...Running Head: Audit Report Section 404 Week 4: Team Assignment Withley E., Kacie Wooding, Audie McRae, Dena Brown ACC/546 Professor: HILLARY EDMONDSON July 20, 2015 Anderson, Olds, and Watershed United States of America July 20, 2015 Mr. Larry Lancaster Chairman of the Board of Directors, President and CEO Apollo Shoes, Inc. 100 Shoe Plaza Shoetown, ME 00001 Dear Mr. Lancaster, You have requested that we perform a SOX Section 404 consulting engagement. We are pleased to confirm our acceptance and our understanding of this consulting engagement by means of this letter. Our consultancy will be conducted with the objective of our expressing an opinion on the financial statements. This letter provides information and considerations related to our services under the SOX Section 404 consulting engagement, including: 1. Difference between a financial statement audit and an internal control consulting engagement; 2. Significant regulations and guidelines related to audits of internal control; 3. Internal control risks identified within Apollo Shoes, Inc.; 4. Relationship between internal controls and the audit process; and 5. Brief synopsis of auditor’s responsibility in detecting and reporting fraud. 1. Financial Statement Audit vs. Internal Control Consulting Engagement The following information provides details regarding the differences between a financial statement audit and an internal control consulting engagement: Financial...
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...THE RELATIONSHIP BETWEEN INTERNAL AND EXTERNAL AUDIT Professor PhD Atanasiu Pop, „Babeş-Bolyai” University of Cluj-Napoca, e-mail: apop@econ.ubblcuj.ro PhD Student Cristina Boţa-Avram, „Babeş-Bolyai” University of Cluj-Napoca, e-mail: botaavram@gmail.com PhD Student Florin Boţa-Avram, „Babeş Bolyai” University of Cluj-Napoca, e-mail: botaavramflorin@yahoo.com ABSTRACT: Analyzing the evolution process of internal audit, from its beginnings and so far, we can easily notice that internal audit function was born through detaching of some activities from external audit, the result being that there some situations when these two functions could be easily confused. The reality is that internal audit and external audit are two distinctive functions; net differenced, but which are also characterized through some complementary relationships. In this paper, we try to give our contribution at the clarification of the similarities and differences between these two functions, making a literature review that allowed us to identify some very interesting studies that permitted us to emphasize the main criterions that influenced the relationship between internal audit and external audit. Keywords: internal audit, external audit, objectivity, competence JEL Codes: M42 1. Introduction The coordination of internal audit activity with external audit activity is very important from both points of view: from external audit’s point of view is important because, in this way, external ...
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...THE RELATIONSHIP BETWEEN INTERNAL AND EXTERNAL AUDIT Professor PhD Atanasiu Pop, „Babeş-Bolyai” University of Cluj-Napoca, e-mail: apop@econ.ubblcuj.ro PhD Student Cristina Boţa-Avram, „Babeş-Bolyai” University of Cluj-Napoca, e-mail: botaavram@gmail.com PhD Student Florin Boţa-Avram, „Babeş Bolyai” University of Cluj-Napoca, e-mail: botaavramflorin@yahoo.com ABSTRACT: Analyzing the evolution process of internal audit, from its beginnings and so far, we can easily notice that internal audit function was born through detaching of some activities from external audit, the result being that there some situations when these two functions could be easily confused. The reality is that internal audit and external audit are two distinctive functions; net differenced, but which are also characterized through some complementary relationships. In this paper, we try to give our contribution at the clarification of the similarities and differences between these two functions, making a literature review that allowed us to identify some very interesting studies that permitted us to emphasize the main criterions that influenced the relationship between internal audit and external audit. Keywords: internal audit, external audit, objectivity, competence JEL Codes: M42 1. Introduction The coordination of internal audit activity with external audit activity is very important from both points of view: from external audit’s point of view is important because, in this way, external ...
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...ABSTRACT This research work deals with internal audit as an aid to management. It aims at finding out the role of internal audit in management decision making in organizations. It is a survey research. Data were collected from primary and secondary sources which included using questionnaires, personal observations, text book, journal and internet. Sample of 92 were collected by random sample method. Three hypotheses were formulated and tested using Z-test statistics, while questionnaires were analyzed using simple percentages. We discovered among other things that internal audit assists management in managerial decisions. We recommended among other things that the auditors be trained in forensic accounting to enable them to be more effective in their duties. pg. 8 CHAPTER ONE INTROUCTION 1.1 BACKGROUND OF THE STUDY. At the beginning of the century, most businesses are small and sole-operated. The owners/managers are overly involved with most of the decision making. As business grows in size and complexity, professional managers take position of the owners and the operators. Consequently, they rely heavily upon streams of accounting and statistical report which summarizes current happenings and conditions in the enterprise. The information carried by these streams of report enables management to control and direct the enterprise in order to assure management that the information received are both reliable and accurate. A system of internal audit is developed to monitor the activities...
