...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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...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 desired level of assurance increases, sample sizes can be smaller. | C. | If materiality decreases, sample size will need to increase. | D. | There is no relationship between sample size and materiality or the desired level of assurance....
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...[pic][pic] [pic] Do the following Questions based on the request of each question 1. What is an entity internal control structure? 2. What are the primary objectives of an internal control structure? 3. What are the reasonable assurances that are intended to be provided by the internal control structure? 4. When considering the potential effectiveness of any internal control structure, what are the inherent limitation that should be recognized? 5. What procedures should be used to obtain understanding of internal control structure? [pic] Do the following Questions based on the request of each question 1. What is the purpose of the second standard of fieldwork? 2. What is the purpose of requiring an incoming auditor to communicate with his predecessor? What is the duty of the incoming auditor if the predecessor auditor informs him that he did not seek re-appointment due to the management’s attempts to exercise undue influence of him to modify his report? 3. What are the major functions expected from internal auditors? 4. Should the internal auditors possess the general standard of GAAS? Why? When you compare the independency of internal auditors with external auditors, which one has more independency and why? 5. The first standard of fieldwork requires, in part, that “The work is to be adequately planned.” An effective tool that aids the auditor in adequately planning the work is an audit program. What is an audit program and what purposes does it serve...
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...specifying reporting requirements considered necessary for fair disclosure to investors. The SEC has power to establish rules for any CPA associated with audited financial statements submitted to the commission. With Smackey Dog Food, Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Solution: Audit Planning consist of the following: 1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make a important decisions. The auditor wants to make this decision early, before incurring any significant cost that cannot be recovered. With Smackey Dog Food, Keller CPA had time to devote to the audit and therefore accepted the job. 2. The auditor identifies why the client wants or needs an audit. This information is likely to affect the remaining parts of the planning process. 3. To avoid misunderstandings, the auditor obtains an understanding with the client about the terms of the engagement. With Smackey Dog Food, the...
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...NEED TO ADD THE TITTLE • Research Paper Topic: • What are Auditors’ Responsibility Today to Detect Fraud; include how do these responsibilities fit into the professional practices of: external auditors, Certified Public Accountants in public practice and Internal Auditors and what has changed in these areas in recent years? For standards or articles use the following items as they relate to your paper to help organize your paper. Statements on Auditing Standards (SAS), especially all those statements relating to fraud, Financial Accounting Standards Board (FASB), International Financial Reporting Standards (IFRS), Sarbanes-Oxley Act , etc. (SOX, Sarbox); International Standards for the Professional Practice of Internal Auditing (Standards), European Confederation of Institutes of Internal Auditing (ECIIA), Committee of Sponsoring Organizations of the Treadway Commission (COSO) , Public Company Accounting Oversight Board (PCAOB)and its standards, and professional articles or books as primary sources. • • • • PLEASE HELP ME OUT EDITING THIS PAPER, SENTENCE STRUCTURE, ADD SENTENCES IF NEEDED I’M LOOKING FORWARD TO AN A PAPER AFTER THIS PROOF READING Thank you in advance please help • Auditors’ Responsibility to detect Fraud today Public companies are required by the SEC to prepare and issue financial statements that made a fair presentation of the companies’ performance. The SEC also stipulates that the companies whose shares...
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...Executive Summary The need for auditors with technology skills have increased, this is why the IT auditing profession has become very important. Information Technology auditors analyze the information technology structure, operations, and software of an organization. They are in charge of identifying better ways in which the organization’s systems can meet their needs in a better and more reliable way. IT auditors can basically design new systems by configuring hardware and software programs and they also test the systems to make sure they are working properly. Most IT auditors work in offices, obviously with computer systems. Some IT auditors work with the same company for years making sure the information systems and internal controls work properly. Some other IT auditors work for CPA firms that provide auditing services, and are required to travel to evaluate the information systems of clients. For the most part IT auditors work independently, but when they are assigned to larger and/or complicated projects, they use the collaboration of other peers. James Reinhard, CPA, CIA, CISA, manager of Simon Property Group Inc. who has more than 20 years’ experience in IT and integrated auditing states that “The ideal IT auditor should be able to discuss IP routing with the network folks in one hour and financial statement disclosures with the controller in the next” (Scharf, 2008). To become the ideal IT auditor IT audit certifications are the best option. IT audit...
