审计Audit—Arens14e_ch08_ppt_ge (student).ppt

* A related party is defined as an affiliated company, a principal owner of the client company, or any other party with which the client deals, where one of the parties can influence the management or policies of the other. * Effective boards ensure the company takes only appropriate risks while the audit committee, through oversight of financial reporting, can reduce the likelihood of overly aggressive accounting. To gain an understanding of the clients governance system, the auditor should understand how the board and audit committee exercise oversight along with the following: The corporate charter Code of ethics Meeting minutes * * * * Auditor’s assessment of client business risk considers the industry and other external factors as well as the client’s business strategies processes and other internal factors. * * * Auditors perform preliminary analytical procedures to better understand the client’s business and to assess client business risk. * * * Analytical procedures are defined by auditing standards as evaluations of financial information made by a study of plausible relationships among financial and nonfinancial data involving comparisons of recorded amounts to expectations developed by the auditor. Required in the planning phase to assist in determining the nature extent and timing of audit procedures. Analytical procedures are often done during the testing phase of the audit as a substantive test in support of account balances. Analytical procedures are also required during the completion phase of the audit. Typically, a senior partner with extensive knowledge of the client’s business conducts the analytical procedures during the final review of the audit files to identify possible oversights in an audit. * * * * The most important benefit of industry comparison are to aid in understanding the clients business and as an indication of the likelihood of financial failure. * * * * Activity ratios for accounts receivable and inventory are useful to