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Auditing Chapter (1) - Second Part 2023

The document discusses the objectives of conducting an audit of financial statements. It outlines the auditor's responsibility to obtain reasonable assurance that the financial statements are free of material misstatement. It describes six transaction-related audit objectives - occurrence, completeness, accuracy, classification, timing, and posting and summarization. It provides examples of each objective and asks several multiple choice questions to test understanding.

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Saleh Raouf
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20 views

Auditing Chapter (1) - Second Part 2023

The document discusses the objectives of conducting an audit of financial statements. It outlines the auditor's responsibility to obtain reasonable assurance that the financial statements are free of material misstatement. It describes six transaction-related audit objectives - occurrence, completeness, accuracy, classification, timing, and posting and summarization. It provides examples of each objective and asks several multiple choice questions to test understanding.

Uploaded by

Saleh Raouf
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Principles of Audit

3 year
rd

Lecture 1 Part (2)


Objective of conducting an audit of financial statement

 The objective of the ordinary audit of financial statements by the


independent auditor is the expression of an opinion on the fairness
with which they present fairly, financial position, results of
operations, and its cash flows in conformity with generally
accepted accounting standards, and to issue an appropriate audit
report.
Auditor’s Responsibilities

 The auditor has a responsibility to plan and perform the audit to


obtain reasonable assurance about whether the financial statements
are free of material misstatement, caused by error
Transaction related audit objectives
1. Occurrence—Recorded Transactions Exist
This
objective deals with whether recorded transactions have
actually occurred.

2. Completeness—Existing Transactions Are Recorded


This objective deals with whether all transactions that should be
included in the journals have actually been included.
Note
 The occurrence and completeness objectives
emphasize opposite audit concerns / objectives.
Occurrence deals with potential overstatement;
completeness with unrecorded transactions
(understatement).
3. Accuracy—Recorded Transactions Are
Stated at the Correct Amounts This objective
addresses the accuracy of information for accounting
transactions.

4. Classification—Transactions Included in the


Client’s Journals Are Properly Classified
This objective addresses whether transactions are included in
the appropriate accounts.
5. Timing—Transactions Are Recorded on the
Correct Dates
A timing error occurs if a transaction is not recorded
on the day it took place. A sales transaction, for
example, should be recorded on the date of shipment.

6. Posting and Summarization—Recorded


Transactions
 This objective deals with the accuracy of the transfer of
information from recorded transactions in journals to
subsidiary records and the general ledger.
•QUESTIONS
1. The objective of the ordinary audit of financial statements is the
expression of an opinion on:
A) the fairness of the financial statements in all material respects.
B) the accuracy of the financial statements.
C) the accuracy of the annual report.
D) the accuracy of the balance sheet and income statement.
2. The auditor is determining that the recorded sales are for the
amount of goods shipped are correctly billed and recorded. She is
gathering evidence about which transaction related audit objective?
A) Existence
B) completeness
C) accuracy
D) cut-off
3. Which of the following combinations is correct?
A) Existence relates to whether the amounts in accounts are
understated.
B) Occurrence relates to whether balances exist.
C) Existence relates to whether amounts included exist.
D) Occurrence relates to whether the amounts in accounts
occurred in the proper year.

4. Which of the following management assertions is not


associated with transaction-related audit objectives?
A) Occurrence
B) Classification and understandability
C) Accuracy
D) Completeness
5. Which of the following assertions is described as "this assertion
addresses whether all transactions that should be included in the
financial statements are in fact included"?
A) occurrence
B) completeness
C) rights and obligations
6.. The audit objective of posting and summarization is associated
with the management assertion of accuracy.
A) True
B) False
7. The transaction-related audit objective that deals with whether
recorded transactions have actually occurred is the completeness
objective.
A) True
B) False

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