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...stockholders; which are the requirements for public and privately held companies. The SEC does have indirect influence over the audit because all companies, whether public or private are required to comply with General Accepted Accounting Principles (GAAP) and the SEC plays a significant role in influencing these standards. The auditors, while not bound by SEC rules they are required to obey specific audit rules and guidelines as outlined under the the American Institute of Certified Public Accountants (AICPA). The AICPA is responsible for establishing auditing and attestation standards for private companies in the United States and for enforcing a code of professional conduct for its members. The code is comprised of six principles that the auditors must adhere to. The principles are: responsibilities, the public interest, integrity, independence and objectivity, due care, and the scope and nature of services. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Solution: During the initial planning of the audit of Smackey Dog Food, the auditors should discuss the following essential activities: 1) ensure the members of the audit team completely understand what Smackey Dog Food business is about; not only Smackey as an individual business but the dog food industry as a whole; 2) does Smackey have any potential risk that could affect the...
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...public accountant, which is a part of a registration statement and subsequent reports. Since Smackey Dog Foods, Inc. is not a public company, there is no direct influence of SEC. However, SEC’s rules establish the guidelines of GAAP and personal conduct for Smackey Dog Foods, Inc. (Auditing and Assurances Services, 13th Edition. Pearson Learning Solutions p. 30). <vbk:9781256083337#outline(6.7)> Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Solution: 1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make important decisions. The auditor wants to make this decision early, before incurring any significant costs that cannot be recovered. 2. The auditor identifies why the client wants or needs an audit. This information...
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...Recommendation Brief for an Internal Accountant Kandi Kolka ACC/544 January 19, 2015 Bunney Schmidt Recommendation Brief for an Internal Accountant When a company hires an Internal Auditor it is usually to improve the business or make sure internal accounts are effective. An auditor would be hired to come into the business and go through the accounts. The accountant would make sure that the company is complying with the government. The auditor would look for internal fraud, operations, and assets. The auditor is hired to make sure the company is profitable and if not what they should do to become profitable. There are three ways for a company to change profitability; by increasing sales, decreasing variables and or reducing average operating expenses. An internal accountant is brought into a business to improve the effectiveness of the internal day to day operations. The internal accountant will test or audit the internal controls for mismanagements and fraud. The internal auditor will make sure that the business is complying with all of the government’s regulations. If the company is not complying this could mean serious trouble from the government. This is why it is important to bring someone who has a vast amount of knowledge into view the components of the company. When an individual internal auditor is brought into a company they may not have exact knowledge of the company but they know what they are looking for. They will investigate the books of the company....
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...was restated for a difference of $10,500,000 and income tax payable had a difference of $9,885,000. Under stockholder’s equity, one major account that was restated is additional paid in capital. Addition paid in capital had a difference of $28,236,000 ($35,540,000-$63,776,000) Like the balance sheet, income statement had many adjustments as well. On major change was a net sale of $17,799,000 ($340,075,000-322,276,000). Cost of Good Sold had a difference of $19,667,000 ($245,940,000 - $265,607,000). Both accounts impacted the gross profit by $37,466,000. 2. Under AU Section 316, it gives the auditor a standard to consider what fraud is in the financial statement. The factors that I believe the auditors should of concentrated was internal controls, related-party transaction and pressure that both management and auditors had. 3. The responsibility that auditors have when the client cannot provide the evidence they need to complete one or more audit test or procedures is to first address this to the audit committee and bod. Additional testing will be required in order to expose the truth...
