Chapter 66-13 Distinguish between the general audit objectives and management assertions.Why are the general audit objectives more useful to auditors?
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6-14 An acquisition of a fixed-asset repair by Construction Company is recorded onthe wrong date. Which transactions-related audit objective has been violated? Whichtransactions-related audit objective has been violated in the acquisition had beencapitalized as a fixed asset rather than expensed?
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6-15 Distinguish between the existence and completeness balance-related auditobjectives. State the effect on the financial statements (overstatement or
Chapter 6
Audit responsibility and objectives
6-1 (Objective 6-1) State the objective of the audit of financial statements.
In general terms, how do auditors meet that objective?
The objective of the audit of financial statements by the independent auditor
is
the
expression
of
an
opinion
on
the
fairness
with
which
the
financial
statements present financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles.
The
auditor
meets
that
objective
by
accumulating
sufficient
appropriate
evidence to determine whether the financial statements are fairly stated.
6-2
(Objectives
6-2,
6-
3)
Distinguish
between
management’s
and
the
auditor’s responsibility for the financial
statements being audited.
It
is
management's
responsibility
to
adopt
sound
accounting
policies,
maintain adequate internal control and make fair representations in the financial
statements. The auditor's responsibility is to conduct an audit of the financial
statements in accordance with auditing standards and report the findings of the
audit in the auditor's report.
6-3 (Objective 6-3) Distinguish between the terms errors and fraud. What
is the auditor’
s responsibility for finding each?
An error is an unintentional misstatement of the financial statements. Fraud
represents intentional misstatements. The auditor is responsible for obtaining
reasonable assurance that material misstatements in the financial statements
are detected, whether those misstatements are due to errors or fraud
.
An audit must be designed to provide reasonable assurance of detecting
material misstatements in the financial statements. Further, the audit must be
planned and performed with an
attitude of professional skepticism
in all aspects
of
the
engagement.
Because
there
is
an
attempt
at
concealment
of
fraud,
material misstatements due to fraud are usually more difficult to uncover than
errors. The auditor’s best defense when material
misstatements (either errors
or
fraud)
are
not
uncovered
in
the
audit
is
that
the
audit
was
conducted
in
accordance with auditing standards.
6-4 (Objective 6-3) Distinguish between fraudulent financial reporting and
misappropriation of assets. Discuss the likely difference between these
two types of fraud on the fair presentation of financial statements.
Misappropriation
of
assets
represents
the
theft
of
assets
by
employees.