Chapter 4

Accepting an
Engagement
Financial Statement Assertions

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Existence or Occurrence
Rights & Obligations
Audit
Financial Completeness
Procedures
Statements Valuation & Allocation
Presentation & Disclosure
Audit
Evidence

Audit
Opinion
 Assertions
TRANSACTIONS & BALANCES PRESENTATION &
EVENTS DISCLOSURE

R, E A, L, OE PFRS

• Occurrence • Existence • Occurrence and

Rights and
• Completeness • Completeness Obligations
• Completeness
• Accuracy • Valuation and • Classification
Allocation and
• Cutoff Understandabili
• Rights and ty
• Classification Obligations • Accuracy and
Valuation
• Inspection • Observation
• Inquiry • Confirmation
• Computation • Analytical Procedures
 Issuing a Report

Completing the Audit

Performing Substantive Tests

Considering Internal
Control
Audit Planning

Accepting an
Engagement
consider:
Ability to serve
Competence
the client
properly

Independence Integrity of
Engagement
Tasks:
1. Make Inquiries
2. Communicate
Contains: Additions:
• Objective of the audit • Billing statements
• Managements • Expectations
responsibility
• Other Arrangements
• Scope
• Request for client
• Reports confirmation
• The fact about Limitations
of the audit
• Client's responsibility in
allowing access to records
Avoid Misunderstandings

Documentation and Confirmation of

Acceptance
Factors:

• Client Misunderstanding(objective and scope)

• Revise or Special Terms
• Change of Senior Management
• Legal Requirements
Components:
• Appointment
• Separate audit report
• Legal Requirements
• Extent of work
• Degree of Ownership
• Degree of Independence.
Source:
surgicalspecs.net
_______ refers to the information
obtained by the auditor in arriving
at the conclusions on which that
audit opinion is based.
Computation consists of _____
the arithmetical accuracy of
source documents and
accounting records.
 On the basis of audit evidence
gathered and evaluated, the
auditor forms a ______ about the
financial statements.
_____ is consists of the analysis of
significant ratios and trends
including the resulting
investigation of fluctuations and
relationships that are inconsistent
with other relevant information.
 _____ are procedures that includes
review of subsequent events and
contingencies, assessing the going
concern assumption, performing
overall analytical review procedures,
and obtaining written
representations from the client's
management.
 _____are the implicit or explicit
claims and representations made by
the management responsible for the
preparation of financial statements
regarding the appropriateness of the
various elements of financial
statements and disclosures.
Essential to the credibility of the
auditor's report is the concept of
___________.
 One of the importance of the
engagement letter is to avoid
__________ with respect to the
engagement.
 In general, _________ which
would have caused an accounting
firm to reject a prospective client
may also result or lead to a
decision of terminating audit
engagement.
 This evidence about the financial
statements will either _______ the
validity of management assertions.
 _____ is a process, where a
preliminary assessment of risk and
materiality should also be made to
be able to develop an overall audit
strategy and a detailed approach for
the expected conduct and scope of
the examination.
 The auditor should give adequate
consideration to the entity's
________ because its condition
directly affects the reliability of the
financial statements.
These procedures would involve
examination of the documents
and evidence supporting the
amounts and disclosures in the
financial statements.
_____ is acquired through a
combination of education,
training, and experience
 The auditor will send new
engagement letter if there is a
recent change of __________,
board of directors or ownership.
 _____ serves as written contract
between the auditor and the client.