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...Chapter 1 Auditing and Internal Control Review Questions 1. What is the purpose of an IT audit? Response: The purpose of an IT audit is to provide an independent assessment of some technology- or systems-related object, such as proper IT implementation, or controls over computer resources. Because most modern accounting information systems use IT, IT plays a significant role in a financial (external audit), where the purpose is to determine the fairness and accuracy of the financial statements. 2. Discuss the concept of independence within the context of a financial audit. How is independence different for internal auditors? Response: The auditor cannot be an advocate of the client, but must independently attest to whether GAAP and other appropriate guidelines have been adequately met. Independence for internal auditors is different because they are employed by the organization, and cannot be as independent as the external auditor. Thus internal auditors must use professional judgment and independent minds in performing IA activities. 3. What are the conceptual phases of an audit? How do they differ between general auditing and IT auditing? Response: The three conceptual phases of auditing are: i. Audit planning, ii. Tests of internal controls, and iii. Substantive...
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...1. Why does Molex have to hire external auditors? The major reason for firms to hire external auditors is to help the control of conflict of interest between firm managers, investors and shareholders. External auditors help you determine whether companies are in compliance with all applicable Internal Revenue Service rules. Under the Sarbanes-Oxley Act, a public company must hire an external audit team to review their accounting procedures and their financial statements. While internal auditor checks the organizations internal control systems, their effectiveness and the business processes, the external auditor checks the financial statement of the business. Molex hire external auditors to look at their financial states and to receive an objective assessment. It is possible that Internal auditor might present a biased view as it would need to work closer with the management while the External auditor who have no interest in company will likely to provide fairly judgment and unbiased report. Under the Sarbanes-Oxley Act, a public company must hire an external audit team to review their accounting procedures and their financial statements. While internal auditor checks the organizations internal control systems, their effectiveness and the business processes, the external auditor checks the financial statement of the business. Molex hire external auditors to look at their financial states and to receive an objective assessment. It is possible that Internal auditor might present...
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...that you enlighten her about Sarbanes-Oxley. a) Describe to Karen the key points of the section 404 of the Sarbanes-Oxley Act. b) Section 404 requires management to make a statement identifying the control framework used to conduct their assessment of internal controls. Describe to Karen the options in selecting a control framework. c) Karen was wondering, if the auditors give a qualified opinion on management’s assessment of internal controls over the financial reporting system, does it mean that the auditor must also give a qualified opinion on the financial statements? Explain how it works. d) In this age of high technology and computer based information systems, Karen was wondering why accountants are concerned about physical (human) controls. Explain. e) Internal control in a computerized environment can be divided into two broad categories. Explain to Karen what they are. Question #2 (Ch.2) You are being interviewed for a job as an internal auditor, and it is the ideal job now that you’ve graduated. The interviewer has asked that you answer the following during the interview process: a) Explain the role of a SAS 70 report in reviewing internal controls. b) How has the Sarbanes-Oxley Act had a significant impact on corporate governance? c) How is pre SOX IT governance different from post SOX IT governance? d) Although IT...
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...Business Should Take to Guard against an Audit report. This report contains information pertaining to the procedures that will prepare an organization for auditing and out of compliance materials. This report is analyzed according to three categories: (1) the accountability an audit can give a company, (2) having on demand documentation on premises, (3) internal auditing being cost efficient versus external audits. This report also explains how audits can damage the business’s reputation if not completed correctly. It is with anticipation that this report will provide the controllers and accountants with the necessary information needed to review the efficiency of the first year using internal auditors. Please feel me know if you have any questions about this report or if you need further information. I may be reached at 973-482-9396 and by email ccassagn@wm.com. cc: Joe Bellanca Enclosures: Senior Financial Analysts Accountants Controllers Conducting an audit is known to be nerve wracking in many companies. The moment they receive confirmation that they will be audited, the managers become concerned. Why does a business become apprehensive? What steps should a business take? Although there are various protocols and procedures a business should follow...
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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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