Auditing lecture 7-8

Assessing specific business risks and Materiality.
Never get home tired.
Make a preliminary judgement about Materiality
Determine inherent risk. Special areas of audit risk.

Phases of the Audit

Accept the Engagement

Plan and design an Audit approach

Perform the Audit

Complete the Audit and issue the report.

Planning the audit: 8 stages

Obtain knowledge of Client's business

Assess business risk

Perform preliminary analytical procedures

Make preliminary judgements about Materiality

Determine inherent risk

Understand Internal Control

Make preliminary assessment of control risk

Develop preliminary approach for TOC & ST

Three characteristics of Materiality

Qualitative factors as well as quantitative factors may affect materiality.

Determine Inherent Risk

At financial report level and assertions level.

Special areas of audit risk

Fraud

Earnings management

Illegal acts

Related parties

Preliminary assessment of going concern

Inherent risk and Audit risk model

It is through the application of the audit risk model the determination of what constitutes sufficient appropriate evidence is made.

The greater the risk of material misstatement, the greater the amount of appropriate evidence required.

Risk defines ur work

Inherent risk: the susceptibility of an account balance or class of transactions to material misstatement given inherent and environmental characteristics, but without regard to internal control.

Earnings management: is the use of judgement and or the structuring of transactions to alter financial reports to influence the perceptions of those reading the reports about the undelying econmics performance of the company and or to influence outcomes that are based on reported accounting numbers.

Be weak and be poor means be risky.

Relax to be ready to join the contest, to fight. Relax to kill. Until we are stronger than enemy, it makes no sense to forgive him.

Only the strong can forgive.

Only the strong and the rich need ethics. Ethics are their belongings.

Do not love wars but must always prepare for one otherwise I will be sunk into one.

Be relaxed and aggressive. Only the weak are not aggressive.

I have thoughts of a weak, a failed. I really do.

My thoughts are poisoned by bad habits of failed thoughts, of a inferior. Thoughts of ready excuses.

Look at nations where best people of a country perform we will understand the nature of human.

Until I accept that love as a failure I will not be able to digest it.

It is very pitiful for people could not digest a failure. They can not relax.

I failed because I did not have the ability to fight. Make sure that I will not repeat that failure. Love is not a lucky game. It is a who is strong game.

Without relaxing, I never could cover all reading of CFT, Options and Auditing.