3171 – ADVANCED AUDITING

 JANE BOWEN
 OBJECTIVE OF COURSE
 SIGN-UP SHEETS
 Presentations
 Project

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 ADVANCED AUDITING
 ANNOUNCEMENTS
 CURRENT NEW ITEMS

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 THE DEMAND FOR AUDITING

 Why do organizations request an

audit?
 It allows contracting to take place in an
agency relationship
 Evidence supporting a demand for
auditing without regulation:
 Extensive non-regulated audit

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 What is an audit?

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 Do investors expect too
much?
 Level of detail?
 Certification to assure the company’s
financial health?
 Detect fraud?

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 Standard Setting Process
 See CICA website
 www.cica.ca
 Auditing and Assurance Standards
Board
 http://www.frascanada.ca/

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 GENERALLY ACCEPTED
AUDITING STANDARDS (GAAS)
 CICA Handbook
 Preface
 CASs – the listing
 Other Canadian Standards
 Assurance Guidelines

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 Reasonable assurance
 What is reasonable assurance?
 Why is it impossible to attain “absolute
assurance”?

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 The Audit Report
 Review the example on Bombardier’s
f/s

 Discuss

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 Question
 What risks should the auditor consider
in planning the audit?

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 Risk Assessment – Multiple
risks involved

 Practice risk – Accept or continue?

 Business risk of client

 Fraud risks
 Risk of material misstatement in f/s
 Inherent risk
 Control risk
 Detection risk

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 Risk of Material
Misstatements

 Inherent Risk

 Control Risk

 Detection Risk

 Audit Risk

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 Understanding the Entity
 Understanding the Entity and its
Environment and Assessing the Risks
of Material Misstatement
 Auditor must obtain this understanding
 Risk Assessment Procedures (RAPS)
 Enquiry of management and others
 Analytical procedures
 Observation and inspection

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 Understanding the Entity
 The entity and its entity’s environment
 Industry, regulatory and other external factors
 Financial reporting framework
 Nature of the entity and the selection of
accounting policies
 Objectives and strategies and business risks
(SWOT)
 Measurement of the entity’s financial
performance
 Internal controls

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 Business Risks
 Business Risk
 Significant conditions, events, circumstances,
actions or inactions
 Setting of inappropriate objectives and
strategies
 “Significant” Risk
 A risk that requires special audit consideration
 Auditor is required to understand the
business risks

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 Risk assessment
 What can go wrong?
 How can the organization's objectives

not be met?
 Could result in F/S misstatements

 Assumes entity objectives have been set

 Assess significance and likelihood

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 Risk assessment

 Risks – Examples
 Significant conditions, events,
circumstances, actions or inactions
 Setting of inappropriate objectives
and strategies

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 Risk assessment
 Review the Bombardier’s f/s and
discuss the risks.

 Business risks?

 Risk of material misstatement

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 Next week - CICA Course
 Complete CICA on-line course before
class
 Sign up at
http://38.113.180.226/cica_init/
 Class will commence at 1 pm
 What risks were identified for the
“marina”?

 What did you learn?

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