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Copy of Auditing presentation
Transcript of Copy of Auditing presentation
Auditing Standard (GAAS)
Guest of today
Audit Partner of Henson, Davis & Company
Cherry Tsoi –
Audit Partner of Cherry Company
the engagement team
ACCB Hong Kong
ACCB Hong Kong
Statements prepared in accordance with GAAP
Expression of opinion on financial statements
Adequacy of disclosures
Circumstances when GAAP not followed
Independence in mental attitude
Due professional care
Adequate training and proficiency
(cc) photo by theaucitron on Flickr
General Accepted Auditing Standard (GAAS)
Proper planning and supervision
Internal control understanding
Sufficient appropriate evidence
Client Acceptance Decision
initial review during the planning phase, done by partner-in-charge (i.e. Black)
Done by Sarah, manager in whom Black had confidence.
Black’s own rationalization
He had been overwhelmed by an emergency
Problems (at the time Black was conducting his first review after the field work was substantially completed):
Accepted McMullan without complying with its new-client acceptance procedures
Without proper communication with prior auditors.
VIOLATED GAAS!!! (HKSA220.12)
Consult the last appointed auditors :
not any reasons behind the vacancy which the new auditors should know.
a courtesy to the last appointed auditors
According tostandards of accepting a new client
standards of accepting a new client
Sarah initiated a communication
left it incomplete when the last appointed auditor did not return her call
She got information of the last appointed auditor through the client
Information may not be complete.
Inappropriate to consider management’s representations in lieu of a direct communication with the predecessor auditor.
The client should NOT have been accepted until a sufficient communication occurred.
can do NOW
To communicate with the
predecessor auditor immediately
If some unfavorable information to audit was obtained?
resigned – breaching a contractual obligation.
continued – taking an unwanted level of business and/or audit risk.
GAAP: to recognize income, contract must be enforceable
Enforceable? => whether it contains cancellation clause
1. Contract in French
2. According to client, it is a ‘standard contract’
3. ‘Standard contract’= with cancellation clause, but requires mutual agreement and cannot be cancelled unilaterally by the buyer
McMullan's Montreal Contract
Sufficient Audit work done?
Sarah’s conclusion based on client representation.
The contract NEEDED to be read.
unrealistic to assume there is “standard” contract
Long-term and short-term contracts are the result of negotiation
What more should be done?
consider other aspects of the contract that relate to various accounting aspects
The French-language copy should be translated by an independent translator and read by the auditors
obtain assurance that the contract is enforceable
(cc) image by nuonsolarteam on Flickr
Compliance with GAAS?
-The work is to be adequately planned and assistants, if any, are to be properly supervised.
-The audit partner should participate in planning
Especially in the situation of a first-time engagement
-Prudent & logical to have some level of on-going partner supervision.
-Black did not really participate at all until final review.
- Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit.
-the work on the Montreal contract was deficient and further evidence is required.
-contradict with Black’s assumption about Sarah’s competence.
Winston Black neglects a new client for an existing one and causes himself several serious problems.
Need to be properly allocated!
Standard of Field Work No.1
Standard of Field Work No. 3
Always Be Ethical!