1. AUDIT RESPONSIBILITIES AND OBJECTIVES
CHAPTER 5
AUDIT RESPONSIBILITIES AND OBJECTIVES

2. OBJECTIVE OF CONDUCTING AN AUDIT
THE OBJECTIVE OF AN ORDINARY AUDIT OF FINANCIAL STATEMENTS IS THE EXPRESSION OF AN OPINION REGARDING THE FAIRNESS OF THE PRESENTATION IN COMPARISON TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

3. MANAGEMENT RESPONSIBILITIES
ADOPTION OF SOUND ACCOUNTING PRINCIPLES
MAINTAINENCE OF ADEQUATE INTERNAL CONTROLS
PREPARATION OF FAILY PRESENTED FINANCIAL STATEMENTS

4. AUDITOR’S RESPONSIBILITIES
PLAN AND PERFORM AUDIT
OBTAIN REASONABLE ASSURANCE THAT FINANCIAL STATEMENTS ARE NOT MATERIALLY MISSTATED
EXERCISE PROFESSIONAL SKEPTICISM DURING AUDIT

5. RESPONSIBILITY TO DETECT FRAUD
SAS 82 - CONSIDERATION OF FRAUD
DEFINES FRAUD
FRAUDULENT FINANCIAL REPORTING
MISAPPROPRIATION OF ASSETS
AUDITOR RESPONSIBLE TO ASSESS RISK OF FRAUD
FRAUD RISK FACTORS FOR FINANCIAL REPORTING
MANAGEMENT CHARACTERISTICS
INDUSTRY CONDITIONS
OPERATING CHARACTERISTICS

6. AUDITOR RESPONSIBLE TO EVALUATE RISK FACTORS
FRAUD RISK FACTORS - MISAPPROPRIATION OF ASSETS
SUSCEPTIBILITY OF ASSETS TO MISAPPROPRIATION
INTERNAL CONTROLS
AUDITOR RESPONSIBLE TO EVALUATE RISK FACTORS
PRESENCE OF RISK FACTORS INCREASES RISK THAT FRAUD COULD OCCUR, NOT INDICATE THAT IT DID OCCUR
AUDITOR RESPONSIBLE TO MODIFY EVIDENCE GIVEN RISK FACTORS

7. RESPONSIBILITY TO DISCOVER ILLEGAL ACTS
DIRECT EFFECT ILLEGAL ACTS
FINANCIAL STATEMENTS ARE MATERIALLY AFFECTED BY ACT
UNDERSTATING TAX LIABILITY
INDIRECT EFFECT ILLEGAL ACTS
FINANCIAL STATEMENTS MAY BE AFFECTED IF DETECTED AND FINES ASSESSED
EMPLOYEE SAFETY LAWS

8. EVIDENCE ACCUMULATION IF AUDITOR SUSPECTS ILLEGAL ACTS
INQUIRE OF MANAGEMENT
CONSULT LEGAL COUNSEL
ADDITIONAL EVIDENCE
IDENTIFY ILLEGAL ACT
CONSIDER EFFECT ON FINANCIAL STATEMENTS
HONESTY OF MANAGEMENT
COMMUNICATE WITH AUDIT COMMITTEE
CONSIDER WITHDRAWAL

9. FINANCIAL STATEMENT CYCLES
CYCLES OF TRANSACTIONS
SALES AND COLLECTIONS CYCLE
ACQUISITION AND PAYMENT CYCLE
PAYROLL AND PERSONNEL CYCLE
INVENTORY AND WAREHOUSING CYCLE
CAPITAL ACQUISITION AND REPAYMENT CYCLE

10. CYCLE APPROACH TO SEGMENTING AUDIT
ACCOUNTS ARE AFFECTED BY ONE OR MORE CYCLES
INTERNAL CONTROLS CAN BE ANALYZED BY CYCLE
RISK OF MISSTATEMENT CAN BE ASSESSED BY CYCLE

11. AUDIT OBJECTIVES MANAGEMENT ASSERTIONS EXISTENCE OR OCCURRENCE
COMPLETENESS
VALUATION AND ALLOCATION
RIGHTS AND OBLIGATIONS
PRESENTATION AND DISCLOSURE

12. TRANSACTION-RELATED AUDIT OBJECTIVES
EXISTENCE
RECORDED TRANSACTIONS EXIST
COMPLETENESS
EXISTING TRANSACTIONS ARE RECORDED
VALUATION
RECORDED TRANSACTIONS ARE STATED AT CORRECT AMOUNTS
TRANSACTIONS ARE PROPERLY CLASSIFIED
TRANSACTIONS ARE IN CORRECT PERIOD

13. BALANCE-RELATED AUDIT OBJECTIVES
EXISTENCE
BALANCES EXIST
COMPLETENESS
ALL EXISTING BALANCES ARE INCLUDED
VALUATION
BALANCES ARE AT CORRECT AMOUNTS
PROPER CLASSIFICATION
CUTOFF
AGREEMENT OF RECORDS
REALIZABLE VALUE

14. RIGHTS AND OBLIGATIONS
ENTITY HAS RIGHTS TO ASSETS
ENTITY HAS OBLIGATIONS REGARDING LIABILITIES
PRESENTATION AND DISCLOSURE
FINANCIAL STATEMENTS ARE PROPERLY PRESENTED
DISCLOSURES ARE ADEQUATE

15. MEETING AUDIT OBJECTIVES
PLAN AND DESIGN THE AUDIT
PERFORM TESTS OF CONTROLS AND SUBSTANTIVE TESTS OF TRANSACTIONS
PERFORM ANALYTICAL PROCEDURES AND TESTS OF BALANCES
COMPLETE AUDIT