精選優(yōu)質(zhì)文檔傾情為你奉上精選優(yōu)質(zhì)文檔傾情為你奉上專心專注專業(yè)專心專注專業(yè)精選優(yōu)質(zhì)文檔傾情為你奉上專心專注專業(yè)A1-auditreportsDifferenceunderISARequirementsinISAsandNotinUSGAAS:UnderISAs:thepreparationofFSgivesatrueandfairview;requiretheintroductoryparagraphtorefertothesummaryofsignificantaccountingpoliciesandotherexplanatoryinformation;requireintheauditor’sresponsibilityparagraphthatauditorscomplywithethicalrequirementsUnderU.S.GAAS:Management’sresponsibilitiesfortheFSshouldnotbereferencedtoaseparatestatementbymanagementaboutsuchresponsibilitiesifsuchastatementisincludedinadocumentcontainingtheauditor’sreport.ISArequiretheauditortoobtainwrittenrepresentationsfrommanagementregardingitsplansforfutureactionISArequirestheauditortowithdrawwhenunabletoobtainsufficientappropriateauditevidenceduetoamanager-imposedscopelimitation.USGAAS:considernotrequireAmendsafterthedateofthereportbutbeforeFSareissued.ISA:newreportdatednoearlierthanthedateofapprovaloftheamendedFS–alleventstothenewdate!US.GAAS:Dueldatethereporttoextendresponsibilityonlyfortheparticularsubsequentevent.P51summaryWhenreportingoncomparativeFS,anauditorshouldchangethepreviouslyissuedopinionontheprioryear’sFSiftheprioryear’sFSarerestatedtoconformwithGAAP.P54PRIMEAnauditoraydraftanentity’sfinancialstatementsbasedoninformationfrommanagement’saccountingsystemTheAICPAprovidesStatementonAuditingStandards,whichprovidesameasureofconventions,rulesandproceduresgovernedbyAICPA.Requirementforauditevidence:appropriate!NotreasonableoradequatePCAOBwasestablishedbytheSOXof2002GroupengagementpartnerAssumeresponsibilityfortheworkofthecomponentauditor:noreferencemade;unabletoreviewthecomponentauditor’sauditdocumentation:makereference!Consistencyisimplicitinreportandexplicitinemphasis-of-a-matterparagraph.Anauditormaynotissueaqualifiedopinionwhentheauditorlacksindependencewithrespecttotheauditedentity.Rather,mustdisclaimanopinionOmissionofrequiredsupplementaryinformationresultinanadditionalparagraphaddedtoanunmodifiedopinion.Anunjustifiedaccountingchangemaycausetheauditortoissueaqualifiedoradverseopinionratherthananunmodifiedopinionwithanemphasis-of-matterparagraph.Goingconcern:discussionwithlenderswouldnotbeamitigatingfactor.ActualagreementswouldberequiredRemovalofgoingconcernincurrentperiod:theemphasis-of-matterparagraphincludedinthepriorperiodshouldnotberepeated,andnodescriptionofthereasonsorplansforrecoveryneedbeincludedSubstantialdoubtofgoingconcern:disclaimerofopinionorunmodifiedopinionwithemphasisAnauditprocedurethatmayidentifydoubtsaboutanentity’sabilitytocontinueasagoingconcern:Confirmwiththirdpartiesthedetailsofarrangementstomaintainfinancialsupport;ReviewcompliancewithtermsofdebtagreementsSolelybasedonthereportoftheotherauditors:indicateadivisionofresponsibilityWhenanauditorqualifieshisopinionbecauseofascopelimitation,thewordingintheopinionparagraphshouldindicatethatthequalificationpertainstothepossibleeffectsontheFSandnottothescopelimitationitselfAccountingchangehasnomaterialeffectonFSinthecurrentyear,butamaterialfutureeffect,theauditormustensurethechangeisdisclosedinthefootnotes,butdoesnothavetorecognizethechangeinthecurrentyear’sauditreportFSomitsthestatementofcashflows:inadequatedisclosure–qualifiedopinion,notdisclaimerofopinion!Anentitychangesmethodofaccounting,inemphasis–of–matterparagraph:identifythenatureofthechangeandrefertothefinancialstatementnotethatdiscussesthechangeindetails.UnderU.S.GAAS,ifamongotherrequirements,thegroupengagementpartnerissatisfiedastotheindependenceandtheprofessionalreputationofthecomponentauditor,thegroupengagementpartnermayexpressanopiniononthefinancialstatementstakenasawholewithoutmakingreferencetotheauditofthecomponentauditorAuditorssendsanengagementlettertotheclient,notviceversaGAAPproblem:failtocontainadequatedisclosureofrelatedpartytransactiosGAASproblem:auditorunabletodeterminetheamountsassociatedwithillegalactscommittedbytheclient’smanagementMakereferencetotheauditofacomponentauditor–noneedofanemphasis–of–matterparagraphOmitoneoftheFSs:qualified!Auditreportforanissuer:Inauditor’sresponsibilityparagraph:conductedinaccordancewithPCAOBstandardsInopinionparagraph:refertoGAAPThepredecessorauditorwhoauditedtheprior-periodFSgenerallyshouldobtainaletterofrepresentationfromthemanagementandsuccessor;butthesuccessorisnotrequiredtoobtainaletterfrompredecessorIftheFSofapriorperiodhavebeenauditedandthereportisnotpresented,thesuccessorshouldindicateinanother-matterparagraphoftheauditreportTheFSofpriorperiodwereauditedbyapredecessorauditorThetypeofopinionexpressedandwhyThenatureofanyemphasis-of-matterorother-matterparagraphincludedinpriorreportThedateofthepriorreportSubsequentevents:inquiryabout:Newcommitments,borrowings,orguaranteesSalesoracquisitionsofassetsDualdatedforasubsequentevent(originaldateofreport,issuanceofrelatedFS):responsibilitylimitedtothespecificeventreferencedReportontheapplicationoftherequirementsofanapplicablefinancialreportingframeworkshouldincludeastatementthatshouldanyfactsorcircumstancesdifferfrompresentedtothereportingaccountant,theaccountant’sreportmaychange.TheauditorwouldnotperformarevieworexpressnegativeassuranceonsupplementaryinformationrequiredbyGAAPIfinformationaccompanyingthebasicFShasbeensubjectedtoauditingprocedures,inthereportitisstated:theaccompanyinginformationisfairlystatedinallmaterialrespectsinrelationtothebasicFStakenasawhole.Reportonapplicationoftherequirementsofanapplicablefinancialreportingframeworktoaspecifictransaction,theCPA’sresponsibleforproperaccountingtreatmentrestswith（取決于）thepreparersofthefinancialstatementsPresentationofselectedfinancialdataisnotaformofprospectiveFS順序很重要?。?！Basisofopinion—opinion—emphasis-of-matterparagraphA2–otherengagements,reports,andaccountingservicesEmphasis-of-matterparagraph:FSarepreparedinaccordancewithaspecialpurposeframeworkOther-matterparagraph:restrictstheuseoftheauditor’sreportCashbasisFSauditing:StatementsofincomeandretainedearningsareaccrualbasisFS.Thereportshouldreferto“therelatedstatementsofrevenuecollectedandexpensespaidfortheyearsthenended”ThebasisofaccountingshouldbeexplicitlyidentifiedSSARS(statementonstandardsforaccountingandreviewservices)issuedbyAICPAAnaccountantisrequiredtocomplywiththeprovisionsofSSARSwhensubmittingunauditedFS.Submissionisdefinedas:presentingtoaclientorthirdpartiesFStheaccountanthasprepared.ReviewisinaccordancewithSSARS,non-issuersonlyForissuers:SASorPCAOBstandardsNoscopeparagraphunderSSARS;thereferencetoprofessionalstandardsisincludedintheaccountant’sresponsibilityparagraphCompilationdoesn’tneedrepresentationletter;ReviewneedsrepresentationletterReviewrequiresindependence,compilationdoesn’tReview:ULIARCPADowngradeandupgradeaudit再看一遍，P50-P56