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Substantive Testing

Ascertain and evaluate The Accounting Sys. Plan and record the audit plan Does the internal control And accounting systems Are reliable? Ascertain and evaluate The internal Control

Design and perform reduced volumes of Substantive Procedures

Yes
Analytically review the Financial Statement for going concern & Materiality

No
Design and perform extensive Substantive Procedures

Audit Report

Standard

auditors report states that the financial statements present fairly in conformity with applicable standards:
Existence or occurrence Completeness Rights and obligations Valuation or allocation

Presentation and disclosure

Assets

and liabilities exist, and the recorded transactions have occurred.

All

accounts and transactions that should be included are included.

All

assets are the rights of the entity and that all liabilities are obligations.

All

assets, liabilities, equity, revenues and expenses are fairly valued and allocated to the proper accounting period.

The

financial statements are properly presented and disclosures are adequate.

Financial

statements are the responsibility of management Auditors express opinion on financial statements Can obtain reasonable not absolute assurance of material misstatements Must exercise professional skepticism
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Ethics-

system or code of conduct based on moral duties and obligations that indicates how we should behave.
AICPA Code of Professional Conduct 10 Generally Accepted Auditing Standards

Must follow the codes and standards to ensure that the auditing services will not lose their value and demand.

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Must

have a broad based business knowledge to understand the risks, strategies, controls, business and industry of your client to understand if the financial statement assertions are valid.
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Materiality Audit

risk Evidence

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Is

the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.
13

Is

the risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated

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Auditors

must obtain and evaluate evidence Then determine the relevance and reliability
Relevance- refers to whether the evidence relates

to the specific audit objective being tested. Reliability- refers to whether the evidence can be relied upon to signal the true state of the assertion of the auditor.

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Auditors

use previous knowledge of commonly misstated items and industry knowledge to check certain transactions. Obtain a sample representative of the population of transactions. The larger the sample the less audit risk involved.

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