According to the aicpa, the purpose of an audit of financial statements is to:
|
Effective Date of Standard: For audits of fiscal years beginning on or after Dec. 15, 2010 .01 This standard discusses the auditor's consideration of audit risk in an audit of financial statements as part of an integrated audit1 or an audit of financial statements only. .02 The objective of the auditor is to conduct the audit of financial statements in a manner that reduces audit risk to an appropriately low level. .03 To
form an appropriate basis for expressing an opinion on the financial statements, the auditor must plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement2 due to error or fraud. Reasonable
assurance3 is obtained by reducing audit risk to an appropriately low level through applying due professional care, including obtaining sufficient appropriate audit evidence. .04 In an audit of financial statements, audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated, i.e., the financial statements are not presented fairly in conformity with the applicable financial reporting framework. Audit risk is a function of the risk of material misstatement and detection risk. Note: The auditor should look to the requirements of the Securities and Exchange Commission for the company under audit with respect to the accounting principles applicable to that company. Risk of Material Misstatement.05 The risk of material misstatement refers to the risk that the financial statements are materially misstated. AS 2110, Identifying and Assessing Risks of Material Misstatement, indicates that the auditor should assess the risks of material misstatement at two levels: (1) at the financial statement level and (2) at the assertion4 level.5 .06 Risks of material misstatement at the financial statement level relate pervasively to the financial statements as a whole and potentially affect many assertions. Risks of material misstatement at the financial statement level may be especially relevant to the auditor's consideration of the risk of material misstatement due to fraud. For example, an ineffective control environment, a lack of sufficient capital to continue operations, and declining conditions affecting the company's industry might create pressures or opportunities for management to manipulate the financial statements, leading to higher risk of material misstatement. .07 Risk of material misstatement at the assertion level consists of the following components:
.08 Inherent risk and control risk are related to the company, its environment, and its internal control, and the auditor assesses those risks based on evidence he or she obtains. The auditor assesses inherent risk using information obtained from performing risk assessment procedures and considering the characteristics of the accounts and disclosures in the financial statements.6 The auditor assesses control risk using evidence obtained from tests of controls (if the auditor plans to rely on those controls to assess control risk at less than maximum) and from other sources.7 Detection Risk.09 In an audit of financial statements,detection risk is the risk that the procedures performed by the auditor will not detect a misstatement that exists and that could be material, individually or in combination with other misstatements. Detection risk is affected by (1) the effectiveness of the substantive procedures and (2) their application by the auditor, i.e., whether the procedures were performed with due professional care. .10 The auditor uses the assessed risk of material misstatement to determine the appropriate level of detection risk for a financial statement assertion. The higher the risk of material misstatement, the lower the level of detection risk needs to be in order to reduce audit risk to an appropriately low level. .11 The auditor reduces the level of detection risk through the nature, timing, and extent of the substantive procedures performed. As the appropriate level of detection risk decreases, the evidence from substantive procedures that the auditor should obtain increases.8 What is the purpose of an audit according to the aicpa?The audit is the highest level of assurance service that a CPA performs and is intended to provide a user comfort on the accuracy of financial statements.
Which of the following is the purpose of financial statement audit?The purpose of a financial statement audit is to add credibility to the reported financial position and performance of a business. The Securities and Exchange Commission requires that all entities that are publicly held must file annual reports with it that are audited.
What is the purpose of a financial statement audit quizlet?The purpose of an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly in all material respects in accordance with the applicable financial reporting framework.
What is an audit of financial statements quizlet?An audit includes, examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation.
|