P66-68ProspectiveFSIftheauditorhasdisclaimedanopiniononthefinancialstatementstakenasawhole,theauditormayexpressanopiniononanentity’saccountsreceivablebalanceonlyifthespecialreportonaccountsreceivableispresentedseparatelyfromthedisclaimerofopinionontheFSandtheaccountsreceivablebalancedoesnotconstituteamajorportionoftheentity’scompletesetofFS.Toexpressanopiniononanemployee’sprofitparticipationinnetincome,theCPAmayaccepttheengagementonlyifhealsoauditsandexpressesanopinionontheentity’sI/SandB/STheauditor’sreportonFSpreparedonthecashreceiptanddisbursementsbasisofaccountingwouldincludeastatementthatthebasisisacomprehensivebasisofaccountingotherthanGAAPInthiscircumstance,theaccountantshouldmodifythereviewreporttoreflectthefactthattheFSwerepresentedonanothercomprehensivebasisofaccouningSummaryFSSpecialpurposeframeworkreportincludesanemphasis-of-matterandother-matterparagraphs.PositiveassuranceAreportonaclient’scompliancewitharegulatoryrequirement,assumingthereportispreparedbasedonafinancialstatementauditofthecompletefinancialstatements,wouldcontainrestricteduslanguage.Writtenrepresentationsshouldbeaddressedtotheaccountant.Thelettershouldbesignedbymembersofmanagementwhomtheaccountantbelievesareresponsibleforandknowledgeableaboutthematterscoversintherepresentationletter.Theaccountantmaydeclinetoissueacompilationreportprovidedthateachpageofthefinancialstatementsisclearlymarkedtorestrictitsuseandawrittenengagementletterisusedtodocumenttheunderstandingwiththeclient.Compiledfinancialstatementsmaybeusedtoobtaincredit.ProhibitiononusingcompiledFS:toobtaincreditrelatestopersonalFSwhentheaccountantwouldliketoexemptedfromtherequirementofSSARSIftheaccountantbelievesthatmodificationofthestandardreportisnotadequatetoindicatethedeficienciesintheFStakenasawhole,theaccountantshouldwithdrawfromthereviewengagementandprovidenofurtherserviceswithrespecttothoseFS.Iftheaccountantconcludesthatthereisreasonablejustificationtochangetheengagement,theaccountant’sreviewreportshouldnotincludereferencetotheoriginalengagementCompilation:iftheaccountantisnotindependent,heshouldspecificallydisclosethelackofindependence.Otherwise,independenceisimpliedReview:substantialdoubtastogoingconcern,notrequiredtomodifytheaccountant’sreviewreport.ButcanchoosetoemphasizethisissueinthereportShouldstatethatareviewincludesprimarilyapplyinganalyticalprocedurestomanagement’sfinancialdataandmakinginquiriesofcompanymanagementWrittendocumentationfromothertypesofengagements(compilation)maybeusedtoprovidesupportforthereviewreportRecalculationofdepreciationexpenseisanauditprocedurenotinareviewAreviewprovideslimitedassurancethatthereareonmaterialmodificationsthatshouldbemadetothefinancialstatementsinordertobeinconformitywithgenerallyacceptedaccountingprinciples.AcompilationprovidesnoassuranceBeforeissuingacompilationreport,accountantsshouldreadthecompiledFSandconsiderwhethertheyareappropriateinformandfreefromobviousmaterialerrors.Compilationreportshouldn’tincludewordslike:“accountantshavenoresponsibilitytoupdatethereportforeventsandcircumstancesoccurringafterthedateofthereport”.ItisonprospectiveFSRepresentationletterAuditprocedurenotinreview:observingayear-endinventorycount;examiningsubsequentcashreceipts;assessingtheinternalcontrolTodeterminewhetherthechangeinengagementisjustified:accountantsshouldconsidertheadditionalauditeffortandcostrequired.InconsistenciesintheapplicationofaccountingprinciplesdonotrequiremodificationofthereviewreportaslongastheFSincludeadequatedisclosureAnaccountantmustexpressanopinionontheFStakenasawholeinanaudit,notareviewWhenauditedFSarepresentedincomparativeformwithunauditedFSfromaprioryear,theauditorshouldeitherreissuereportorincludeaseparateparagraphinthecurrentyearreportdescribingtheresponsibilityassumedfortheunauditedstatementsBeforereissuingacompilationreportontheFSofanon-issuerfortheprioryear,thepredecessoraccountantisrequiredto:Reviewofinterimfinancialinformation:awareofasignificantchangeinthecontrolactivities——resultinfurtherinquiryofmanagementAuditaffectreviews:Theobjectiveofareviewofinterimfinancialinformationistoprovidetheaccountant,throughinquiriesandanalyticalprocedures,withabasisforreportingwhethermaterialmodificationsshouldbemadetosuchinformationtoconformwithgenerallyacceptedaccountingprinciples.Theaccountant’sreviewofinterimfinancialinformationisperformedinaccordancewithPCAOBstandard.Areviewofpublicentity’sinterimfinancialinformationrequiresanevaluationofinternalcontrol;requirescommunicationwiththepredecessorauditor;requiresinquiryoftheclient’sattorneyregardinglitigation,claimsandassessments;doesnotprovideanopinionontheFS;providesnegativeassurance;thereferencetoToupdatetheaccountant’sknowledgeoftheclientduringplanningstage:Consideringtheresultsofauditproceduresthathavepreviouslybeenperformedandhowtheycorrespondtothecurrentyear’sFSAnalyticalproceduresareafterplanningstage(understand-learn-inquiry)Comfortletter:TheaccountantsexpressanopinionconcerningintheFS’scompliancewiththepertinentaccountingrequirementsoftheSECNegativeassuranceisprovidedregardingunauditedcondensedfinancialinformationAddressedtotheunderwritersofthesecuritiesSignedbyindependentauditor使用SSAE（statementonstandardsforattestationengagement）的服務(wù):Norequirementofrestrictedtospecifiedpartieswhenreportingonanassertionaboutthesubjectmatterinsteadofreportingdirectlyonthesubjectmatter.Reportonagreed-uponproceduresrelatedtomanagement’sassertionaboutanentity’scompliancewithspecifiedrequirementscontainsastatementthatthesufficiencyoftheproceduresissolelytheresponsibilityofthepartiesspecifyingtheproceduresandadisclaimerofresponsibilityonthepartoftheaccountAfinancialforecastmaybeissuedforgeneraluse;afinancialprojectioncanonlybeissuedforrestricteduse(e.g.abankwithwhichtheentityisnegotiatingforaloan)Anattestengagementmaybepartofalargerengagement:suchasabusinessacquisitionstudyorafeasibilitystudy;attestationstandardsincludetwostandardsthatparallelGAAS:planning/supervisionandevidenceAsufficientunderstandingofinternalcontrolisnotrequiredtobeobtainedinanattestationengagementAnaccountant’scompilationreportonafinancialforecastshouldincludeastatementthatthecompilationdoesnotincludeevaluationofthesupportoftheassumptionsunderlyingtheforecastAmanagementconsultingengagementtoprovideEDP(electronicdataprocessing)advicetoaclientisnotanattestengagementNegativeassurancemaybeexpressedonreviewofmanagement’sassertionWhetheranentityisincompliancewiththeprovisionsofForeignCorruptPracticesAct:accountantmayperformanexaminationofanagreed-uponproceduresengagementbutNOREVIEWWhenanaccountantexaminesafinancialforecastthatfailstodisclosesignificantassumptionsusedtopreparetheforecastadverseopinion!Partialpresentationsarepresentationsofprospectivefinancialinformationwhichwouldnotordinarilybeappropriateforgeneralusebecausetheyomitoneormoreoftheseessentialelements:salesorgrossrevenue,grossprofitorcostofsales,unusualorinfrequentlyoccurringitems,provisionforincometaxes,discontinuedoperationsorextraordinaryitems,incomefromcontinuingoperations,netincome,EPS,significantchangesinfinancialpositionAttestengagement:WebTrust&SysTrustA3-Engagementacceptance,planning,andriskassessmentMateriality:tolerableerrorAnauditorconsidersmaterialityfortheFSasawholeintermsofthelargestaggregatelevelofmisstatementsthatcouldbematerialtoanyoneoftheFSMaterialjudgmentsaremadeinlightofsurroundingcircumstancesandnecessarilyinvolvebothquantitativeandqualitativeconsiderationsIndependentauditorsmaynotshareanyresponsibilityinvolvingjudgments,includingtheassessmentofinherentandcontrolriskAuditRisk=RiskofMaterialMisstatement(InherentRisk*ControlRisk)*DetectionRiskKnowledgeaboutthedesignandimplementationofrelevantinternalcontrolsshouldbeusedtoidentifytypesofmisstatementsthatcouldoccurAnalyticalproceduresandriskassessmentproceduresarenecessaryinFS;testoftheeffectivenessofcontrolisnot.Inobtaininganunderstandingoftheentityanditsenvironment,includingitsinternalcontrol,anauditorisrequiredtoobtainknowledgeaboutthedesignofrelevantinternalcontrolspertainingtofinancialreportingineachofthefiveinternalcontrolcomponentsSegregationofdutiesinIT:Controlgroup,operators,programmers,analyst,librarianAreviewofpredecessor’sauditdocumentationrelatedtomattersofcontinuingaccountingandauditingsignificancewouldbepermitted.ThisincludecontingenciesandinternalcontrolsScopelimitationtoprecludeanunmodifiedopinion:ThemanagementrefusestoacknowledgeitsresponsibilityforthefairpresentationoftheFSinconformitywithGAAPManagementrequeststhatcertainmaterialARnotbeconfirmedit’sok,therearealternativeproceduresSubstantivetestsaregenerallyperformedafteryear-endPre-acceptanceprocedureincludes:inquiryofthepredecessorauditorEngagementletterwillinclude:Thefactthatauditriskexistsandthatanauditonlyprovidesreasonableassuranceofthedetectionoferrorsandfraud;ArrangementstobemadewiththepredecessorauditorTheauditordoesnotconsultwiththeclientaboutauditproceduresthatwillbeperformedDuringtheaudit,ifthesuccessorauditorbecomesawareofinformationindicatingthattheFSreportedonbythepredecessorauditormayrequirerevision,heorsheshouldrequesttheclienttoarrangeameetingamongthethreepartiestodiscusstheinformationandattempttoresolvethematterBeforeacceptinganengagement:Thesuccessorauditorisrequiredtomakeinquiriesofthepredecessorauditoraboutmattersthatmaybearonmanagementintegrity,include:Thepredecessor’sunderstandingastothereasonsforthechangeinauditors;disagreementsbetweenthepredecessorauditorandmanagementastosignificantaccountingpoliciesandprinciplesTheprospectiveclient’ssignaturetoawrittenengagementletterwouldbeobtainedupontheacceptanceofanengagement,notpriortotheacceptanceFactorsmostlikelywouldinfluenceanauditor’sdeterminationoftheauditabilityofanentity’sFS:theadequacyoftheaccountingrecordsAnauditor’sfaithintheintegrityofmanagementisoftheutmostimportanceinperformingaFSauditAnunderstandingbetweentheauditorandtheclientgenerallyincludestheauditor’sresponsibilities.Oneoftheauditor’sresponsibilitiesistoensurethatthosechargedwithgovernanceareawareofanysignificantdeficienciesininternalcontrolthatcometotheauditor’sattentionIt’snotappropriatefortheauditortorequestareviewofthepredecessorauditor’sengagementletterIntheplanningstage,theauditorshouldconsiderFSaccountslikelytocontainamisstatement;conditionsthatrequireextensionofaudittests.Assessingtheobjectivityofinternalauditors:objectivityisreflectedbytheorganizationalleveltowhichtheinternalauditorreportsaswellasbypoliciesprohibitingauditsofareaswheretheinternalauditorlacksindependenceIndeterminingthepreliminaryjudgmentaboutmateriality,theauditorshouldusetheentity’sannualizedinterimFS!干擾項(xiàng)：resultsoftheinternalcontrolquestionnaireInternalauditor’sworkwouldaffectindependentCPA’sauditingprocedureswhentheworkrelatestoassertionsaboutexistenceoffixedassetadditionsthedegreeofsubjectivityincreases,theneedfortheauditortoperformtestsoftheassertionsincreases.Inplanningprocess:Auditorandclientshouldagreeupon:timingofinventoryobservationprocedurestobeperformed-auditorwouldhavetocoordinatescheduleswiththeclientDeterminationofthependinglegalmatterstobeincludedinalettertotheclient’sattorneywouldnotgenerallybemadeduringtheplanningstageoftheauditDuringplanningphase,mattersthatmayaffecttheauditshouldbediscussedwithfirmpersonnelresponsiblefornon-auditservicestotheentityUsingaspecialist:theauditorshouldnotrefertotheworkorfindingsofthespecialistunlesstheworkresultsinachangetotheauditor’sreportInassessingcompetenceandobjectivityofinternalauditors,theauditorusuallyconsidersdiscussionswithmanagementpersonnel,externalqualityreviewsofinternalauditactivities,previousexperiencewiththeinternalauditfunction.Representationlettersareobtainedbytheauditorattheendoftheaudit.Therepresentationlettershouldnotbedatedearlierthanthedateoftheauditor’sreportAuditorconsidersmaterialityforplanningpurposesintermsofthesmallestaggregatelevelofmisstatementsthatcouldbeconsideredmaterialtoanyoneoftheFSReviewofassistant’sworkisnecessarytodeterminewhetheritwasperformedinasatisfactorymannerandtodeterminewhethertheworksupportstheconclusionspresentedintheauditor’sreportTheauditorwithfinalresponsibilityandanassistanthavedifferentopinionabouttheresultsofanauditingprocedure,CPAfirmshouldenabletheassistanttodocumentthedetailsofthedisagreementwiththeconclusionreachedIfthematerialityamountusedinevaluatingauditfindingsincreasesfromtheamountusedinplanning,thenlesssubstantivetestingAccordingtoPCAOBstandards,acentralizedaccountingfunctionisindicativeoflesscomplexoperationsAccordingtoU.S.SupremeCourt,informationismaterialifthereisasubstantiallikelihoodthattheinformationwouldbeviewedbyareasonableinvestorashavingsignificantlyalteredthetotalmixofavailableinformationBoththeRMManddetectionriskmaybeassessedinquantitativetermssuchaspercentagesorinnonquantitativetermsthatrangefromaminimumtoamaximumControlriskshouldbeassessedintermsofFSassertionsDetectionriskBC不相關(guān)，A正相關(guān)Regardlessoftheassessedlevelofcontrolrisk,anauditorwouldperformsomesubstantiveteststorestrictdetectionriskforsignificanttransactionclassesIfcontrolriskistobeassessedatalowlevel,testsofcontrolswouldberequiredtoevaluatetheeffectivenessoftheinternalcontrolstosupportthatassessedlevel.Assumingcontrolsareoperatingeffectively,onlylimitedsubstantivetestingwouldbeperformedTheauditorshoulddeterminewhetherandtowhatextentfraudriskfactorsarepresentduringtheplanningstageoftheaudit,notduringthefinaloverallreviewstageTheauditorshouldinquirewhethermanagementhascommunicatedtothosechargedwithgovernanceregardinginternalcontrolandhowitfunctionstoprevent,deter,ordetectmaterialmisstatementduetofraudHeightenanauditor’sconcernaboutRMMTheauditorshouldconsiderthequantitativeandqualitativematerialityoftheactofnoncompliancewithlawsandregulations.ButthisdoesnotchangethepreliminaryjudgmentaboutmaterialitylevelsTheauditorshoulddesigntheaudittoprovidereasonableassurancethatdirecteffectactsofnoncompliancearedetected.BecauseofthenatureofnoncompliancewithlawsandregulationshavinganindirecteffectontheFS,theauditorprovidesnoassurancethatsuchactswillbedetectedAlackofindependentchecks(稽核檢查)isafraudriskfactorthatprovidesanopportunityformisappropriationofassetsTheauditormayconcludethatwithdrawalisnecessarywhentheclientdoesnottaketheremedialactionthattheauditorconsidersnecessaryinthecircumstances,evenwhentheactofnoncompliancewithlawsandregulationsisnotmaterialtotheFSAnalyticalproceduresperformedduringplanningoftenusedataaggregatedatahighlevel;donotgenerallyhelpanauditordeveloptheirpreliminaryjudgmentaboutmaterialityBearerbonds（

不記名債券）representthehighestriskofmisappropriationofassets（侵占、濫用資產(chǎn)）.Theyareusedtofacilitatemoneylaundering,taxevasionTheprimaryobjectiveofthefraudbrainstormingsessionistoassessthepotentialformaterialmisstatementduetofraudReviewinganinternalcontrolquestionnaireisnotlikelytouncoveranyactsofnoncompliancewithlawsandregulationsTheauditorshouldobtainasufficientunderstandingoftheentityanditsenvironment,includingitsinternalcontrol,toplantheauditoftheentity’sFSAnalyticalproceduresusedinplanningtheauditshouldfocusonenhancingtheauditor’sunderstandingoftheclient’sbusinessandthetransactionsandeventsthathaveoccurredsincethelastauditdateAnalyticalproceduresWhentheauditor’sriskassessmentisbasedontheeffectivefunctioningofinternalcontrol,theauditorshouldidentifyspecificinternalcontrolsrelevanttospecificassertionsthatarelikelytopreventordetectmaterialmisstatementsinthoseassertionsIftheclientfailedtomaintaincopiesofitsproceduresmanualsandorganizationalflowcharts,theauditorshoulddocumenttheauditor’sunderstandingofinternalcontrolsObservationandinspectionmaybeusedtoevaluatethedesignofcontrolsObservationofentitypersonnelapplyingcontrolactivities–designeffectivenessReperformingcontrolactivities–operatingeffectivenessPropersegregationofdutiesreducestheopportunitiesforanyindividualtobothperpetrateandconcealerrorsoffraud.E.g.recordandconcealfraudulenttransactioninthenormalcourseofassignedtasksThecontrolenvironmentelementofanentity’sinternalcontrolrelatestothetoneoftheorganization,whichincludeshumanresourcepoliciesandpractices(commitmenttocompetence)InternalcontrolInobtaininganunderstandingofanentity’sinternalcontrol,anauditorisrequiredtoobtainknowledgeaboutthedesignofcontrolsandwhethertheyhavebeenimplemented,notoperatingeffectivenessofcontrolsAnunderstandingofinternalcontrolrelevanttoanentity’sfinancialreportingobjectiveisnecessaryaspartofauditplanningControlsrelevanttoFSauditBudgetaryreportingsystemServicesperformedbyanotherorganizationarenotconsideredtobepartoftheclient’sinformationsystemiftheservicesprovidedarelimitedtoexecutingtransactionsthatarespecificallyauthorizedbytheclientInherentlimitationsininternalcontrolarelimitationsthatexistdespiteimplementationofappropriatecontrols.E.