Question

Identify the four phases of the audit and the relation of these phases to the objectives of a financial statement audit.  Create a graphic organizer to answer the following questions and be prepared to them in a group activity.

a.  What is the overall objective of the financial statement audit?

b. What are the six transaction class audit objectives?

c.  What are the four account balance audit objectives?

d.  What are the four disclosure audit objectives?

e.  Why is understanding the entity and its environment important to planning the audit? Illustrate with an example

Answer 1

Answer for a)

The overall Objective of financial statement audit is obtaining reasonable assurance that financial statements are free from material mistatemnet and expressing an opinion on financial statements are prepare in accourdance with financial reporting framework and communicating significant findings to the users of such financial statements.

Answer for b)

1)Occurrence-whetger such transaction actually occurred or not

2)completeness-When such transaction is completely recorded or not

3)cutoff-Transaction recorded for period to which it belong to

4)classification-transaction classified correctly or not

5)accuracy-Whether the transaction amount is accurate or not.

6)Posting and summarization-Whether it is posted and Summerising properly

Answer for c)

1)existence-whether such account balance existed or not

2)Completeness-whether such balance is completely or not.

3)Valuation-whether such account balance is properly valued or not.

4)rights and obligations-Whether the organisation have rights and fulfilled obligation to claim such account balance

Answer for d)

1)Occurrence-The disclosures is given for what had actually occurred or not

2)Complteteness-Whether that disclosure give complete view or not.

3)Classification- Such classifications provided in disclosure is accurate or not.

4)Summerising-Such disclosure provide the summary that user need

Answer for e)

Understanding an entity is definitely a need to get an understanding on all external information like competition, obligations to be fulfilled,legal needs, internal information like ownership,management integrity,accounting policies followed etc.

Here for example say apple has entered into a new market say India.Now the auditor in need to know that integrity of management in India to evaluate the degree of reliance that can be place on internal controls,the law applicability to check whether they are full filled or not,the accounting policies to see whether they are properly applied or not etc which helps him to setup the milestones and achieving them to conclude that he had actually achieved the overall objectivity .