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...Building an Effective Internal IT Audit Function (While this topic is written from an internal auditor's perspective, the concepts and philosophies can be adapted to guide the external audit function as well) AUDIT DEPARTMENT PURPOSE Why does the internal audit department exist? What's the end goal? * Is our purpose to issue reports? * To raise issues? * To make people look bad? * To show how smart we are and how dishonest, incompetent, and corrupt the rest of the company is? * To flex our muscles and show that we can do anything and tell on anyone because we report to the board of directors? AUDIT DEPARTMENTS * formed by the company's audit committee (a subset of the board of directors) * for the purpose of providing them with independent assurance that internal controls are in place and functioning effectively. The audit committee wants a group that it can trust to be objective enough to tell it if there is anything the committee should be worried about. What's "really going on" in the company. The committee wants someone it can trust to turn in all the evildoers in the company who refuse to implement internal controls. Internal audit departments usually report directly to the chairman of the audit committee, so they feel protected from blowing the whistle on the hordes of dishonest managers who surely have infested the company. The real mission of the internal audit department is to help improve the state of internal controls at the company. Admittedly...
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...Assurance and Financial Statement Auditing True / False Questions 1. | Independence standards are required for audits of public companies, but not for audits of private companies. True False | 2. | Decision makers demand reliable information that is provided by accountants. True False | 3. | Information asymmetry seldom occurs. True False | 4. | Conflicts of interest often occur between absentee owners and managers. True False | 5. | Auditing services and attestation services are the same. True False | 6. | Auditing is a type of attest service. True False | 7. | Testing all transactions that occurred during the period is cost prohibitive. True False | Multiple Choice Questions 8. | Why do auditors generally use a sampling approach to evidence gathering? A. | Auditors are experts and do not need to look at much to know whether the financial statements are correct or not. | B. | Auditors must balance the cost of the audit with the need for precision. | C. | Auditors must limit their exposure to their auditee to maintain independence. | D. | The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company. | | 9. | Which of the following statements best describes a relationship between sample size and other elements of auditing? A. | If materiality increases, so will the sample size. | B. | If the...
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...The duties, status and liability of the auditor WHAT IS AN AUDIT?[1] The word “audit” comes from the Latin word audire which means “to hear” because, in the middle Ages, accounts or revenue and expenditure were “heard” by the auditor. An audit is the process of checking that the way an organisation presents information about its financial position (its ‘Financial Statement of Accounts’) is true and fair. In essence, ‘true and fair’ means that, in the auditor’s opinion, the company’s financial statements offer a true and fair view of its actual financial position, and that any assumptions they include are reasonable. We can say that, Auditing is works with evaluating organizations financial statements, systems, projects, process according to standards. It is also engaged with non-financial matters of an organization. Such audits can be performed to identify inefficiencies in an organization. Why Auditing:[2] Audits exist to add credibility to the implied assertion by an organization's management that its financial statements fairly represent the organization's position and performance to the firm's stakeholders. The principal stakeholders of a company are typically its shareholders, but other parties such as tax authorities, banks, regulators, suppliers, customers and employees may also have an interest in knowing that the financial statements are presented fairly, in all material aspects. An audit is not designed to provide assurance of 100% accuracy; rather it...
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...INTRODUCTION A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation. Financial audits are typically performed by firms of practising accountants who are experts in financial reporting. The financial audit is one of many assurance functions provided by accounting firms. Many organizations separately employ or hire internal auditors, who do not attest to financial reports but focus mainly on the internal controls of the organization. External auditors may choose to place limited reliance on the work of internal auditors. Internationally, the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB) is considered as the benchmark for audit process. Almost all jurisdictions require auditors...
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...INTERNAL AUDITING AS AN EFFECTIVE TOOL FOR CORPORATE GOVERNANCE This journal of JBM International Science Press, examines the study of the relationship between internal audit and corporate governance with various argumentations of internal audit activities, attempting to sketch out their relationship. It analyses the contribution of internal audit to corporate governance. Based on what I found in the journal and my opinion, this journal have emphasized the importance of internal audit which is really compulsory for every company to follow as it improves the efficiency and effectiveness of the management and company. Moreover it also have mentioned that the relationship and communication between employer and management is important in internal control which is an effective idea on maintaining employer’s loyalty and reduce fraud. But this journal less focus on the disadvantage of internal control if it is not handled wisely which is really need to be considered before implementing internal audit control system. The journal have explained well on how the internal control benefits the company but as an auditor or a manager, one should also consider the disadvantage that might be faced by the company from internal audit control. Internal audit control systems have a few weaknesses that business owners must address. First, broad application. Internal audit control systems can be very broad in their application and this can create a weaker...
