Question

Auditing:

Describe the reasons for demand for audits

Describe the different assertions included in assertion and audit objectives frameworks of the auditing standard board(ASB) public companies  accounting oversight board (PCAOB)  

Describe the roles and responsibilities of auditors versus management( including those required by PCAOB  

Describe the components of the three fundamental auditing principles  

Responsibilities  

Performance

Reporting  

Audit planning and documentation: client acceptance decisions : Analytical procedures; materiality

Answer 1

1. Answer:The reason for demand of audit is to examine the correctness of information given in the financial statement of the organization. The main purpose is to ensure that financial statement provides true and fair view of a company’s financial performance and position.
2. In order to ensure that financial statement are in conformity with financial reporting framework assertions are inserted regarding recognition, measurement, presentation, and disclosure of the various elements of financial statements and related disclosures. The following are classified in below categories:

-        Existence or occurrence – Assets or liabilities of the company exist at a given date, and recorded transactions have occurred during a given period.

-        Completeness – All transactions and accounts that should be presented in the financial statements are so included.

-        Valuation or allocation – Asset, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts.

-        Rights and obligations – The Company holds or controls rights to the assets, and liabilities are obligations of the company at a given date.

-        Presentation and disclosure – The components of the financial statements are properly classified, described, and disclosed.

1. Answer: Responsibility of management-It is the Management’s responsible to prepare the financial statements and the contents of the statements in line with the applicable accounting standard and with all the necessary disclosure and accompanying footnotes.

Responsibility of Auditor: The auditor is responsible for examining management’s financial statements and expressing an opinion on the correctness of financial statement. The auditor’s responsibility is limited to performing the audit and investigating and reporting the results in accordance with generally accepted auditing standard

4. Answer:Component of auditing principle are given below:

-        Integrity. Auditors should be straightforward and honest in all professional and business relationships.

-        Objectivity-Auditors should not be bias or should not be influenced by any other professional judgement.

        - . Confidentiality-Auditors should always maintain the confidentiality of the information which he   

    acquired during professional or business relationship or audit. Also,he must not disclose such information to third parties without authority or unless there is a legal or professional right or duty to disclose.

5. Answer

Responsibility-

It is the auditors responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements presents true and fair view of financial result.

Performance

It is to an independent examination of a program, function, operation or the management systems and procedures of a governmental or non-profit entity to assess whether the entity is achieving economy, efficiency and effectiveness in the employment of available resources.

Reporting

An auditor should give his opining in Audit report whether entity financial stement gives true and fair view of results.

Audit planning & documentation

The auditor should plan the audit in such a way that it could be performed in timely manner.He should detail the transaction to be audited, time required,persones needed etc.He should also document all the information and supports for audit evidence.

Analytical procedures

Analytical procedures helps the auditor to understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures.

Materiality

The concept is applicable for both planning and performing the audit.An auditor can not cover all the transactions .So he has to set some threshold to determine the transactions reporting in financial statement.