Chapter 5- Ethics MM
AU 240 points to three conditions that enable fraud to occur, discuss each condition. How does one's propensity to act ethically in Rest's model of morality, influence each of the three elements of the Fraud Triangle?
Fraud risk model- incentives/pressure, opportunity, rationalization.
Explain the content of each section of the audit report. Evaluate the importance of each section with respect to the users of financial reports.
Introductory paragraph- identifies the entity, financial statement being examined, and statements have been audited management responsibilit- description of management's responsibility for the preparation and fair presentation of financial statements nand design and implementation and maintenance of internal control Auditor's responsibility to express an opinion on the financial statements Opinion- unmodified present fairly, emphasis of matter in the auditors report refers to a matter appropriately presented or disclosed in the financial statements. other matter is matter other than those pretend or disclosed. modifed materially misstated , qualified obtain suffienet evidence misstatements, disclaimer is when auditor is unable to obtain sufficient evidence on which the base opinion adverse is when he gathers but both are material and pervasive to the financial statements
How do the standards in COSO's integrated framework help define a strong control environment?
tool to assess internal controls and provides a suitable framework
What is the purpose of audit risk assessment? What are the objective s and why is it important in assessing the likelihood that fraud may occur?
goal is to make inquiries of management and others within the organization to obtain their views about risk of fraud, consider unusual expectoration or unexpected relationships, financial statement comparison and other information. Assessing fraud to properly ensure professional skepticism and questioning mind
How do materiality judgments affect risk assessment in an audit of financial statements?
materiality is justement of audotr of needs of user for the information in the financial statement and effect of possible misstatements, is judged by assessing whether the misstatements should includenc economic decision too
Do you think the concept of materiality is incompatible with ethical behavior?
no
What are the auditor's responsibilities to communicate information to the audit committee under PCAOB standards? What steps might the auditor take ?
requires the auditor to communicate with the company's audit committee regarding certain matters related to he conduct of an audit an obtain certain information about the audit committee relevant to the audit
What signs might the auditor look for prior to issuing their report that help them reevaluate the going concern assessment?
siginfiant losses
Distinguish between an auditor's responsibilities to detect and report errors, illegal acts, and fraud? What role does materiality have in determining the proper reporting and disclosure of such events?
the auditor is performed to obtain reasonable assurance about whether the financial statements are free of material misstatement. Materiality recognizes that some matters are important to the fair presentation of financial statements while others are not.