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... |School of Business/Graduate | | |ACC/546 Version 2 | | |Auditing | Copyright © 2009, 2008, 2007 by University of Phoenix. All rights reserved. Course Description In this course, students focus on the auditing practice performed by public accountants. Topics include the CPA profession and the auditor’s role, planning the audit, audit reporting and required communications, evaluating internal controls, audit programs for current assets and liabilities, and audit programs for other business cycles. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials ...
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...External auditors do not rely on internal auditors as much as they could – why? How could this reliance be improved? Presented By Mingdi Deng Shirene Horner Yueyang Shi Trevor Stewart Jingtao Wang CONTENTS PAGE ABSTRACT 3 1. INTRODUCTION 3 2. REASONS 3 2.1 INTERNAL AUDITOR ROLES 3 2.2 THE REPORTING AND OBJECTIVITY RELATIONSHIP OF THE INTERNAL AUDITOR 4 3. COLLABORATION IN PRACTICE 5 3.1 COMMUNICATION AND COOPERATION 5 3.2 PROFESSIONAL STANDARDS 5 3.3 RECORDING AND TESTING ACCOUNTING SYSTEMS 6 3.4 SUBSTANTIVE TESTS 6 4. CONSEQUENCES OF INFLUENCE 7 5. RELIANCE IMPROVEMENTS 8 5.1 ATTEMPTS FOR IMPROVEMENT 8 5.2 INCREASE THE EFFICIENCY AND COMMUNICATION METHOD FOR INTERNAL AUDITORS AND EXTERNAL AUDITORS 8 5.3 FURTHER EDUCATION IS...
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...Internal audit Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.[1] Internal auditing is a catalyst for improving an organization's governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity. The scope of internal auditing within an organization is broad and may involve topics such as an organization's governance, risk management and management controls over: efficiency/effectiveness of operations (including safeguarding of assets), the reliability of financial and management reporting, and compliance with laws and regulations. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts; participating in fraud investigations under the direction of fraud investigation professionals, and conducting post investigation fraud audits to identify control breakdowns and establish...
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...Auditing Review Sheet Period Test II Chapter 4. Audit Evidence and Audit Documentation. * Understand the types of management’s assertions (assertions about (1) account balances, (2) transactions, and (3) disclosures). Should be able to describe in own words, give own examples and relate to examples given in the exercises. * 1) Account Balances Existence – assets, liabilities, and equity interests exist. Rights and obligations – the entity holds or controls the rights to assets, and liabilities are the obligations of the entity Completeness – all assets, liabilities and equity interests that should have been recorded have been recorded. Valuation and allocation – assets, liabilities, and equity interests are included in the financial statements at appropriate amounts, and any resulting valuation or allocation adjustments are appropriately recorded. * 2) Transactions Occurrence – transactions and events that have been recorded have occurred and pertain to the entity (sometimes referred to as validity) Completeness – all transactions and events that should have been recorded have been recorded. Authorization – all transactions and events have been properly authorized. Accuracy – amounts and other data relating to recorded transactions and events have been recorded appropriately and properly accumulated from journals and ledgers. Cutoff – transactions and events have been recorded in the correct accounting period. Classification – transactions and events...
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...Understanding auditing can improve the decision-making ability of consultants, business managers, and accountants by providing a framework for evaluating the usefulness and reliability of information—an important task in many different contexts. 1-2 There is a demand for auditing in a free-market economy because the agency relationship between an absentee owner and a manager produces a natural conflict of interest due to the information asymmetry that exists between the owner and manager. As a result, the agent agrees to be monitored as part of his/her employment contract. Auditing appears to be a cost-effective form of monitoring. The empirical evidence suggests auditing was demanded prior to government regulation. In 1926, before it was required by law, independent auditors audited 82 percent of the companies on the New York Stock Exchange. Additionally, many private companies and municipalities not subject to government regulations, such as the Securities Act of 1933 and Securities Exchange Act of 1934, also purchase various forms of auditing and assurance services. 1-3 The agency relationship...
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...Risk Management Planning Carvella Bennett Everest University Risk management planning is the process of developing options and actions to enhance opportunities and reduce threats to project objectives. Risk management implementation is the process of executing risk management actions. Effective crisis response begins with effective decision-making. Good initial decisions can make even a catastrophe manageable; bad decisions can fatally exacerbate an otherwise small problem. In both cases, the window of opportunity for initial decision making is extremely small and closes rapidly. Once the moment for decision making has gone, it does not come back. Proper crisis response is about developing a range of emergency management options that can be exercised and that focus on what could happen, not what will happen. This is achieved through practice, and lots of it. It is no easy task getting a crisis management team together for the first time during an unfolding emergency. In all cases, the best crisis management results are delivered on-site and in the same time zone. However centralized a company may be, when it comes to crisis management, even local staffs need to sharpen their crisis management skills because ultimately, those are the ones that will be used when disaster first strikes. When actually organizing a live run-through of the crisis management plan, the scenario should ideally be one in which a business system is disabled. It is better to act this out in a real...
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