Description
LP1 Seminar - Part 1: http://youtu.be/NydtATqLjUs
LP 1 Seminar - Part 2: http://youtu.be/vIQtdDxDTT8
Financial Assertion and Audit Objectives
You are engaged to examine the financial statements of Spillane Company for the year ended December 31. Assume that on November 1, Spillane borrowed $500,000 from Second National Bank to finance plant expansion. The long term note agreement provided for the annual payment of principal and interest over five years. The existing plant was pledged as security for the loan. Due to the unexpected difficulties in acquiring the building site, the plant expansion did not begin on time. To use the borrowed funds, management decided to invest in stocks and bonds and on November 16, invested the $500,000 in publicly traded securities
Required
Develop specific assertions (audit objectives) related to securities (assets) based on management’s five (PCAOB) general assertions.
Internet Exercise: Public Company Accounting Oversight Board Inspection Reports
Refer to the website of the public company Accounting Oversight Board (PCAOB) (www.pcaobus.org) and review the information under “inspection” and select the most current inspection report for one of the Big Four firms (Deloitte, EY, KPMG and PwC)
Required
What information is contained in the “public” version of the PCAOB’s inspection reports? Is there any additional information that you would like to see?
What categories of practices, policies, and procedures are evaluated in the PCAOB’s inspection of the firm’s quality control system?
For the firm you selected, how many practice offices had audits inspected by the PCAOB
For the firm you selected, how many audits (issuers) did the PCAOB find deficiencies?
Identify five deficiencies that were cited in the PCAOB’s inspection report. For each deficiency, to which of the elements of the principles does it most closely relate? (if the firm had fewer than five deficiencies, evaluate all the deficiencies identified in the report).
Briefly summarize the firm’s response (if any) to the PCAOB’s inspection report.
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Explanation & Answer
Running Head: AUDIT ASSERTIONS AND OBJECTIVES
Audit Assertions and Objectives
Name
Instructor
Institutional Affiliation
Date
1
AUDIT ASSERTIONS AND OBJECTIVES
2
Management assertions are basically claims used in audit of a company’s financial statement. In
this case the auditor relies on varied assertions regarding how the business is transacted. In order
to confirm the validity of these assertions, the auditor generally conducts a number of tests. The
most commonly used management assertions falls into three d...