Professional Documents
Culture Documents
and Objectives
Chapter 5
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-1
Learning Objective 1
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-2
Objective of Conducting an Audit
of Financial Statements
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-3
Steps to Develop
Audit Objectives
Know management
3
assertions about accounts.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-4
Steps to Develop
Audit Objectives
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-5
Learning Objective 2
Distinguish managements
responsibilities for preparing
financial statements from the
auditors responsibilities for
verifying those financial statements.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-6
Responsibilities
Management is responsible
for the financial statements,
and for internal control.
Auditors issue an
opinion on fairness
of the financial statements.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-7
Learning Objective 3
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-8
Auditors Responsibilities
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5-9
Responsibilities for
Discovering Illegal Acts
Sales returns
1,242 and allowances
Charge-off of
3,323 uncollectible
Ending balance $ 20,197 debts
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 17
Learning Objective 6
Distinguish among
the five categories of
management assertions
about financial information.
1. Existence or occurrence
2. Completeness
3. Valuation or allocation
4. Rights and obligations
5. Presentation and disclosure
Recorded
Existence
transactions exist.
Existing transactions
Completeness
are recorded.
Recorded transactions
Accuracy are stated at the
correct amount.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 21
Transaction-Related
Audit Objectives
Transactions are
Classification
properly classified.
Transactions are recorded
Timing
on the correct dates.
Transactions are included
Posting and
in the master files and
summarization
are correctly summarized.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 22
Transaction-Related Audit Objectives
and Management Assertions
Amounts
Existence
included exist.
Existing amounts
Completeness
are included.
Amounts included
Accuracy are stated at the
correct amounts.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 25
General Balance-Related
Audit Objectives
Amounts are
Classification
properly classified.
Transactions are recorded
Cutoff
in the proper period.
Account balances agree
Detail tie-in with master file amounts,
and with the general ledger.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 26
General Balance-Related
Audit Objectives
Perform analytical
Plan and design procedures and
Phase I Phase III
an audit approach. tests of details
of balances.
Perform tests of
Complete the
controls and
Phase II Phase IV audit and issue
substantive tests
an audit report.
of transactions.
2003 Prentice Hall Business Publishing, Essentials of Auditing 1/e, Arens/Elder/Beasley 5 - 31
End of Chapter 5