment cycle
Inventory and
warehousing
cycle
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.
Balance and Transactions Affecting
Balances Example
Accounts Receivable (in thousands)
Beginning balance $ 17,521
Sales returns
$ 1,242 and allowances
Charge-off of
$ 3,323 uncollectible
accounts
Recorded transactions
Occurrence
exist
Existing transactions
Completeness
are recorded
Recorded transactions
Accuracy are stated at the
correct amounts
General Transactions-related Audit
Objectives
Rights and
Assets must be owned
obligations
Hillsburg Hardware Co.
(Applied to Inventory)
Perform tests of
Complete the
controls and
Phase II substantive tests Phase IV audit and issue
an audit report
of transactions
End of Chapter 6