1 Chapter 6 Managements’ Assertions Financial Statement Assertions Page 58 - 61.

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Presentation transcript:

1 Chapter 6 Managements’ Assertions Financial Statement Assertions Page

2 What is the overall objective of the independent auditor in conducting an audit? Pei

3 Overall Objective AU-C Section 200 Overall Objectives of the Independent Auditor and Conduct of an Audit in.11 The overall objectives of the auditor, in conducting an audit of financial statements, are to a. obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework; and b. report on the financial statements, and communicate as required by GAAS, in accordance with the auditor's findings.

4 What is a misstatement ? David

5 misstatement A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be presented fairly in accordance with the applicable financial reporting framework (GAAP).

6 Audit objectives

7 Page 59

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9 We typically audit transactions differently than account balances differently than disclosures

10 Priya Describe 2 Significant Classes of Transactions

11 Classes of Transactions Accounts receivablexxx.xx Salesxxx.xx Cashxxx.xx Accounts receivablexxx.xx

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16 Name three management assertions that relate to transactions. Algernon

17 Name three managements’ assertions that relate to account balances. Cody

18 Reflecting on the Vouch & Trace example To which assertion would the following situation relate? There is a balance in the Sales Journal for which there is no underlying Invoice Emily

19 Reflecting on the Vouch & Trace example To which assertion would the following situation relate? There is a balance in the Sales Journal for which there is no underlying Shipping Document Jeffrey

20 Reflecting on the Vouch & Trace example To which assertion would the following situation relate? The price on the Invoice exceeds the price on the Sales Order Bart

21 Reflecting on the Vouch & Trace example To which assertion would the following situation relate? The quantities on the Invoice exceed the quantities on the Shipping Document Jo Ellen

22 Reflecting on the Vouch & Trace example To which assertion would the following situation relate? You locate a Sales Order, Shipping Document and Invoice for which there is no entry in the Sales Journal Jordan

23 Reflecting on Inventory The audit client’s records indicate they have 187 cars in inventory but they only locate 184 cars when they take their physical inventory Joseph

24 Reflecting on Inventory The audit client’s Inventory records indicate each new car cost $28,500 but the Vendor Invoices indicate each car actually cost $27,500. Juancarlos

25 Reflecting on Inventory The client failed to adjust their inventory balance to Lower of Cost or Market even though cost exceeds the replacement cost Meredith

26 Reflecting on Notes Payable The balance sheet includes 3 Notes Payable at the local bank but a confirmation letter from the bank indicates there are actually 4 outstanding Notes Payable Garren